Big Issue Invest is at the forefront of developing new social investment products that aim to increase the amount of capital available to social enterprises and provide investment opportunities for socially-minded investors offering a spectrum of risk and return.
We are also exploring new ways of tackling financial exclusion that deal with some of the underlying causes of the problem. Currently we are leading on a project linking rent payment to credit scoring that could increase access to mainstream credit and other services for more than 1.5 million low-income social tenants.
We have partnered with Experian to tackle the financial, digital and social exclusion challenges faced by social housing tenants in the UK and will be working with housing associations, local authorities and key stakeholders across the public, private and voluntary sectors to collect up-to-date rental payment information on tenants living in social housing and feeding this data into the Experian Rental Exchange.
We are looking for more social housing landlords to join this important social initiative.
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Innovating to tackle exclusion
The Social Housing Rent Data Sharing initiative will add social rent payment data to traditional credit scoring models as a way of tackling financial exclusion. We are working in partnership with social housing landlords and organisations across the credit sector to develop this initiative.
In 2010, following three years of research and work involving credit scoring experts Experian, we published a report entitled The impact of social housing rent-payment data on credit scoring (Dec 2010, Sarah Forster and George Wilkinson).
A case of Catch 22
A key cause we identified was a simple case of ‘Catch 22’: there are millions of low-income people who are excluded from affordable credit due to the lack of a mainstream credit history. Since they have no history, they are more likely to be declined or pay a higher price for credit. This, in turn, contributes to keeping them in the poverty trap. And so the cycle of exclusion continues. If we could show that these people were keeping up their rent payments, then there was information that could help vouch for their ability to repay credit.
The study set out to test whether sharing social housing rent data with credit reference agencies and the lending industry would have benefits for low-income social housing tenants. The answer is an unequivocal ‘yes’.
What we found
• Sharing rent data would improve credit decisions for 30 per cent of social tenants, an estimated 1.56 million people.
• Integration of rent data into credit scoring models and / or decision systems would make mainstream credit more accessible and affordable to a significant number of social housing tenants. It would also result in less lending to those that could not support more credit –so reducing over-indebtedness and supporting more responsible borrowing.
• Rent-payment data is also of high value for enabling electronic identification, which would give tenants easier access to full banking services as well as a range of non-financial public and private services.
In 2011, we commissioned independent research consultancy Policis to assess the initiative from the tenants’ perspective. This report entitled The impact of sharing social rent payment data on the financial inclusion of social tenants: The tenants’ perspective (Jan 2012, Anna Ellison) found that the majority of social tenants were broadly supportive of rental data sharing with support highest amongst the young, credit users, workers and families.
Key benefits were seen to be proof of financial reliability, access to cheaper credit and automated evidence of ID and proof of address.
We are now working with a group of housing associations and the National Housing Federation to assess the best option to for a data sharing model that will deliver social benefits to tenants.
Our thanks to Friends Provident Foundation, Joseph Rowntree Foundation, Esmée Fairbairn Foundation, the National Housing Federation, Affinity Sutton, Catalyst Housing Group, Circle Housing, East Thames, Genesis, Hyde Housing, Peabody, Places for People, Raven Housing Trust, The Riverside Group, Selwood Housing and Southern Housing who have funded this project.
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