Newsmaker: Credit where it's due - Faisel Rahman Managing director, Fair Finance

Mathew Little

Moneylender who's trying to shift the balance of power away from the sharks.

Faisel Rahman is trying to convince the world he can make money out of reducing poverty. "We say let's make a profit, but not a ridiculous profit; let's charge interest, but not ridiculous interest," he says.

The background is hardly encouraging. The number of people going bankrupt is at a record high, according to official figures. We are a nation hooked on credit, the total debt owed by Britons standing at £1 trillion.

We are also a nation with the most unregulated credit industry in Europe, with companies that sell so aggressively they flogged loans worth £70,000 to a mentally ill man and offered a credit card to a dog in Manchester.

It is in deprived areas of the country that the industry really shows its dark side. Moneylenders prowl from to door to door offering loans to people desperate for cash - the only catch is the interest rate, which can reach 1,600 per cent APR. Loan sharks quite legally demand 8,000 per cent interest and confiscate benefit books, leaving people with £10 a week to live on.

But in one corner of east London, where pawn shops are a present-day reality rather than a pre-war memory, Rahman's organisation is trying to shift the balance of power.

Fair Finance, which has been formed with money from charitable trusts, the New Deal for Communities and a couple of banks, is a responsible lender in a sea of ruthless predators.

"There is a private sector approach, but we don't want to lend like that," says Rahman, the managing director. "We want to lend what you can afford to pay back, when it is appropriate for you to borrow money. We believe we can do this without charging 200 per cent interest."

In fact, Fair Finance charges 20 per cent, cajoles local banks into opening accounts for customers so they can re-enter the financial mainstream, and arranges affordable housing to make debts manageable.

It has made 50 loans since its launch in June, with 50 more pending.

The loans are for buying fridges, school uniforms or holidays. Many are to pay off existing debts. Ninety per cent of loans are to people on benefits.

Rahman's own career has spanned both micro-credit and the astronomical sums of City finance. He worked for the ground-breaking Grameen Bank in Bangladesh, which set off a worldwide revolution in poverty reduction strategies by offering small loans to women. By 1999, he was in the City as an underwriter for Lloyds. He insured the Space Shuttle Endurance for a cool £9.5bn. Fortunately, it wasn't the one that blew up in 2003.

Fair Finance is a three-year pilot, but Rahman is already seeking investors for the long term - from local government, housing associations and charities.

"I'd like to prove we'll get them a return," he says. "Not the return you'll get if you leave your money in Barclays - but part of your portfolio will be doing good."

If Fair Finance is too successful, however, it might attract some unwanted attention. Credit unions in some parts of the country have been attacked by moneylenders who don't like the competition. The Fair Finance shop in Stepney has a panic alarm and CCTV cameras outside. "If we're compromising people's livelihoods, in a relatively unregulated market, we have to be honest about the type of people who might take offence," admits Rahman.

Yet he has a strong distaste for the currency in which he deals. Years of exposure to the seedy underbelly of the banking industry in the UK have given him an aversion to debt. He used a credit card to finance the creation of Fair Finance and make the initial loans. "But as soon as the first grant came in, I cut it up," he says.

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