Monzo and Fair4All Finance pilot aims to open up low-cost credit for UK consumers with poor credit histories

Addressing a growing credit gap

Monzo and Fair4All Finance have unveiled a pilot aimed at widening access to low-cost borrowing for UK consumers who struggle to obtain mainstream credit, in a move framed as both a commercial test and a financial inclusion initiative. The partnership centres on an updated version of Monzo’s Flex Build product, which is designed for customers with thin or poor credit histories and now uses a one-off deposit to unlock a borrowing limit of up to £250.

The overall goal

The initiative comes against a backdrop of rising credit exclusion. The companies said more than 16 million UK adults face barriers to mainstream borrowing, up by about 30% since 2018. Fair4All Finance, a not-for-profit body focused on financial inclusion, is backing the pilot with a partial guarantee of up to £7m, sharing the risk of lending to customers who might otherwise be turned away.

Supporting the transition to mainstream credit

The product is intended to help borrowers build a repayment record and then move on to standard credit. Repayments run over fixed periods of one to 24 months, and customers who keep up with payments can regain their initial deposit and increase their limit to as much as £500. Monzo says the product charges no interest if balances are cleared each month, while the cost rises to 39% APR when users spread payments. The bank also says there are no fees for paying early or missing a scheduled repayment, although a missed payment will trigger a spending block and a seven-day grace period before credit scoring is affected.

Scaling financial inclusion

The pilot is part of Fair4All Finance’s Small Sum Lending Pilot, which sits within the Government’s Financial Inclusion Strategy and is intended to bring more small-ticket credit products to market. Monzo is the first partner in the programme, and both organisations have said they will share the results with policymakers, regulators and the wider lending industry in the hope of encouraging broader change.

Looking ahead

Luke Enock, Monzo’s general manager for borrowing, noted that the scheme was designed to remove barriers to financial progress and help customers build the credit history needed for future borrowing. Kate Pender, chief executive of Fair4All Finance, also stated that the launch marked an important step for financial inclusion and pointed to the US, where several major banks offer similar products at scale. Economic secretary to the Treasury Rachel Blake was impressed by the pilot noting that it this is strong early progress towards the government’s ambition of improving access to responsible credit.

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