Faisel Rahman is a social entrepreneur with a vision. He has successfully introduced microfinance to a segment of the financially excluded in the UK, challenging the way in which banks underserve the poorest and leave them at the mercy of predatory loan sharks. The non profit organisation Fair Finance was founded by Rahman in 2005, using principles he developed whilst working as an intern for Professor Muhammad Yunnus, winner of the Nobel Peace Prize and founder of the Grameen bank.
Rahman describes himself as working in the poverty business. He caters to clients who were previously reliant on doorstep lenders and loan sharks, often caught up in debts which carried interest rates of over 1000%. Rahman’s aim is to lend small amounts to poor people excluded from mainstream lending and demonstrate to banks that such clients are creditworthy.
By developing relationship banking rather than focusing on technical risk analysis, Fair Finance has a remarkably low default rate of just 6%. Tellingly, Rahman says, “Default has nothing to do with income levels and everything to do with character.”
The clientele which Fair Finance deals with are primarily women with no established credit history and recent immigrants. Rahman describes them as ‘sub prime risks’. All are trapped in poverty which is endless once they become indebted to predatory lenders. Fair Finance works to consolidate clients’ debts, issues personal loans and supports start-up businesses with small loans.
Although run as a non profit organization, Fair Finance is not a charity, and charges interest at around 35%. All profits are reinvested into the company, which hopes to attract wealthy investors who are interested in investing in taking a risk.
Fair Finance works to compile credit histories for its clients through its own database, in order to influence mainstream finance lenders to promote credit to those excluded through poverty. Rahman’s aim is to transform the provision of financial services to those reliant on predatory lenders.
Fair Finance is expanding its community-based offices through the poorest boroughs of London and could well serve as a model for others who are influenced to branch into microfinance. There are an estimated six million people in the UK that are dependent on pay day loans, home credit and loan sharks. The benefits of microfinance are currently only available to thousands through Fair Finance. Where microfinance has proved successful it has helped to eradicate the shackles of poverty.
Fair Finance is attracting the notice of some of the mainstream lenders such as Barclays bank. As well as influencing mainstream lenders, Rahman also wants to tackle the predatory lenders that prey on those not serviced by mainstream lenders. He typifies his goal when he says, “There is no reason why all finance shouldn’t be fair finance.”