Description of the programme

Through the What Works Fund, (WWF), a pilot Community Development Finance Institution, (CDFI), was co-ordinated and evaluated. The Consortium approach to establishing a CDFI is innovative, and was led by three Scottish councils, covering an area with more than 700,000 residents. Conduit Scotland, (CS), a social lender, were appointed following a competitive tendering exercise, to run the CDFI. The aims of the CDFI were to offer the lowest income households in Falkirk, Fife and West Lothian access to affordable credit, and to promote take up of wider advice and support services by those in need.

The CDFI offered a more affordable alternative to higher cost short-term lenders. Activities included telephone and online support. Face-to-face lending services were delivered through four shops. From each shop base, ‘pop ups’, were run in local communities. The pops-ups enabled staff to engage with local people through community based services and events in deprived areas. A key objective for the CDFI was to refer customers onto ‘wrap around’ advice and support services provided by existing locally based providers. The evaluation ran from June 2017 to February 2018. During this time 765 loans with a total value of around £354,587.08 were made.

The study

The target group were individuals who were unlikely to be able to access mainstream credit options and may be experiencing financial exclusion.

The research questions were:

1. How does the provision of affordable credit influence access to products for consumers who would otherwise be unable to access lending or influence their credit choices more broadly?
2. How do face-to-face, online and telephone channels compare as effective forms of delivery? Are customers more likely to take up support services if referred face-to-face? Are face-to-face service points (shops) in the most accessible locations?
3. How important is the partnership model involving local authorities? What added value does this bring?

An outcomes evaluation and process evaluation were undertaken. A mixed methods approach, using quantitative and qualitative tools, was used. This included a structured pre- and post- intervention survey with service users. 65 Conduit Scotland customers responded to the baseline survey, whilst 37 completed follow-up surveys. Three workshops were held, consulting 15 council staff members in total. Stakeholders and customers were also consulted through one-to-one interviews, as follows: 25 customers, 40 users of council advice funded advice services, 10 council staff members and 10 Conduit Scotland staff members.

Key findings

The findings suggest that the CDFI contributed towards the following outcomes:

• 50% of CDFI customers, by securing affordable loans, experienced improved access to financial services, and increased their awareness and understanding of affordable credit options.
• 60% of CDFI customers, when referred onto other advice and support services, gained confidence and were more able to manage their money day-to-day.
• CDFI Customers were less likely to apply to higher cost ‘for profit’ credit providers after securing a loan from Conduit Scotland.

• Stakeholders reported improved relationships between Falkirk, Fife and West Lothian councils, and increased opportunities for future partnership working.
• Falkirk, Fife and West Lothian councils jointly established a cost-effective approach to promoting financial inclusion and reducing poverty.
• The loan application methods were complex. Most CDFI customers indicated a preference for online services, viewing this approach to be convenient and confidential.

Points to consider

• Customers were asked to complete the survey and participate in interviews for the evaluation by Conduit Scotland on behalf of the Improvement Service. The take-up rate was low (c5%), despite modest financial incentives being offered. This highlights the importance of establishing effective sampling procedures at the outset, to generate sufficient responses for analysis.
• Selection bias is likely to have been a factor amongst respondents, as all customers were contacted and invited to participate and random sampling was not possible.

• The sample sizes were considerably lower than hoped for, and as a result the level of confidence in the results was adversely affected. The pilot results should therefore be viewed with caution. However the programme is being continued for a further four years, and therefore over time should be in a positon to share findings which could inform the transfer of this approach to other settings.