One of the most discussed topics in the UK at the moment is about payday loans : short-term loan at a very high rate of interest which is given to those with low income and paid at the end of the week or month . Taken on an annual basis , APRS is said to exceed 1,000 percent , while banks can borrow from the Bank of England at an annual interest rate of 0.5 percent , and rich people can borrow at a single-digit percentage rate , it seems unfair to many people of their poorest counterparts should be forced to pay a much higher rate . Justin Welby , the Archbishop of Canterbury , has proposed waging war against payday loan companies to establish more credit unions to make loans with lower interest rates but so far they are few and far between and by no means universally available . Better yet would be interest-free loan revolving scheme provided by the national welfare program .
Payday loans mostly quite small . One example that is often cited is a loan of £ 100 to be paid at the end of the month with an additional cost of £ 30 or flowers . Even if the borrower continues with his / her payments , it is clear that the 30 pounds lost and borrowers are forced to live on a monthly income reduced by this amount . It is not surprising , then , that many borrowers behind in their payments and find themselves paying more and more interested in debt swells . Payment of interest or costs , however small , means the loss of funds to meet essential needs . It is difficult to understand how poor people in debt can actually help to improve and effectively reduce the debt / her income .
Why do people get into a position where they need a loan until payday ? Most people can be expected to plan their monthly expenses to be slightly less than their monthly income . The problem seems to come when large unexpected bill due. So what is needed is an opportunity to spread the payments over a longer period of time , ideally without increasing costs , and this can only be achieved with an interest-free loan .
What is needed is the funding provided by the government , or perhaps by some great charities , of which every citizen could take out an interest-free loan , up to the limit set can be adjusted from time to time in accordance with the state of the economy . When a loan is repaid, the funds will be available to be withdrawn at any time of need , designated funds assigned for every citizen to live . The justification for each initial loan will require careful assessment of the needs , and referral by the Citizens Advice Bureau may locally accepted criteria , with a revolving loan subject only to the payment . The maximum loan size is limited , say 500 pounds , will help to prevent the misuse of the main scheme , but too many restrictions would be counter - productive and encourages applicants back to the payday loan provider .
There will need to be penalized for late payments , but it does not involve the borrower to pay more and more increase / her financial burden . The threat of reducing the amount available for borrowing in the future may provide sufficient incentive for prompt payment , but the next good record of payment must work to restore the original limits . The fact that many people regularly take out a payday loan and manage to keep up with payments , regardless of the cost , shows that more people should be able to maintain an interest-free loan repayment .
At the moment efforts are being made to streamline the welfare benefits system difficult to justify other forms of benefits . But what is being proposed will help reduce the cost of credit for a lot of people with a cost-effective manner . The loan will help people in low paid jobs , as well as those on state benefits , to effectively increase their purchasing power to meet the rising cost of living . From the example above , avoid payday loans would mean that every £ 100 interest-free loan will provide savings of around £ 30 to the borrower to be used and circulated in the local economy instead of being drawn into the coffers of payday loan companies .
Provide interest-free loans will involve only administrative costs scheme and there is a bank and a post office can be used as an agent . Bad debts can be expected to be slightly smaller because the number of individuals and failure to pay will reduce or cut - off access to further loans . The Archbishop of Canterbury said that he wants to force the payday loan companies out of business by encouraging credit unions . A revolving interest-free loan scheme will provide church leaders with a much more powerful weapon .
John Powell
To learn more about life in general and compelling story of the grassroots industrial revolution in the turbulent Ghana the second half of the twentieth century , read John Powell's novel The Colonial Gentleman's Son and Back to the Garden City or account of non - fiction The survival of the Fitter . Further details of the books and photographs of the informal sector artisans of Suame Magazine in Kumasi will be found on the following websites .
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