A new IFISA-eligible bond offer has been launched on impact investing platform Ethex by Salad Money, an innovative ethical finance provider. Salad Money is a pioneer in using Open Banking to lend sustainably to consumers who suffer financial exclusion due to the flawed credit scoring system.
Within days of opening, the bond was around 70% of the way to its initial target of £500,000, demonstrating a strong appetite for ethical finance from Ethex’s community of 26,000 active investors. It is expected the target will be reached ahead of the May closing date.
Tim Rooney, CEO of Salad Money , said: “Every pound raised on Ethex will be used for lending capital, rather than business overheads. Each time a loan is repaid we recycle every pound meaning that £500k raised will facilitate over £60 million of affordable loans over five years for thousands of workers hindered by poor credit scores.”
What is an Innovative Finance ISA?
Investments into this bond are eligible to be held within an innovative finance ISA (IFISA), through which eligible crowd-funded investments up to £20,000 can be sheltered with tax-free returns. This was a draw for investor Manuel Peleteiro, CEO of InBest, and a former investment banker, who said:
“I’ve invested half of my IFISA allowance (£10k) into Salad’s raise because of the 10% forecast return and the fact that all of my investment is being lent out many times over to people that need it and can afford it. Salad has an industry-leading loss ratio because they are so good at using open banking to accurately assess who can afford to repay. I know Salad’s proven business model very well because they’ve embedded my firm’s technology within their application journey to help applicants identify hundreds of pounds each in unclaimed benefits.”
Whilst the average investment into Salad’s Ethex bond to date is more than £4000, the minimum investment allowed is £250.
Salad Money is a social purpose lender committed to changing the system by offering:
- Affordable and fair loans, that have already been accessed by over 50,000 people in the UK.
- Rates that have helped customers save an average of £497 in interest each compared to other credit providers that they can access (based on an average loan amount of £973).
- A pioneering scoring system using Open Banking data and human decision-making that sees beyond the credit score.
- A lending business that in 2023 helped people access £135,000 in hardship grants.
- A built-in calculator enabling applicants – all of whom are employed – to identify £36.3m in unclaimed benefits they were entitled to but not claiming each month, an average of £348 each (£4,176 per year; 2022-2023 figures).
Fair For You breaks £500,000 raise target
Salad’s raise follows a successful raise by ethical lender Fair for You which has just smashed its £500,000 target on the platform. Great Western Credit Union, whose two bond offers raised £950k from 320 individual investors, also benefited from an appetite for community finance investments as borrower demand outstrips supply of fair finance due to cost of living pressures.
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Who is Salad Money?
Salad Money is a social enterprise set up in 2019 to offer people with full-time jobs who have poor, thin, or non-existent credit scores an alternative to high cost lending; it says its process is fairer and more transparent for the people it serves, who otherwise would be at risk of borrowing from higher interest and even illegal lenders. But as demand “explodes” it wants to ensure it extends its capability to make fair decisions.
Millions of people in the UK have difficulty accessing affordable credit from mainstream lenders despite having the ability to repay it. Flaws in credit scoring, which powers many traditional lenders’ affordability checks, unfairly limit many. While many regulated yet high-cost sub-prime lenders have failed or closed in recent years Salad and other community development finance institutions have witnessed growing demand.
Lisa Ashford, CEO of Ethex said: “Investment opportunities with ethical finance providers are gaining popularity with the Ethex audience. These successful raises are superb examples of retail investor interest in supporting community finance firms that are taking action where the UK banking system has failed hundreds of thousands of families across the UK.”