The impact of COVID19 on the affordable credit sector: anecdote to evidence

July 2, 2020

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by Rachel Heydecker, Policy and Development Officer, Carnegie UK Trust

The Carnegie UK Trust works to improve personal, community and societal wellbeing. Many of the issues that we work on, and the partners and groups who we work with, are deeply affected by the impact of the COVID-19 crisis. Over the coming weeks we’ll be sharing a series of blogs with reflections and questions across these different aspects of wellbeing. We are interested in learning from others, so please get in touch to share your reflections on how communities, networks and organisations are responding.


Over three months since the announcement that the UK would enter lockdown, it is clear that COVID19 has created an economic as well as a health crisis. Workers have been furloughed, whole sectors have been put under threat and thousands have taken mortgage, credit card or personal loan payment breaks due to the disruptive impact COVID19 has had on their income.

We are seeing the financial effects of COVID19 disproportionately impacting lower income households. Even before COVID19, millions of UK consumers were financially excluded – they could not access mainstream credit, or had to pay a premium to access it. The options available to these individuals often consisted of high cost short term credit, such as payday lenders, or other types of subprime credit such as pawnbroking or catalogue credit. Ethical alternatives, which are cheaper but not cheap, do exist in the form of affordable credit providers – credit unions and CDFIs – yet these alternatives currently only reach a small proportion of the people who they could potentially support.

The Carnegie UK Trust, alongside others, have been working to support and grow the affordable credit sector in order to offer alternatives for those excluded from the mainstream credit market. However, the affordable credit sector has been greatly affected by COVID19. We were hearing from those in the sector about decreased demand for lending, increased requests for forbearance and additional costs to transition to remote ways of working.

This is a major problem, because while people aren’t borrowing at the moment, they will need to in the future – for immediate outgoings or repayment of debt incurred during the crisis, particularly when government support such as the Job Retention Scheme starts to taper off. If ethical, affordable lenders are not there to offer access to credit, the alternatives are much bleaker.

The Trust worked with Community Finance Solutions at the University of Salford to turn anecdote into evidence, through a rapid response survey distributed to the affordable credit sector in May with the help of trade bodies ABCUL, Scottish League of Credit Unions and Responsible Finance.

The survey results revealed the immediate impact COVID19 has had on the affordable credit sector.

  • The survey was answered by 63 Lenders (58 Credit Unions and 5 CDFIs) across England, Scotland and Wales.
  • Requests for payment breaks have increased by 128%, and 65% of respondents are concerned at this trend.
  • Almost 70% of respondents report the scale of demand for loans is much lower than last year, with loan values dropping by 70% in April 2020 compared to April 2019 – from £23.3m to £7m.
  • 78% of Credit Unions have seen an increase in saving deposits

The results of the rapid response survey were presented at a webinar earlier this month, where a panel of representatives from ABCUL, Scottish League of Credit Unions, Responsible Finance, the FCA, National Credit Union Forum and Fair4All Finance gave reactions and support for the sector was voiced by actor and social activist Michael Sheen. A recording of the webinar is available at  and the slides are available to download here. You can also download the data tables here.


Further analysis of the data is underway, and we anticipate sharing this in the form of a short report soon.