Four thousand low-income families applied for loans to buy groceries in the first day of a credit fund opening for Christmas, food retailer Iceland has revealed.
The Iceland Food Club, which was launched in August, allows customers to apply for “affordable micro loans” between £25 and £100 on a pre-loaded card, which can be used in any Iceland or The Food Warehouse store. The loans are repaid at the rate of £10 a week, and are available in six annual windows coinciding with school holidays, when family finances are usually most stretched.
Iceland Foods’ managing director Richard Walker said was intended to tackle food insecurity, however, Simon Dukes, boss of Fair For You, the ethical loan company which has partnered with Iceland for the initiative, said the scheme is “not a silver bullet” for families battling food poverty.
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Around 50,000 people applied for micro-loans from Iceland in its first week after the scheme launched in August, representing 50 customers for each of Iceland’s 1,000 stores. The scheme is only available to families on a low income, and, according to Mr Dukes provides people with a choice if they don’t want to go to the food bank to feed their family.
He 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” and was clear that Iceland’s 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," he said. “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. 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."
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.
Iceland managing director Richard Walker tweeted. “Looks like the loans are being spent almost as soon as the money is loaded onto the cards. We’re keen to help those most in need through these tough times.”
Previously, Mr Walker had said that it was only right that businesses such as Iceland should ask what it can do to help people struggling n the current cost of living crisis. Speaking on his blog when the Food Club was launched in August, he said: "In recent months, we’ve seen customers increasingly rely on food banks and struggling to feed their families, which is why we’ve come up with the idea of The Iceland Food Club. This is specifically designed to help families manage their finances as the cost of everyday essentials continues to rise, despite our best efforts to hold our own prices down as far and for as long as we can.
"Some critics have been quick to come forward and say that buying food on credit cannot be the answer. Usually, I note, these are middle class people who have no difficulty accessing mainstream banks themselves, and would not think twice about paying for their own weekly shop with a credit card. Iceland Food Club is dedicated to helping the staggering 20 million of our fellow citizens who struggle to access credit from mainstream institutions.
"We are also deliberately making the loans available only in school holiday windows to ensure that they are used for smoothing out incomes rather than inducing permanent dependence. There are currently 8.4 million people in food poverty in the UK, and I really hope that our Food Club will help a significant number of people to break out of this depressing cycle."
The Iceland Food Club was trialled in parts of Wales, Yorkshire and North West England, before being rolled out nationally in the summer. You can apply for a card here.
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