Worries over the role of the moneylenders (that’s excluding the banks, whom some think don’t deserve that name any more) is growing.
Wonga is but one of the many lenders to those who cannot really afford to borrow. But it’s catchy name means it will receive more adverse attention than most. Yet CSR strikes even here: in an effort at PR, Wonga has launched openwonga.com a website that details how it all works and why it is not such a bad thing. This points out that they have made 7 million loans over the last 6 years and that (only?) 1.2% of those were extended three times. But it is not clear what happens after a loan has been extended 3 times: while that is the maximum number of extensions Wonga allows, can you take out another loan on top? And 1.2% of 7 million is 84,000. It’s a shame there is no analysis of those loans. Or the number that have been tipped into bankruptcy as a result.
But that is all for the UK, yet Wonga also operates in South Africa, Canada and Poland. The national websites for those operations do not have similar statistics pages. However, under the title of ‘Responsible Lending’ they do helpfully point out that ‘Wonga is not the cheapest way to borrow money.’
Part of the solution is to promote credit unions, a form of social enterprise that may charge high rates of interest, but not the hundreds of percent that the likes of Wonga charge. So perhaps the main part of the solution is simply to limit the interest rates that can be charged.
People’s needs should be given priority over the needs of the market.