A financial company has launched a programme designed to offer interest-free loans to Isle of Man residents.

The service will be expanded to the UK in 2023 after the pilot here is completed.

ZeroPA picked the Isle of Man to launch its service through its wholly owned island subsidiary The Interest Free Loans Company Ltd.

The service, named Argid which is ‘money’ in Manx, ‘offers financial education and tools and crucially interest-free loans to the financially disadvantaged and vulnerable and a commercial return to lenders and investors’, according to ZeroPA.

It will offer interest-free loans between £50 and £1,000 over one week to 52 weeks. People will be able to apply online and receive a decision and their funds within five days.

It was approved by the Office of Fair Trading on September 8. The service will start on November 1 this year.

The Interest Free Loans Company Ltd aims to attract investors and encourage altruistic lenders to lend to Argid borrowers at no guaranteed return.

It will then match lenders with borrowers ‘thereby spreading the risk’, according to ZeroPA.

It doesn’t offer cash loans but instead offers vouchers and e-cards to spend with retailers, manufacturers and utility companies.

The running costs are covered through revenue share with retailers, white goods manufacturers, household repairers and partnerships with financial institutions.

The company wants its borrowers to improve their financial literacy and help them through interest-free loans.

ZeroPA said: ‘Because we want to target our lending to those most in need, we only lend to those that have been referred to us by a partner such as a credit union, citizens advice bureau, place of worship, school or food bank.

‘By eliminating interest we make sure our loans are affordable and over time help our borrowers out of their financial situation through learning to manage their money better. If we feel a loan is not appropriate we may offer an emergency grant of up to £50 to help with food, utilities, clothing or furniture.’

The company added historically the vulnerable in the UK had only payday lenders to count on, with ‘unscrupulous practices’.

It added: ‘Fortunately high levels of customer complaints and interventions by the regulator have resulted in a progressive decline in the payday lenders’ portfolios from £4bn during the peak of 2012 to £1bn in 2018.’