THE Archbishop of Canterbury said he is “irritated” and “embarrassed” by revelations the Church of England – which pledged to create a network of credit unions to rival short-term lenders – has invested indirectly in controversial payday lender Wonga.
The Most Rev Justin Welby yesterday called for the Church’s investment rules to be reviewed following the row, which came just days after he unveiled proposals to compete against the controversial lenders with its own credit unions – which would offer deposit accounts and low-interest loans.
He said the investment was an embarrassment to his plans for the credit unions, which he argued would be a better option for people in need of short-term cash.
The Archbishop said: “It shouldn’t happen, it’s very embarrassing, but these things do happen and we have to find out why and make sure it doesn’t happen again,” he said. But he added that he was committed to offering an alternative to families in need of short-term loans.
“I’ve seen it, I’ve lived in these areas and worked in them. I’ve had staff who’ve got caught up in it and had to be helped, and had their lives destroyed by it. This is something that really matters to me.”
Payday loans are short-term loans – so-called because operators essentially lend money “until payday”, when, in theory, the borrower pays the money back. Because of the short-term nature of these loans, many lenders charge very high rates of interest – in some cases as high as 4,000 per cent.
The Church’s Ethical Investment Advisory Group “recommends against investment” in companies which make more than 3 per cent of their income from pornography, 10 per cent from military products and services, or 25 per cent from other industries such as gambling, alcohol and high interest rate lenders.
Archbishop Welby said the 25 per cent level for firms which deal in high interest rate lending was “probably too high” and he would ask the advisory group to review it.
Although the Church of England also had an ethical investment policy, it emerged its pension fund had put money into Accel Partners, which fundraised for the payday loan firm in 2009. The Church has since said that the amount it invested indirectly in Wonga was £75,000.
Financial services experts say it would be difficult for the Church of England – or other organisations which want to invest ethically, such as the Church of Scotland – to keep track of where its money had been invested.
Peter Michaelis, head of sustainable investments at Dundee-based Alliance Trust Investments, said: “Many investors will be as surprised as the Church of England was by their links to Wonga in the nature of these underlying companies. That is if they can actually uncover what they own. For very few investment companies do disclose the underlying holdings in their portfolios, even to large institutions.”
Meanwhile, the Church of Scotland last night insisted it has not “knowingly” made any investments in payday loans firms as it pledged its support for the Church of England’s plan – but said it could not guarantee where its pensions investments had gone. The Kirk said its pensions were actively invested into “ethical” portfolios which did not, among others, include alcohol. tobacco, firearms or gambling firms, but admitted that the sector is hard to police. A spokesman for the Kirk admitted it was unable to offer a comprehensive list of its investments.
Wonga hit back against the controversy yesterday, taking out a large advertisement in a national newspaper entitled “Wonga’s Ten Commitments”.
The final entry, “We always welcome competition”, was an apparent reference to Welby’s plans to create an alternative to payday lenders by offering church resources to help traditional credit unions offer deposit accounts and low-interest loans.