No Interest Loan Scheme enters second pilot phase

The No Interest Loan Scheme (NILS) programme is backed by the Treasury, but will be run by credit unions and other lenders.

It enjoyed a successful trial in Manchester and will be rolled out across the UK from September.

Its larger pilot phase will last for up to two years, following which a decision will be made on whether to roll it out further.

Eligibility is limited to those who have been rejected from normal borrowing, with the loans available being between £100 and £2,000.

Money can be borrowed from six to 18 months, and customers are only permitted to have one no-interest loan.

The pilot is being funded with £3.8m committed from HM Treasury, £1.2m from JPMorgan Chase and up to £1m of lending capital from each devolved administration, matched in England by Fair4All Finance.

The latter was founded by the Treasury and Department for Culture, Media and Sport in 2019 to “support the financial wellbeing of people in vulnerable circumstances”.

The nationwide pilot phase is designed to offer small scale help to 20,000 people, who otherwise would have struggled to borrow.

A full-scale roll-out could reach 500,000 people, according to a pre-pandemic feasibility study.

Earlier in 2022 Economic Secretary to the Treasury John Glen talked about the £3.8m of government funding for the pilot.

The scheme was designed for consumers "in vulnerable circumstances who would benefit most from affordable credit to meet unexpected costs", he said.

"This is a fundamental, worthwhile, new initiative, to provide a gateway product for people who at the moment are beyond the lending capacity of some credit unions.

"The challenge now will be to take that proof-of-concept pilot to a bigger pilot so that we can now validate it.”

The news comes as the Financial Conduct Authority announced last week it was writing to firms to remind them of their obligations to support vulnerable customers.