An independent report, carried out by the Centre for Responsible Credit, found 92 per cent of customers who took out loans either stopped using food banks or reduced their food bank use.
The access to credit saw 71 per cent of customers indicate they were less likely to fall behind on bills like rent and council tax and the same amount said they were better able to cover essentials. There was also an 80 per cent fall in the number of customers using loan sharks.
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Customers paid interest on loans during the pilot phase of the project but now Iceland has decided to make the loans interest free as the scheme rolls out nationwide.
Anyone can apply for the Iceland Food Club to take out a micro-loan of between £25 and £100 with the pre-payment card available to use only in Iceland stores or online. Repayments are set at £10 a week while customers can choose which day of the week repayments come out of their bank account.
The scheme is available to use up to six times a year with a total limit of £100 outstanding at any one time.
Ethical lender Fair For You, which has previously been supported by the Big Issue’s social investment arm Big Issue Invest, is working with Iceland to provide credit through the scheme.
Simon Dukes, Fair for You chief executive, said the partnership offers people who may struggle to access mainstream credit a way to cover food bills without turning to high-cost lender that can push people further into debt.
“Nobody should have to go hungry in order to feed their kids, or be forced into making impossible decisions between putting food on the table or having hot water,” said Dukes.
“Our mission at Fair for You is to provide affordable credit to those who need it, to ensure they are not ripped off by exploitative lenders. We’re proud to be working with Iceland to operate the Iceland Food Club.
“Now that it has launched nationally, it gives plenty more families the opportunity to get the groceries they want, improve their diet and enjoy family meals together, while also getting a better handle on their finances.”
The cost of living crisis is driving more people to food banks to stave off hunger at a time when food banks themselves are battling to overcome the challenge of rising energy bills and food costs to stay open.
Labour MP Ian Byrne has been campaigning for a human right to food to tackle food poverty across the UK in recent years.
He told the Big Issue that Iceland’s intervention is “welcome” but demonstrates the need for wider systemic change to end hunger.
“Any initiative that helps hard pressed families at the moment would be welcomed in my constituency and beyond so a thank you to Iceland for acknowledging this fact,” said Byrne.
“Another huge help would be for food price rises to be absorbed by corporate profits, so that these price rises are not passed onto customers.
“All this highlights a broken system and why we need fundamental structural change to prioritise the needs of the very people I am elected to serve. It also brings into stark contrast why we need a Right To Food, and food poverty tackled at its root causes, because we must be demanding change and a fairer society for all.”
Campaigners such as Independent Food Aid Network’s (IFAN) Sabine Goodwin have previously called for people facing food insecurity to be given cash to help them afford food.
“People on low incomes need all the help they can get and interest-free loan schemes can be invaluable,” Goodwin, the coordinator at IFAN representing more than 550 independent food banks around the UK, told The Big Issue.
“However, micro-loans to spend with Iceland will not address the root cause of a person’s struggle to afford food. As inflation soars, people need immediate and direct cash payments to boost their incomes as well as adequate social security payments and wages to address escalating poverty in the long term.”
Head here to apply for the Iceland Food Club Card.