Microcredit can kick start self-employment

It pains me to say so, but the coalition have come up with one good idea. They call it ’troubled families’. We might call it ’family intervention plus’. This programme offers £458 million over three years to help turn round personal and financial problems, and focus on getting all adult members of the family into work.

One thing, at least in rhetoric, which unites both Labour and the Conservatives, is that work is the best way out of poverty.

The trouble is that government action has often been top-down, and has been about trying to fit those in particular neighbourhoods into a broader uniformed pattern of behaviour.

What is needed is a two-fold approach.

The first is the targeted and unified approach which the ‘troubled families’ initiative is intended to achieve. It does, however, need to go a great deal further in uniting the range of benefits and therefore income available into something more positive.

Secondly, it needs to take people where they are and address the potential for them finding a niche within the immediate and broader community, which will lift their self-esteem and self-respect and give them a feeling that they really can make a contribution.

One way we can do this is through ‘microcredit’, which provides affordable loans specifically to kick-start self-employment.

Where there is very deep-seated poverty and a tradition of rejecting more conventional pathways to learning skills and taking job placements, we need to think imaginatively. Microcredit offers this opportunity.

To begin with, it would take people who are either on ‘social fund’ loans, or more likely the two-and-a-half-million people who are on ‘home domestic credit’ at most incredible APR repayment rates, and work with them.

They have a loan, they have problems in paying it back, they are captured by the interest payments, which make it impossible to escape from the trap.

Linking affordable credit with microcredit would ensure that people were given the opportunity to borrow at acceptable rates, but not simply to pay off existing debts. Instead, this would create an account on which they could then draw (using of course existing credit unions) to provide the advice as well as the funding needed for them to be able to start earning a living.

Yes, a lot of it would be fairly menial and basic work. But if people need ironing doing, meals preparing and delivering, basic repair and gardening work, then why not?

Getting paid means being able to pay off the debt; paying off the debt whilst having an account offers people the chance of building up their own credit.

In this way, we can then move people into an optimistic situation of genuine hope. Let’s not fall into the trap set David Cameron’s in his recent welfare proposals: we too, will need to think radically about conditionality but reciprocity means a key role for government not its disengagement.

David Blunkett is MP for Sheffield Brightside and Hillsborough

This article was originally published in the Fabian Society’s Summer edition of the Fabian Review. It forms part of the Fabian Society’s Next State project. We’ll be publishing other articles from the series this week.

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