Evaluation Scotland Wales
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Evaluation of the DWP Growth Fund

Evidence type: Evaluation i

Description of the programme

The Department of Work and Pensions (DWP) Growth Fund was a UK government programme which aimed to improve access to affordable credit by increasing lending by third sector organisations, including credit unions and community development finance institutions. The Fund aimed to benefit low-income and financially-excluded families living in deprived areas who might otherwise turn to high cost credit such as pay day loans. 329,888 loans were made between July 2006 and October 2010.

The Fund offered three kinds of funding:

  1. Capital for third sector organisations to lend to low income families.
  2. Funding to cover the costs of administering loans.
  3. Funding to build the capacity of third sector lenders.

The study

The evaluation ran from December 2009 to August 2010, exploring programme impact on borrowers and lenders, its administration, costs and benefits. It used qualitative and quantitative methods:

  • Case studies of lenders, including interviews with staff, successful and unsuccessful applicants, and other organisations serving financially excluded people.
  • Quantitative surveys of successful (504) and unsuccessful (328) applicants and a comparison group with no access to the fund (520).
  • Surveys of 82 participating lenders and 25 non-participating lenders.
  • Administrative data from the DWP.

What are the outcomes?

  • The study highlighted issues relating to:
  • People’s propensity to use high-cost or illegal credit.
  • The impacts of access to, and use of, appropriate financial services.
  • The impact of savings on interest payments.

Key findings

1. Process

Who did the Growth Fund attract?

The profile of applicants reflected the Fund’s target. Most applicants reported running out of money occasionally. 40% had recently been unable to pay a bill due to lack of money.

Applicants were typically women aged 25-44. Most had dependent children. Two thirds of those with children were lone parents. A few owned their own home, but most rented from a housing association or local authority. Nearly 80% were not in work. Most received benefit payments or tax credits.

Why were some applicants unsuccessful?

Applicants were rejected if they failed to provide identification, lacked sufficient income to repay, had poor credit history or outstanding debt, failed to justify the purpose of the loan or lied during their application.

How were unsuccessful applicants dealt with?

  • Over 50% of unsuccessful applicants said they weren’t given an explanation.
  • Nearly 80% reported that they weren’t referred to an advice agency.
  • Over 50% said they would nevertheless reapply to the same lender.
  • Over 50% said they would recommend the lender to others.

How did successful applicants feel about the scheme?

Almost all would reapply to the same lender and would recommend them to others.

2. Impact

Impact on borrowers:

  • Roughly a third of borrowers reported that they had borrowed less since participating in the scheme, however levels of borrowing were similar between participants and the control group.
  • Many borrowers did not have a current account.13% of applicants subsequently opened one.
  • 30% of applicants opened a savings account.
  • 40% of successful applicants reported that they felt better able to manage their finances.

Impact on third sector lenders:

  • Processes: 80% of lenders who gave feedback reported that they had improved their working practices.
  • Staff: Participating lenders increased staff numbers from 1.5 FTE in 2004 to 4 FTE in 2009.
  • Loans made: Lenders more than doubled the number and value of loans made between 2004 and 2009.
  • Comparable lenders who did not participate did not see similar benefits.
  • Debt written off: Participating lenders wrote off nine times more bad debt between 2004 and 2009 than others. This represents an increase in the proportion of bad debt within their portfolios

Points to consider

Methodology: The evaluation adequately assessed the impact and operations of the Growth Fund. More information about some aspects, such as surveys and participant data, could have provided additional depth.

Relevance: This study offers a comprehensive assessment of the costs and benefits of providing low cost loans to people on low incomes. It highlights that the cost of Growth Fund loans exceeded interest rate income – indicating that third sector lenders should be subsidised or charge higher interest rates.

Transferability: The Fund targeted a particular group - low-income and financially-excluded families in deprived areas. We cannot be confident that a similar programme would achieve similar results, especially if it had different eligibility requirements.

Applicability: The evaluation is a useful reference for third sector lenders. It could inform future government schemes to promote affordable

Full report

Evaluation of the DWP Growth Fund - full report

Key info

Activities and setting
Funding provided to third sector organisaitons to help them lend money to low-income and financially excluded families.
Measured outcomes
Programme delivered by
Department for Work and Pensions
Year of publication
United Kingdom
Contact information

Sharon Collard, Personal Finance Research Centre, University of Bristol Chris Hale and Laurie Day, Ecorys