WHAT IS THE POVERTY PREMIUM?
People in poverty or on low incomes often pay more for the same products or services than people who are better off financially. This is called the “Poverty Premium”, the extra cost of being poor. The Poverty Premium is often dubbed the ‘double penalty’: in addition to not being able to buy many goods and services, people in poverty also end up paying more for the ones they can buy.
A 2016 report by the University of Bristol revealed that the poverty premium paid by low-income families is, on average, £490 per year – enough for a family holiday, children’s clothes and shoes, or keeping a house warm in winter. According to Joseph Rowntree Foundation research, 21% of the UK’s population lives in low- income households.
WHAT IS THE FAIR BY DESIGN FUND?
The Fair By Design Fund is managed by Ascension Ventures and Finance Birmingham, bringing nationwide reach and infrastructure for companies looking for funding in this space. The Fund is investing in companies seeking loans and equity funding from Seed through to Series A and beyond, and will share Ascension’s collaborative approach, seeking deal-flow and co-investment opportunities from other funds, corporates, VC’s and angel investors.
The Fund is deploying capital into exceptional businesses designed to make an impact on the Poverty Premium. These include for-profit and non-profit companies, tech start-ups, Community Interest Companies (CICs), charities and private limited companies.
The Fund will be investing primarily across these broad focus areas:
This area is focused primarily on electricity and gas. In most homes, energy is used for heating, cooking, lighting, electrical products, and heating water, with heating responsible for most energy consumption in the home. Low-income households often pay more for the energy they use, for example, through pay-as- you-go meters or by not switching suppliers
This area is focused on the problem lower-income consumers have accessing money and the management of everyday credit and savings. Everyone requires access to credit at various times and in differing amounts, especially low-income consumers, due to their smaller income and lack of savings. Often, low-income consumers pay more for their financial services, such as pay-day loans and cashing cheques early
This area is focused on the problem lower-income consumers have accessing insurance. For example, there are few ‘no-frills’ insurance products suitable for low-income consumers. These consumers often also live in deprived areas, which may also be higher crime areas, and therefore might incur higher insurance premiums – there is crossover with the geo-based premiums
This area covers a wide basket of costs that are imposed, or difficult to prevent, due to someone’s geographic residence. This covers food, insurance, transport, though this list is not exhaustive. Digital Exclusion can be included in this category; low-income consumers may not have access to the Internet, or be confident using it, making them unable to access online services to reduce household costs. This could range from shopping online to comparing insurance products