How is Fair4All Finance using consolidation lending pilots to make guarantee funds more self-sustaining?
Fair4All Finance has launched pilot work around consolidation lending — widely acknowledged to be more profitable than most other lending constructs when executed well — and has built in a profit-sharing mechanism specifically designed to test whether the profits generated can be recycled back into the guarantee fund, making it self-sustaining over time rather than dependent on perpetual external subsidy.
The pilot portfolio is deliberately balanced: roughly 80% of the lending sits close to lenders' existing risk tolerance, while the remaining 20% extends well outside of it. This split allows Fair4All Finance to test a broader range of risk profiles within a single structure, gathering real data on how different types of consolidation lending behave under a guarantee — without exposing the entire portfolio to unproven risk territory at once.
The profit-sharing mechanism is the genuinely novel element here. Rather than treating a guarantee fund as a one-directional resource that absorbs losses and is periodically topped up, the design asks whether a sufficiently profitable lending type — like consolidation lending — can generate enough return to flow money back in. If the pilot validates this, it opens the door to guarantee constructs that become increasingly self-funding. You can hear Kate Pender discuss this approach and Fair4All Finance's broader appetite for testing innovative guarantee structures in full on The Responsible Finance Podcast on Listenly.
"You shouldn't need blood pressure medication to be attempting innovation in financial services."
— Kate Pender, Chief Executive, Fair4All Finance
About Kate Pender
Kate Pender's involvement with Fair4All Finance dates back to the organisation's very inception in 2019, when she joined on a part-time secondment to lead its pilot scale-up programme — the work that made the first investments into community development finance institutions and credit unions across the UK. That early-stage role gave her direct, hands-on experience of the structural barriers facing alternative lenders and the realities of deploying capital into underserved markets. She then led the first phase of Fair4All Finance's COVID grant programme, a high-stakes operation launched in 2020 to rapidly support community lenders under severe financial pressure. Having demonstrated the breadth of her contribution, Pender moved into a permanent role and subsequently applied for and was appointed to the Chief Executive position, making her one of the few leaders in the sector who has built a complete, internal view of the organisation from the ground up. Before Fair4All Finance, her career was rooted in economic development: she spent many years running programmes designed to help SMEs and small businesses grow faster, giving her a grounding in programme design, impact measurement, and the systemic levers that determine whether financial products actually reach the people who need them. That combination of practical programme management, early-stage risk-taking, and strategic leadership is precisely what lends authority to her perspective on innovative guarantee constructs and the long-term sustainability of mission-driven finance.
See also
The NILS pilot operated with a Treasury-backed guarantee covering 80% of the loan principal as a straight guarantee, with the remaining 20% covered by an additional layer of protection. The pilot lent £10 million to 14,000 people, with bad debt rates lower than most stakeholders had expected.
For an approved loan, a CDFI can pay as much as 70 times more to a credit reference agency for the data it needs compared with a mainstream finance provider. This structural cost disadvantage makes it significantly harder for community lenders to achieve the unit economics needed to scale affordable credit.
The unit economics work, conducted with Responsible Finance and supported by community development finance institutions, revealed how persistent the gap is between the true cost of delivering small-sum lending and the rates that are both affordable to borrowers and commercially sustainable for lenders.