We need a new way of lending

The high street banks have never really been a suitable source of loans for those with limited assets or income - their basic idea seems to be that you can only borrow from them if you can afford not to do so. The principal alternative that grew up historically for those in need who could not meet the strict lending criteria of the banks was loan sharks and unregulated lending. Other than credit unions, of which more later.

Payday lenders have more recently become popular, based on eye-watering rates of interest, but these have recently been brought into the purview of the Financial Conduct Authority, which has severely restricted their lending activities. They have apparently complained that this recent development is likely to drive people back to the loan sharks, which is an unintended outcome that would benefit nobody but the people who offer much needed cash to those with no alternative source of money - on terms that can quickly become unaffordable. You might ask how this makes them different from payday lenders, but I couldn't possible comment.

The fact is that some people will always need access to money at short notice, to cover unexpected expenses or simply because their next pay is not due for a few days. It is not sufficient for society to say that it is 'not our problem'; in a truly liberal society, we should care for those who are disadvantaged, without exercising judgement over whether it is 'their own fault' or that they should 'defer making purchases until they can be afforded'.

Credit Unions are an alternative to conventional banking which are based on the savings of their members, which are then lent out to those needing funds. They have no profit motive, but are there for the benefit of the community. Of course, there is nothing intrinsically wrong with profit - it is simply the reward given to those who provide capital, rather than labour, and is therefore not a bad thing. Without the savings of provident individuals, society would be unable to progress - at least until we find a way of producing limitless energy and resources and can do without money altogether. (For details of which, please refer to my science fiction writing!)

But, laudable as Credit Unions are, they are not necessarily the only form of lending that is possible to provide much needed support for those unable to meet the savage criteria imposed by the banks. We need to have a discussion that involves both those with money to lend and those who need to borrow, so that a new and more equitable - liberal - form of providing finance can be created; one that takes account of the need to provide security for those who lend their money, but not at the expense of making borrowing impractical for those who need to borrow.

Do I have a suggestion? No, this is not my area of expertise. But there must be many people who could become involved in such debates; not those who are professional lenders, but those who care about people and their place in society.

Just a thought.

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Stephen Phillips is a member of the Shepway Liberal Democrats, and his views are not necessarily those of the Party. He has been writing professionally for many years on investment and economic related issues, and has focussed recently on creative writing.

You can find Stephen online at www.phillips-writer.co.uk