Analysis: Czech NGO People in Need loses independence working with Provident Financial loan company

The Provident Financial firm has launched a new TV ad. The message that will stick in many people’s heads isn’t that the company is offering new loans, but that it has connected its authority and name with the respected organization People in Need (Člověk v tísni).

At first glance, one might think Provident Financial is exploiting its place on People in Need’s risk ladder of non-bank loan institutions without the organization’s awareness. The opposite is true.

People in Need agreed to have its name used in the ad and has issued a statement making it clear that it sees no conflict of interest, nor does it foresee any circumstances in which such an association might harm them as an organization active in the fields of humanitarian aid and social work. Again, the opposite is true.

This is a very problematic step that says a great deal about what People in Need considers important for its work. As for Provident, this is not a new strategy. 

For quite some time the loan company has done its best to present itself as a socially responsible firm, seeking nonprofits to aid and support it as it establishes itself in the charity field. The problem, however, is that Provident’s core business is extremely socially irresponsible.

It is not surprising that these efforts have prompted a great deal of controversy. However, what is entirely new now is that an organization of such importance as People in Need is supporting Provident’s image as a socially responsible firm.  

By lending its auspices to Provident, People in Need is essentially saying that falling into the debt trap is not a serious problem. This message also corresponds to the new form and new name used by the organization for its ongoing evaluation of non-bank loan institutions in general.

Over the course of the years, People in Need’s "Index of Predatory Lenders" has been transformed into the "Index of Ethical Lending" (Index etického úvěrování). Think there’s no difference? I’d say there is, and it’s a big one.

While the old name of the index explicitly indicated that usurious lending definitely is not in order and is about making a lot of money, the current name of the index does its best to convince us that it is not measuring usury, but "ethical lending", lending that does not impact the economic and social position of households throughout the Czech Republic. It’s as if what were really important is how large of a font size is used when publishing the interest rate, not how high the interest rate actually is.

I don’t believe that People in Need has lent its name to Provident Financial because it supports helter-skelter borrowing. Most people are not borrowing money for luxury, superfluous items they don’t need from the non-bank companies tracked by the index.

Many people borrow money from Provident and these other companies to buy school supplies for their children, to repair a broken computer, or to buy a refrigerator. However, by lending its auspices to these loans, People in Need is saying it doesn’t matter if the borrowers then fall into the trap of high interest rates and high payments.

People in Need is no longer standing on the side of those who are borrowing money, but is starting to stand on the side of those who loan it and rig the rules of the game. If non-bank companies are "ethical" players, then disproportionate indebtedness due to high interest rates and possibly other fees is solely the responsibility of the borrower.  

Connecting the name of People in Need with that of Provident Financial is particularly problematic because People in Need is a significant social services provider in the Czech Republic. The organization works with socially excluded people and with those at risk of social exclusion.

The People in Need program providing these services is called "Social Integration". On its own website, People in Need says that "From the beginning [the program] does its best to prevent the continuing social decline of individuals or whole families. After stabilizing the situation, the next task is to find solutions to the problems that caused the social decline in the first place."

Among many other factors, an important role in this decline is played precisely by indebtedness and the usurious practices associated with it. By affiliating itself with Provident, People in Need is losing its independence, as well as any public trust that it has the best interests of its clients at heart and wants to help solve their problems. 

We can no longer believe that People in Need will correctly identify the reasons why socially excluded people are experiencing problems. If we wanted to be extremely cynical, we could ask them whether they aren’t also getting ready to offer the "innovative aid tools" of a brochure all about the "appropriate, ethical" loans offered by Provident Financial and a social worker to accompany clients when they make their regular weekly loan payment.