Wonga.com is a British online firm whose work is based on a simple principle: people often need small amounts of money, quickly, and would be willing to pay hefty amounts in interest if they could get it easily. Wonga provides the liquidity—with an annual interest rate that works out to 5,853%. In earlier times, this business model—which some would call usury—was confined to street corners in less salubrious parts of town. Wonga brought it online and made it simple and transparent. Justin Welby, the archbishop of Canterbury and spiritual head of the Church of England, calls it “morally wrong” (paywall). And he’s out to destroy it.
The Archbishop told Total Politics magazine that he had sat down with Errol Damelin, the head of Wonga, and “said to him quite bluntly we’re not in the business of trying to legislate you out of existence. We’re trying to compete you out of existence.”
It’s not just Wonga that Rev Welby is after but payday lending in general, which is a £2.2 billion ($3.7 billion) industry in the United Kingdom. The Church plans to engage Britain’s 500-odd credit unions and give them access to the Church’s network of 16,000 premises across the country. The Church has also started its own credit union for its staff. The Archbishop admitted it would be a “decade-long process,” but the end result would be to make credit unions much more engaged and professional.
It is a nice idea, but Britain’s payday lenders are a formidable force. Wonga itself, which started just five years ago in early 2008—just before a full-blown recession but at a time when credit was increasingly hard to come by in Britain—has grown from a promising start-up into a powerful company. It has expanded into lending to business, has its named splashed across soccer jerseys and is said to be considering an IPO with a valuation of $1 billion. It will be a battle of biblical proportions—or at least one that encourages biblical metaphors.