EXCLUSIVE: Iceland’s zero-interest loans ‘not a silver bullet’ for food poverty

The Iceland zero-interest loan scheme is “not a silver bullet” for families battling food poverty, according to Simon Dukes, the CEO of Fair For You – the ethical loan company which has partnered with Iceland for the initiative.

The scheme, which is only available to families on a low income, will provide customers with small loans ranging from £25 to £75 to help them bridge the gap in income over the school holidays.

Dukes told Grocery Gazette the zero-interest loans are targeted at individuals and families who “have difficulty” getting mainstream loans as a result of “poor credit files”.

“This loan is for those who can’t get credit anywhere else, who just need that extra bit of money to smooth over the holiday period,” he said.

“Households have to pay the loans back at £10 per week, which can be frozen or overpaid, depending on the individual situation. It’s not a silver bullet, but it does provide people with a choice if they don’t want to go to the food bank to feed their family.”

READ MORE: Cost of living: Iceland launches interest-free loans

Dukes adds that the scheme does have a cut-off, so households earning over a certain amount per month will be ineligible for the loan. However, that cut-off point will depend on individual circumstances and affordability.

According to Iceland’s research from previous trials, 92% of customers of using food banks previously had stopped or reduced their food bank use due to the scheme.

“Food poverty is something that is a massive problem for our society. This is not the the one solution to it. But it does is provide people with a solution that might work for them,” Dukes said.

He was clear that Iceland’s new scheme will “not work for everyone” as the company rejects a lot of people on affordability grounds.

“It would be wrong of us to to give people a loan that they can’t pay back, that would be adding to the debt problem of society.

“We’re giving loans to people who can afford to pay them back, and who need a bit of smoothing out during the course of that extra expense.”

During initial trial of the scheme, which ran last year, a 3.5% interest rate was added to the amount consumers had to pay back. Iceland will be covering this fee for customers for the national rollout.

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