Friday, 26 July 2013

Welby and Wonga

I wish I understood economics and finance more, but the truth is that I am fairly financially illiterate. I’m fine at managing my own money but when it comes to the stock markets, quantitative easing, the balance of payments, financial derivatives, hedge funds and the like I easily start to get very lost and very bored. Yet the financial world and its impact on ordinary people is something that none of us can avoid. Decisions made by politicians, economists, traders, lenders and bankers have a huge impact, especially on the poorest.

Unlike me, Justin Welby is someone who understands the financial world. Prior to ordination he was an oil executive, later he wrote a paper called ‘Can Companies Sin?’ and now as Archbishop of Canterbury he is a member of the influential Parliamentary Commission on Banking Standards. He understands just how important it is for the Church to understand and meaningfully engage with the financial world. He also understands that in the present economic climate the Church needs to be on the side of the poor and give help to those who are suffering through poverty.

The past few days have seen good headlines for the Church when Archbishop Justin said that the Church of England would try to force online payday lending firms, such as Wonga, out of business by helping credit unions to compete against them. But it’s also seen bad headlines when it was revealed that, unbeknown to the archbishop, the Church Commissioners (who invest the Church’s money to fund pensions) have indirectly invested a very small amount of capital in Wonga through a venture capital firm. Despite the bad headlines (and the truth is that it is really hard for any investor to know exactly where the companies they invest in will end up investing their capital) the principle of Welby’s plan to support credit unions is really breathtakingly audacious, and it would be unfair for it to be overshadowed.

The main difference between payday lenders and credit unions is the rate of interest charged for a loan. Payday lenders such as Wonga can charge around 1% interest per day whereas credit unions can only charge up to 2% interest per month. That means that payday lenders are making money out of the poor (after all it’s only the poorest in society that often need these kind of short-term loans) whereas the credit unions charge a much smaller rate of interest just to break even. 

The Bible is clear that usury - the charging of excessive rates of interest - is a sin. So how can  charging 5,853% APR (Wonga’s annual rate of interest) ever be justified? It is this injustice that Welby and the Church are challenging through promoting the idea of credit unions using parish churches to allow local people access to finance that doesn’t charge extortionate rates of interest. Additionally, if people had easier access to credit unions then perhaps those in desperate need of cash could avoid the illegal and predatory loan sharks than plague our poorer communities. 

For all the embarrassment that Welby and the Church have faced over a tiny percentage of its capital being indirectly invested in Wonga, what the Archbishop of Canterbury has proposed is far too important to improving the lives of the poorest to be blown off course. If the Church can help force payday lenders and illegal loan sharks out of business then the lives of some of the poorest in our society could be changed and perhaps the spiralling of debt can be ended.

Justin Welby is to be commended for his vision and his commitment to helping the poorest in our society. After all, those in poverty are human beings and should never be a commodity for companies and individuals to make money from.

If you lend money to any of my people among you who is needy, do not treat it like a business deal; charge no interest.’ Exodus 22:25.


  1. Bible is even more clear and radical than being against excessive rates of interest. Rather, as Ex 22:25, the ethic for Israel is that no interest should be charged to those within the house of Israel. If this applies to contemporary church then it means we need to rethink mortgages, car finance, etc .... Thanks for writing this post as it points again to Welby pointing the way to a more radical way of being church.

  2. Judaism and medieval Christianity were indeed crystal clear that no interest should be charged at all. It was John Calvin and the Protestant Reformers who reinterpreted texts on usury to allow a small amount of interest to be charged. Personally I have far more sympathy with earlier Jewish and Christian views on usury and am uncomfortable with even small rates of interest being charged. However, I also acknowledge that the world is complex and even using a credit union is far from ideal - though it is better than the alternatives.