What results has the No Interest Loan Scheme (NILS) pilot delivered — and how did the guarantee structure actually work?
The NILS pilot used a Treasury-backed guarantee covering 80% of each loan's principal as a straight guarantee, with the remaining 20% covered by an admin payment contingent on lenders demonstrating they had attempted collection in their usual way. This shared-risk model enabled £10 million to be lent to 14,000 people, with overwhelmingly positive customer feedback and bad debt rates that came in lower than most stakeholders had anticipated.
The significance of those numbers goes beyond the headline figures. The pilot directly challenged the assumption — widely held across mainstream finance — that lending to people in vulnerable circumstances is inherently high-risk. In practice, as Kate Pender explains in this episode of The Responsible Finance Podcast, many of the myths surrounding this demographic did not play out. Repayment behaviour proved more resilient than expected, which matters enormously for building the evidence base needed to scale no-interest lending further.
The No Interest Loan Scheme (NILS) is a lending model designed to provide small, affordable loans to people who would otherwise have no access to fair credit — without charging any interest. The UK pilot operated with a government-backed guarantee to de-risk participation for lenders and attract them into a market they had traditionally avoided.
The structure itself is worth examining closely. By splitting the guarantee into an 80% straight coverage and a 20% performance-linked admin payment — tied to lenders demonstrating good-faith collection efforts — the model created accountability on both sides. Lenders were protected from catastrophic loss, but not entirely insulated from outcomes. This nuance was deliberate: it kept lenders engaged with the quality of their own lending decisions rather than simply relying on a full backstop.
"You shouldn't need blood pressure medication to be attempting innovation in financial services."
— Kate Pender, Chief Executive, Fair4All FinanceThe pilot sits within a much larger picture of unmet demand. Research commissioned by Fair4All Finance estimates approximately £2 billion of unmet lending demand in the UK that could be commercially viable, compliant lending — and up to 3 million people potentially borrowing from illegal lenders. The NILS results demonstrate that bringing even a fraction of that demand into safe, regulated channels is not only feasible but produces better outcomes than many in the sector predicted.
About Kate Pender
Kate Pender has been central to Fair4All Finance since the very beginning — joining at inception on a part-time secondment to lead the pilot scale-up programme, which focused on making the organisation's first investments into community development finance institutions (CDFIs) and credit unions across the UK.
She then took on responsibility for running the first phase of Fair4All's COVID grant programme in 2020, a fast-moving and high-stakes initiative designed to protect responsible lenders and their customers during an acute period of economic shock. That experience cemented her move into a permanent role at the organisation, and she subsequently applied for — and was appointed to — the Chief Executive position.
Before joining Fair4All Finance, Pender built a long career in economic development, designing and running programmes to help SMEs and small businesses grow faster. That background gives her a grounding in how markets are built and sustained over time — and informs her current work bridging the gap between community lenders and mainstream financial institutions.
Her direct involvement in structuring and delivering the NILS pilot, alongside her broader role shaping Fair4All's strategy on financial inclusion, makes her one of the most authoritative voices on no-interest lending and the challenge of serving people excluded from mainstream credit in the UK.
See also
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 — a structural cost disadvantage that makes small-sum lending far harder to sustain.
The unit economics work, conducted with Responsible Finance and supported by community development finance institutions, revealed how persistent the gap is in making small-sum lending commercially viable for responsible lenders serving the most financially excluded.
Fair4All Finance commissioned novel research combining a classic quantitative study conducted with Ipsos Mori and qualitative work carried out by an independent team, finding that up to 3 million people in the UK may be borrowing from illegal lenders.