It's hard to make sense of a scenario where people who are poor pay more for essential goods and services than wealthier folks. Yet the University of Bristol suggested in a 2016 report that the so-called "poverty premium" paid by low-income families averages £490 per year. When you think about people forced to buy things on credit because they don't have cash or taking on high-cost payday loans to make ends meet, you can see how the euros add up. But as you'll read below, a UK accelerator is taking on that poverty premium, funding tech startups to develop solutions. Let's wish them well; if they are successful they could help a lot of people struggling to escape poverty. – Liz Enbysk
The new Wayra Fair by Design program will support start-ups that want to tackle the poverty premium – where people from low-income households pay higher prices for such things as energy, insurance, borrowing, transport and food.
“It should not cost more to be poor," says Gary Stewart, Director of Wayra UK. "An entrepreneur’s central task is to offer a compelling, sustainable solution to big problems, and we can think of fewer problems bigger or more worthy of a solution than this one. We are eager to work with startups to make real progress in the battle against inequality.”
Four focus areas
Emphasis will be on tackling the poverty premium across four broad focus areas, according to a Wayra blog which describes some of the challenges poorer residents face in those areas:
- Energy: Low-income households often pay more for the energy they use, for example, through pay-as-you-go meters or by not switching suppliers.
- Finance: Low-income consumers often pay more for their financial services, such as payday loans, paying with credit and cashing checks early.
- Insurance: There are few ‘no-frills’ insurance products suitable for low-income consumers who also tend to live in deprived areas, which may also be higher crime areas, and therefore might incur higher insurance premiums.
- Geo-based: This includes a wide array of costs that are imposed, or difficult to prevent, due to someone’s geographic residence -- food, insurance, transport and digital exclusion among them.
The initiative expects to support up to seven startups a year in a new facility in Oldham, with the first cohort expected to begin in September.
Wayra UK, which is backed by the telecommunications giant Telefónica, says the Fair By Design Fund will be funded and supported by a partnership between Big Society Capital, the Joseph Rowntree Foundation, Finance Birmingham and Ascension Ventures. The fund has £8 million ready to deploy and backers intend to raise up to £20 million to invest in companies tackling the poverty premium, both within the accelerator and in separate investments across the UK.
This article is from the Council's Compassionate Cities initiative which highlights how city leaders and other stakeholders can leverage smart technologies to end suffering in their communities and give all citizens a route out of poverty. Click the Compassionate Cities box on our registration page to receive our weekly newsletter.
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