Our home credit model is a long-established, resilient and profitable business model that has been operating for 130 years. It has proved adaptable to the changing economic environment and, despite the difficulties brought about by the global economic downturn, we have delivered a record profit in 2010.

There are two core elements to our home credit product – a small sum, short-term unsecured cash loan and a home collection service provided by dedicated agents.

We operate in emerging markets where demand for credit is growing and markets are relatively underserved. Our customers have average or slightly below average incomes and want to borrow relatively small sums of cash, quickly and in a manageable and transparent way. Most loans are between £200 and £500 and repayable between 6 and 12 month terms. On average, we lent £358 to each of our customers in 2010.

High level of personal service

We take a distinctive personal approach to lending and our agents are the linchpin of the home credit business model. Credit vetting and, where the home service is provided, the provision of the loan and collection of weekly repayments are all performed in the convenience of the customer’s home by a dedicated agent. Typically we can deliver a loan within 48 hours from first contact.

Being closer to our customers means we provide a high level of personal service compared to remote lenders and can be responsive to changes in our customers’ circumstances.

Responsible lending

It is not in our interest to lend more than a customer can afford to repay. We employ a ‘low and grow’ approach to manage loan size and credit risk. This also supports our guiding principle of responsible lending. Typically, new customers who pass our credit criteria receive smaller loans repayable over shorter terms than established customers. This enables us to monitor closely their repayment behaviour. Only when a customer has proven their willingness and ability to repay a smaller loan, will longer, larger loans be allowed by our credit scoring system.

Transparent and flexible

Our charges are easy to understand and set out clearly for customers to see.

Historically our home credit product has been structured to give a single, fixed charge for the loan including all interest, fees and service costs. In recent years a new structure, known as the ‘flexible’ product, has been introduced in most of our markets and this gives customers greater visibility of the cost of their loan by showing all the elements of the product cost separately.

The flexible product gives customers the option to repay the loan using our home collection service or by money transfer to a bank account. The majority of our customers choose to take the home collection service as they value its convenience and simplicity.

Typically, customers who use the home collection service are not charged any default interest or fees as a result of late payments. If they experience financial difficulties, they can take comfort in the fact that the amount they owe does not increase as a result of missed payments and they have the flexibility to miss occasionally or make reduced repayments at no extra cost.