“To challenge payday lenders, we need to focus on the details”

Alt Twit logo 2Francis Davis

This article is part of a series on faith and finance.

On 23 October 2013 Public Spirit was formally launched in Westminster at an event which saw a panel of distinguished guests debate the question: ‘Can public faith help rebuild the link between morality and markets?’ In this response to that question, Francis Davis of the Cathedral Innovation Centre argues that religious organisations need to focus on details rather than talking only in general concepts and simple slogans. To respond to the challenge faced by modern payday lenders faith communities need to ‘think big’, moving beyond the established tradition of credit unions and looking to innovative social finance projects overseas.

Get a pdf of this article here

A good starting point for answering this question is: What is your theory of change, and what is your theory of value? If your theory of change is that you can sit in the Treasury, set some targets, and the whole of society will jump to meet those targets, then you are as much engaged in a sophisticated commitment to ‘trickle down’ as any neo-liberal. Because you have a kind of patronising hope that somehow, by something happening somewhere else, a whole series of intended or unintended consequences will make themselves felt at the grass roots. So in that sense I would add another dimension to what Jon was saying, that there is a conflict of values between the neo-liberals and the Aristotelians, but also between the neo-liberals, the Aristotelians, and those that still believe that bureaucracy can act rationally, without self-interest, without having any interest of its own; and that all of the budgetary conflicts that go on within institutions do not need to be made transparent, do not need to be democratised, and do not need to be broken open.

I say that particularly at the moment, because I’ve had a little sabbatical as a carer, so it has been really fascinating to watch a clinical commissioning group near me do a national comparison of all the psychiatric units for young children. Their criteria for allocation of resources to particular units has been what they call ‘speed of churn of the stock’. The ‘stock’ here would be kids under the age of 18, and the ‘speed of churn’ would be the speed at which you can get that ‘stock’ into the psychiatric unit, through the unit and out the other side again. So, of course, if you can stabilise very quickly, say, an acute case of anorexia, and move a girl with anorexia back home very quickly, you get a big tick. But, if you take a working class kid off a big estate and that kid has got schizophrenia, and all kinds of auditory hallucinations and the like, it is going to take a year to sort that young lad out – because he was horrendously beat up one night, for example. Then you fail all of those ‘churn tests’.


“In religious communities, it is really easy for us to reach for big normative categories like ‘faith’, ‘public’, ‘markets’, or ‘virtue’, and to use that to run away from focusing on details.”


Launch 7
Francis Davis at the launch of Public Spirit

So, how do we measure these things, and how do we unpack them? That is really important If you look at public swimming pools – and I’m doing a charity swim at the moment round every county, swimming a mile in each county – even they have immense variety nestling under a normative category:  Look at public swimming pools in Bramley. John Battle, sometime Labour MP, has turned Bramley swimming pool into a co-op. They had the first ever under water showing of jaws the movie the other night to raise money. In Jersey, the swimming pool is completely privatised and run by Serco. In Tunbridge it is a public-private partnership – that is, still owned by the local authority but half spun out. There are a load of hybrid things going on within the state, just as there are within marketplaces and faith communities. And whether you think that those are true mutuals or true ‘public service’ or not comes down to your theory of what value is, what decentralisation is, and what works.

Why is that critical for this conversation? Well, it seems to me it is very critical to this conversation because particularly in religious communities it is really easy for us to reach for big normative categories like ‘faith’, like ‘public’, like ‘markets’, like ‘virtue’ and to use such terms to run away from focusing on particular questions of detail, questions about what is actually happening. Take the example of Mary Jo Bane, who was Assistant Secretary for Children under Bill Clinton. She had a delegation of Catholic bishops come to her and tell her that the 25 per cent of Americans that represent the Roman Catholic community in America believe this – and she was sitting there with opinion polls privately carried out by the Clinton administration showing that they actually believed the direct opposite.

We talk in the same general terms. We talk about ‘markets’ as though there is a single capitalism. But what we now know from political economy studies is that there is as much variation in the way that markets function between Leeds and Bristol as there is between Chinese family enterprise, Bangladeshi family enterprises and more bureaucratic market structures from South East Asia. If you have read Joel Migdal or Alice Amsden the same point could be made about forms of state, as well as, it seems to me, about forms of public faith. Grace Davie has argued in her books there are at least two key traditions of what a faith or religion  is: firstly, just a belief or an idea; or secondly, a chain of memory, a complex set of social practices expressed in a series of institutions.


“If I’ve got to wait for three days for a credit union to get back to me, credit unions are the wrong institutional response to the aim of ‘competing Wonga out of business’.”


And crucially we duck the institutional question when we run with ‘faith’ as an idea: The thing about religious communities is they invent lots of institutions, and these too have a consequence on the way that resources are allocated. You don’t just go to a mosque on your own; you do it at the East London Mosque, or the Medina Mosque in Southampton. Those organisations then invest, and the way that they are organised, their governance structures, their internal organisation, the way that they use talents, the ethnic makeup –  all of these have a huge impact on the way that they organise their relationships with the market, and the way that they then turn round and engage with conversations about what market institutions and market patterns might look like or what might constitute ‘access’ to new services. And if we misunderstand or skip that institutional dimension then we end up with what I call the ‘Welby problem’. Archbishop Justin Welby is absolutely right to name payday lenders as a significant problem. And you will recall he said, ‘We are going to compete Wonga out of business’. So, right analysis, right aspiration: we need to constrain their ability to be in business, or perhaps screw up Wonga’s initial public offering so that it is not as interesting to investors, so they can’t grow so quickly.

But then your strategic response is like the Treasurer of Shell got captured by a bunch of community workers from the social responsibility office of the church, who think that credit unions can compete with a company like Wonga. A quick market test, ringing up few credit unions, will show that many have a three day response on loan applications. So, if I’m lying awake at one o’clock in the morning, absolutely fretting because my gas meter is going to be taken out by some repulsive person from the gas company in the morning, well, I can ring up Wonga, or I can get on the website for Wonga, and in 15 minutes I’ll get the money in my account. Or if I’m turned down by Wonga, which happens quite often for some people, they can get the money much more likely from Quick Quid, who can be more liberal because they are based off-shore. And, then I can go back to sleep, and I can sleep and I can be sane and look after the kids in the morning, and get them off to school and worry about all the usual things that parents worry about. If I’ve got to wait for three days for a credit union to get back to me, or the credit union simply can’t arrange the money on enough scale to be able to respond flexibly to my needs, those credit unions are the wrong institutional response to competing Wonga out of business. And so a ten year campaign to build credit unions as an alternative to Wonga becomes not really a response at all.


“Wonga only raised £70 million on their first equity round. That is not a lot of money by com-parison to the sorts of cash that we have sitting round in religious banking institutions in this country.”


So, what could one do from a faith base? Well, there are loads of examples across the planet, and because we think too small in the UK, we don’t often bother to go and look for them. But here is just one example, Neal Keny-Guyer is the Chief Executive of Mercy Corps, which is US based NGO, turns over 308 million dollars, based in Portland, Oregon. They looked at the position of the financial excluded at the bottom of the economic pyramid in Indonesia, and there was a massive issue around provision of finance to those trying to farm and pursue other micro-business opportunities at the bottom of the Indonesian economic pyramid. The aditional NGO response, traditional Catholic NGO response, traditional Christian NGO response, might be: ‘Let’s try and build a load of micro-credit unions on a small scale, and build it up from the bottom’. But that’s going to take years. So, Keny-Guyer, goes to the Gates Foundation, gets a multi-million US dollar grant, matches it from traditional fundraising from the NGO. He now has tens of millions of US dollars, and he goes into Indonesia, buys a major bank and over the next six months turns it into one of the largest micro-finance institutions in the country. So, it is now competing with the big banks, and also specialising in delivering its services to the bottom of the economic pyramid.

There are similar sorts of examples in Austria, and Keny Guyer’s Bank Andara in Indonesia is now being replicated in the Philippines and being rolled out in Mongolia as well. The equivalent here would be Bridges Ventures putting up 20 million pounds, and then that being matched by the religious philanthropic community – the might of the Jewish, the Christian and the Muslim communities together. And perhaps someone from Boston Consulting Group, who is training for ordination, who has got a bit of time on their hands; or a retired Goldman Sachs person who wanted to put their faith into institutional practice, would want to actually launch that and go into direct competition. Wonga only raised 70 million quid on their first equity round. That is not a lot of money by comparison to the sorts of cash that we have sitting round in religious banking institutions in this country. Something like that could be built, and be a more appropriate response with more capacity and flexibility than credit unions.  But, of course, if our theory of change as religious people is on the one hand stick with community development or on the other write an article for The Observer, issue a press release, have a gin and tonic with a minister, and eventually it will trickle down to Byker Wall in Newcastle, then we are part of that same misread institutional response either locally or via a national bureaucratic structure. We need to identify key allocations of resources, combine those with fresh amounts of talent, and launch a new set of institutions to combat poverty, or else we are going to become a little complacent, it seems to me, and let markets wash away with themselves, and leave the poorest of the poor stuck with the outcome of our tendency towards high minded visions without a project plan!

Francis Davis is founder of the Cathedral Innovation Centre and former advisor to government on faith communities and social action and from 2004-07 chaired The Observer/DTI Social Enterprise of the Year.

The image of the Public Spirit launch is included courtesy of Stephen Jones.

Leave a Reply