Responsible lender Five Lamps has today secured a £5 million investment to help vulnerable households across the UK break out of the cycle of high-cost debt. The funding will mobilise over £60 million of lending, enabling Five Lamps to offer over 100,000 affordable loans, under their Conduit brand. It is being funded by nine social investors, including four charitable trusts and five social investment funds over six years, and represents the largest-ever single investment in a UK community lender.
Financial exclusion remains a pressing issue in the UK, and high-cost credit is widespread. 3.1 million UK adults have one or more high-cost loans or have had one in the past year. Potentially vulnerable people are twice as likely to have used high-cost credit as other UK adults; younger single parents are three times as likely. 6.5 million UK adults have no cash savings, leaving them particularly vulnerable to financial shocks and more likely to turn to high-cost credit in times of financial need .
Five Lamps is a responsible finance provider, regulated by the Financial Conduct Authority, offering fair and affordable personal loans as an alternative solution to high-cost credit. It is based in Stockton on Tees, and has to date provided close to £40 million of affordable personal loans primarily in the North East of England, but more recently in Scotland and, following considerable investment in systems and infrastructure, throughout England and Wales.The new investment will allow Five Lamps to grow the scale and impact of affordable credit to vulnerable individuals nationally.
Graeme Oram, Chief Executive of Five Lamps, says:
“This is a truly transformational investment which will enable us to help up to 100,000 financially excluded people break the cycle of high-cost debt which blights the lives of so many in our communities. The Financial Conduct Authority ‘High Cost Credit Review’ published recently highlighted the need for more alternatives to high-cost credit and we at Five Lamps are delighted to be that different kind of lender. We are driven to make a difference to people’s lives. Too many people have little or no financial resilience and at times of crisis have little choice but to go to high-cost or, sometimes, unregulated lenders. We want these people to come to us.”
The investors include specialist social investment funds Big Issue Invest, FSE, North East Social Investment Fund, Social Investment Scotland and Social and Sustainable Capital, as well as charitable trusts the Esmée Fairbairn Foundation, the Joseph Rowntree Foundation, Barrow Cadbury Trust and Harpur Trust.
Lars Hagelmann and Peter Morris, Investment Directors at Big Issue Invest and Social and Sustainable Capital, said:
“We are pleased to be playing a lead role in financing the next phase of growth of Five Lamps’ affordable personal lending. Five Lamps has been building its lending operation’s reach. Along with the other investors, we look forward to increasing Five Lamps’ capacity to support individuals who can benefit from access to fair and responsible credit.”
Recent measures by the FCA to address the failures in the high cost credit market and a new £55 million government fund to improve financial inclusion highlight the gaps in the affordable finance market. Social investment is allowing leading responsible lenders such as Five Lamps to meet the increasing demand for personal loans at affordable rates.
Social Finance advised Five Lamps in structuring and coordinating the investment, funded in part by a Big Lottery Fund grant as part of its Big Potential programme. Legal firms Simmons & Simmons and Allen & Overy provided pro-bono legal support for this investment.
For more information, please contact: nicolagarrett@fivelamps.org.uk or alisa.helbitz@socialfinance.org.uk.