Social purpose fintech Salad Money has closed an impact investment of £1.2m with Ceniarth, a family office which funds market-based solutions to benefit underserved communities, part-guaranteed by not-for-profit financial inclusion organisation Fair4All Finance.
Salad Money is a social enterprise and community development finance institution (CDFI) serving full-time key workers. Its customers typically earn £20-£30,000 but are excluded from mainstream credit because they have a low credit score or lack a credit file completely. Despite this, Salad’s customers, many of whom work in the public sector, still need to borrow and want to avoid high-cost and illegal loans. Each of Salad’s loans saves a typical customer approximately £500 in interest compared with the alternatives available to them.
It will use the Ceniarth loan – initially £1.2m over two years but with the potential to be extended to £2m over five years – to meet rocketing demand. The deal is set to be a “blueprint” for enabling more impact investors to back UK CDFIs.
With at least 1 in 3 adults now facing difficulty accessing credit from mainstream lenders, and more than 20 million UK adults financially underserved, campaigners, journalists and politicians across parties have called for more investment into “social purpose” lenders like CDFIs.
More than a quarter of UK adults would struggle to pay an emergency bill and millions are borrowing from illegal moneylenders or loan sharks. CDFIs including Salad Money are purpose-driven lenders which offer a cheaper option to people excluded from mainstream finance.
Salad uses Open Banking and machine learning to assess affordability, so applicants aren’t penalised or unfairly excluded for having an impaired credit score. Many of its customers would automatically be turned down by traditional lenders which use credit scores, leaving them with limited options when they need credit, which 8 out of 10 in the UK do from time to time.
In addition, Salad gives tailored financial education, support and signposting to many applicants whether or not it can offer them credit. It has built a trusted reputation with partner NHS Trusts and among public sector workers. In 2022-23 it also helped applicants identify £36.3m in unclaimed benefits they were entitled to each month – an average of £348 each (£4,176 per year) – and access £130,000 in hardship grant awards.
Guarantor Fair4All Finance, the not-for-profit financial inclusion organisation, is already a social investor in Salad Money, having made a £5m investment in 2021 and a further £2m investment in 2022 through its Affordable Credit Scale Up Programme, designed to increase the supply of fair and affordable credit for people in financially vulnerable circumstances.
Diane Isenberg, Ceniarth’s Founder and Managing Director, said: “As a major lender to the mature, US CDFI sector, we have been closely watching developments in the more nascent UK CDFI landscape and looking for ways to support growth. With millions of people locked out from access to fair credit even if they can afford to repay it, the CDFI sector is key to building a more inclusive consumer credit market.
“Salad Money is providing a vital service to public sector workers and others who would otherwise be subject to highly predatory lenders. Salad’s support in educating consumers about their options is also critical. We are appreciative of the role that Fair4All Finance is playing in extending a guarantee for our loan. I hope this deal inspires more impact-focused investors to back the UK’s social purpose lenders.”
Phillip Hyett, CFO at Salad Money, said: “We are thrilled to close this innovative transaction which will directly help several thousand financially vulnerable customers. Ceniarth is an excellent long-term partner for Salad with impressive pedigree in impact investment and Fair4All Finance have demonstrated great imagination and determination to help facilitate the deal. We hope the investment structure will serve as a blueprint to galvanise more funding into the affordable finance space. It has been a pleasure working with both parties.”
Holly Piper, Investment Director at Fair4All Finance, said: “We’re delighted to be able to play a part in this catalytic investment, which will ensure thousands more people are able to access fair and affordable credit from Salad Money. We know the impact a small, affordable short term loan can have on people in financially vulnerable circumstances, helping smooth incomes, meet unexpected costs and build financial resilience. We’d love to see more investors follow Ceniarth’s lead and further unlock the potential of the UK’s community finance sector.”
Salad is a member of Responsible Finance, which represents the UK’s community finance sector. The Financial Conduct Authority, MPs from the UK’s three main political parties, the Centre for Social Justice and the Joseph Rowntree Foundation have all called for an urgent expansion in community lenders such as Salad, so people excluded from mainstream credit have better and fairer options available.
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