A gender analysis of the home credit industry in the UK

• Context
• The study
• Key findings
• Points to consider

Context

In the UK home credit (or doorstep lending) is a relatively small but longstanding industry that offers small, short-term unsecured cash loans using a network of agents. Home credit is used by approximately 3% of UK adults, which compares to around 60% of UK adults who have a credit card.

There are around 500 firms in the UK home credit market, and while the majority are small lenders, the market has always been dominated by a handful of larger lenders, with Provident Financial being the largest. The number of home credit users are reducing, with Provident Financial seeing its home credit customers drop from 1.53 million in 2004 to 0.7 million in 2017. However, it is still estimated that there are over 1.5 million users of home credit in the UK.

Traditionally the home credit business model has worked under a female-to-female ‘lending model’. Women account for two-thirds (65%) of the industry’s customer, while women are more inclined to work as loan agents. In addition to home credit services being used predominantly by women, borrowers are typically aged under 50, with both single parents and renters over-represented among them, as well as being on lower incomes and reporting relatively poorer health.

The study

This 2018 report from the University of Bristol’s Personal Finance Research Centre addresses two main questions:

1. To what extent is gender integrated into the regulations and policies governing the home credit industry?
2. To what extent are international principles to promote women’s financial empowerment, as set out in the G20-led women’s financial inclusion agenda, evident in UK financial services and home credit in particular?

The paper is based on a comprehensive review of existing research, industry reports and policy documents. This research was published in Women’s Studies International Forum, which is a bi-monthly peer-reviewed academic journal.

Key findings

• The paper asserts that there is a gap between policy and the urgent need to empower women as financial consumers. Policy interventions, data collection and further research on the industry needs to be reconsidered to take gender into account.
• While some borrowers may value the easy access to credit (despite being high-cost), home credit’s highly gendered social networks create the ideal environment for a potential harmful cycle of ‘perpetual borrowing’ as agent-borrower relationships grow stronger over time.
• The paper suggests that policy interventions in the home credit market and the assessment of their impact have been generally developed, implemented and monitored in a gender-neutral manner.
• While the emotional and psychological aspects of home credit lending are well understood, they do not currently translate into regulation and policy.
• One option is for regulators and other stakeholders is to use Equality Impact Assessments in different and more creative ways, to consider the possible effectiveness of any interventions once the profile of the target audience is taken into account.
• The Public Sector Equality Duty (PSED) is another tool that could facilitate more effective change. THE PSED stipulates that the FCA must ensure that regulatory interventions promote gender equality. The FCA also has an opportunity to improve our knowledge of gender issues in financial services more generally through analysis of its Financial Lives Survey.
• The UK evidence on home credit strategy strongly challenges the G20’s actions to encourage financial institutions to adopt gender sensitive policies and marketing strategies. It is known that much of the ‘dynamism’ of the doorstep lending industry has centred on a female-to-female lending model that is built on strong personal relationships, which in turn has been highly appealing to women. However, research has shown that some companies exploit the strong personal relationships that develop between the two parties, putting customers at risk of increasing their debts.
• The authors conclude by suggesting that a much wider issue, beyond the scope of their research, is how to tackle structural inequalities that mean women (and men) on lower incomes are the major users of both home credit and other forms of high cost credit.

Points to consider

• Methodological strengths/weaknesses: While little information on the methods used is included, the analysis is based on comprehensive desk-research and evidences consideration of a range of resources that suggests a thorough and robust approach.
• While methodological details are scarce, much of the analysis presented is from secondary resources that are robust and reliable (for example the Office for National Statistics).
• Generalisability/ transferability: This report is of significant interest to politicians, policymakers and other stakeholders who are interested in the home credit market, and of particular significance to those interested in gender-based analyses of the consumer credit market, both in general and with a specific focus on home credit.
• Relevance: The findings are situated in a UK context, though some of the learnings may be transferrable to other countries with similar lending practices.
  With the total number of UK home credit users at around 1.5 million, it is clearly a relevant and important piece of research in relation to the UK consumer credit market.