Answer extracted from The Responsible Finance Podcast — listen to the full episode below.
How has the decline in home credit availability contributed to illegal money lending?
When legal credit options disappear, borrowers don't stop needing money—they turn to illegal alternatives. Over the past decade, home credit availability has collapsed by 90%, leaving vulnerable households with no legitimate path to affordable borrowing, a dynamic that mirrors the profile of people now using illegal lenders.
The connection is direct. The traditional customer base for legal home credit—women in rented housing earning between 20,000 and 25,000 pounds annually, borrowing for seasonal needs like Christmas and summer holidays—now represents the exact profile of illegal money lending users. This overlap is not coincidental; it reflects a supply vacuum being filled by illegal operators.
As Neil Alexander explains in the episode, the tightening of credit availability in the legal market has had a predictable outcome: those unable to access lawful lending products migrate toward illicit money lenders. Research conducted by Fair4All Finance, working with 287 people with lived experience of illegal money lending across Glasgow, Port Talbot, Preston, and South London, revealed this pattern consistently.
The income profile of illegal money lending users runs counter to assumptions. Users typically borrow around 3,000 pounds and are often employed—70% of current users and 52% of previous users have jobs. These are not people outside the formal economy; they are workers systematically locked out of regulated credit products, a detail explored in depth in the full discussion on Listenly.
"If people cannot access forms of credit in a legal way, they will begin to access it in an illegal way."
Neil Alexander — Markets and Consumer Insights Manager at Fair4All Finance. Alexander has spent decades working in financial inclusion and community development, beginning with the Tony Blair government's Policy Action Team 14 in 1997 focused on financial exclusion. He established the Westerhales Community Banking Agreement with Bank of Scotland, opening approximately 1,800 bank accounts for unbanked people in an 18-month period, and has since worked as a consultant with multiple Community Development Financial Institutions and lenders before joining Fair4All Finance in August 2021.
The policy implications are severe. When affordable, regulated credit products are withdrawn from the market, the assumption that individuals will simply forgo borrowing is proven false. Instead, as explored in The Responsible Finance Podcast, they turn to predatory lenders charging rates that trap them in debt and expose them to exploitation. The 90% reduction in home credit is not a sign of market success; it is a policy failure that has created a demand vacuum illegally filled.
Understanding this link matters for regulation and financial inclusion strategy. The decline is not inevitable—it reflects decisions by lenders and regulators that have made legal high-cost credit virtually inaccessible for low-income earners. Without intervention to restore accessible credit pathways, the illegal lending market will continue to grow, serving customers who remain credit-worthy but legally invisible.
See also
What is the income range and employment profile of people who resort to illegal money lending?
Research found that individuals using illegal credit had slightly higher income than anticipated, with an income range of 20,000 to 25,000 pounds. About 70% of current illegal money lending users are employed, compared to 52% of previous users.
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