Economic and Social Research Council
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Taking the risk out of lending to low income groups

People on low incomes who find it impossible to secure affordable loans can now access finance more readily following a successful Knowledge Transfer Partnership (KTP) project jointly funded by Economic and Social Research Council (ESRC) and the Engineering and Physical Sciences Research Council (EPSRC).

Following the two-year KTP collaborative project, lending by East Lancashire Moneyline (IPS) Ltd, a not for profit Industrial and Provident Society that provides access to credit, savings and advice, primarily to low income individuals, is set to increase by 50 per cent from 2011 to 2012. Total lending by East Lancashire Moneyline to people on low incomes will top £10 million this year.

"Benefit claimants and others on low incomes typically have difficulty in obtaining loans because they fall outside the lending criteria of high street banks and building societies," explains Diane Burridge, Chief Financial Officer of Moneyline. "Our typical customer relies wholly or partially on benefits and has no alternative but to manage their finances from week to week, so when an unexpected item of expenditure occurs they often have little or no disposable income or savings to meet that need."

To help tackle the financial exclusion experienced by low income groups as well as reduce the risk of bad debts, researchers from the University of Salford worked in partnership with Moneyline to develop a consistent and objective framework of risk assessment for use in the process of loan approval.

Professor Sunil Vadera, Associate Dean of Research and Innovation, College of Science and Technology at the University of Salford explains: "The main aim of the KTP was to create a framework to assist loan approval at East Lancashire Moneyline by applying data mining methods to a real world problem where success would have a positive impact on improving financial inclusion."

Data-mining is the process of detecting patterns in data which can be used to inform decision-making models. "For this project we needed to really understand the socio-economic factors and personal circumstances that can influence loan approval for those on low incomes", Professor Vadera continues. Identifying patterns of data in, for example, cash machine use enabled researchers to create a web-based Credit Risk Assessment Tool (CRET) for use in the objective assessment of loan applications.

Using this tool has enabled East Lancashire Moneyline to move from a relatively simple and informal means of assessing loan applications to a consistent framework for risk management.

"Through the project there has been a significant improvement in the collection, storage and analysis of client data," says Diane Burridge. "There is also increased appreciation, by the underwriting staff, that social factors can have as significant impact on the client’s ability to pay. The KTP has helped us gain the confidence to move our business into more geographical areas and, as a result, more people now have access to affordable finance than would previously have been possible."

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Notes for editors

  1. This release is based on a Knowledge Transfer Partnership (KTP) project between the University of Salford and East Lancashire Moneyline (IPS) Ltd. The project was led by Professor Sunil Vadera, Associate Dean of Research and Innovation, College of Science and Technology, University of Salford. The KTP with jointly funded by the Economic and Social Research Council (ESRC) and Engineering and Physical Sciences Research Council (EPSRC).  
  2. You can watch the 'Enabling low cost loans' video clip for additional footage and information here:
  3. ESRC's Knowledge Transfer Partnerships strengthen the UK’s competitiveness and wealth creation by enabling research organisations to apply their knowledge to important business problems. The ESRC co-funded nine new KTP projects in 2011/2012 and 165 on-going projects with a total contribution of £2.6 million. Further information on Knowledge Transfer Partnerships:
  4. East Lancashire Moneyline (IPS) Ltd (ELM) was established in 2001. It is a not for profit Industrial and Provident Society. Further information see: 
  5. The Economic and Social Research Council (ESRC) is the UK's largest organisation for funding research on economic and social issues. It supports independent, high quality research which has an impact on business, the public sector and the third sector. The ESRC's total budget for 2012/13 is £205 million. At any one time the ESRC supports over 4,000 researchers and postgraduate students in academic institutions and independent research institutes. More at


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