There are 13m people living in poverty in the UK. These peoples outgoings and income are volatile and subject to affordability need to borrow money from time-time. The Owner of a Birmingham based micro finance business founded in 2007 that served this market was struggling to get onto of the business to get it back to profit and meet the impending FCA legislation and yet had the potential to grow and develop the business in the long term. The industry has been dogged by a history of greedy suppliers and customers desperate for cash creating a abused market and abused customers. The industry by its won admission has no strategy and no-one has created any measurable model that creates sustainability beyond a short term dependence on this type of lending. The fast growing £2.5bn+ market however is there to be served and it was clear the entrepreneurial business owner with the right support could make this happen.
The FCA legislation launched in 2015 rendered the competitions business models dead as it put to an end some loopholes and means to charge uncapped fees with compound interest rates that create customers a serious debt problem very quickly.
The branding was weak and we created “the fruitful company” fruitful being the benchmark for everything that we sell. The approach of the Ezar (meaning help) the loans business is doing what we can to help the customers which often is identifying the means to increase their income rather than or as well as lending money.
Substantial market research was carried out into b-b and b-c lending in this space. It was also identified that the industry is driven by the strength of the customer relationship. The financial model was created to figure out the main industry financial drivers: bad debt, cost of collection and the means of creating new business.
Bad debt was bench marked and FCA regulations studied to figure out whether it was possible to make a profit. At the start of December we changed the products, rates, loans, lending and customer process to reduce bad debt and recruit the right customers. Furthermore a pure lending business model is fundamentally unhealthy and needed a sustainable means of creating cash to fund growth and create a congruent product offer, so we created the Fruitful Retail business to serve the same customer base. The plan is to gift back profits to sponsor micro business to create sustainability. We have adopted Christian ethics to create a business with a heart for the poor and a cultural focus on enabling people to raise their aspirations and excel and thereby transform communities bottom up.
The bad debt norm in the industry is estimated to be c50%, and we have reduced this down to less that 1%. Revenue has increased by 30% from the same capital base and the business has moved from loss making to break even and a stable platform to profitably grow from. Having got the business model right, to move to profit the business needs more scale and debt funding.
By getting and resetting the customer relationships right, on time in full collections over the Christmas period were in excess of 95%.
“Fantastic I can’t believe your going to help me” “I thought as my finances were bad ages ago there would be no way of getting a loan with you” “Thank you so much for sorting my account, and helping me get a loan again”
“Happy not to be isolated” “Happy to get another chance to prove themselves” “Really pleased that there is somebody to talk to and see”.
The business is now small but scalable and we are ready to meet the FCA regulations and meet their criteria as our business model is compliant, customer centric and we are now in a position to profitably grow.
We are launching a number of other health and apparel businesses to compliment this customer segment to enable our customers become more Fruitful.