Whilst Wonga broke some rules, and their business model was flawed this proposal from the church of England is utterly insane. When i ran a microfinance business in Birmingham i met the Bishop of Birmingham and i shared the good opportunity to leverage these businesses to create sustainability and enterprise, but no Christian would invest so we wound the business down when the risk outweighed the reward in 2014. This article shows despite the hype COE have no idea about the economics of lending to these communities, and to the contrary at 0.8% per day capped to 100% interest its tough to make money at those levels. APRs whilst they have to be quoted for comparative reasons and to meet FCA regs are misleading and inflammatory The grim reality is that closing down even Wonga these people will be pushed to the real loan sharks where there is no regulation and a real risk to the customers safety. There is a tragic misunderstanding of how these businesses serve communities and how necessary they are to those “just about managing” and there are about 15m of them in the UK.. I am hoping to get involved with the recovery of Wonga with a fund so lets see!
Contrary to the press Wonga serviced a legitimate product and market need. Yet flawed: 1. tech model undermining the customer relations as per Provident. 2. Flawed business model aka carillon, hof 3. had weak management unable to: a) put the business interests first, b) correct the flawed business model or c) achieve adequate governance & control key processes. I used to chair such a business the rates are capped and its important that the service is provided at a profit. At the current caps set by the FCA that’s very tough. If you want to know more go out with a door – door money collector then you’ll get it, Its a completely different (hidden) world. The caps mean that the rates never reach gt 34% over 30 days or hgt 100% of the loan. The apr has to be legally quoted as a comparator but its pretty misleading because costs now never materialise on an apr basis, these are short term loans. Misaligned action – Wonga collapses into administration – no surprises?
http://www.bbc.co.uk/news/business-45359395
https://www-bbc-co-uk.cdn.ampproject.org/c/s/www.bbc.co.uk/news/amp/uk-45534283
