It was not the ideal start to the Archbishop of Canterbury's grand initiative to bring a new morality to Britain's banking sector.
Just months into his tenure at the head of the Church of England, the Most Rev. Justin Welby, Archbishop of Canterbury, last week announced plans to use the Church's clout to take on a controversial new breed of money lender and "compete [them] out of business." With the financial clout and moral authority of the Church of England behind it, the proposal was not made lightly.
Then came the revelation a few days later that the church’s own pension fund holds a stake in one of those very lenders, Wonga. It was, as Archbishop Welby himself admitted to the BBC, "very embarrassing."
But despite the stumble out of the gate, Welby appears committed to taking on payday loans – small, high-interest, short-term loans to those who can't get credit elsewhere – as a means of "speaking for the poor." And his plan raises questions about just how much clout the Church of England wields through its portfolio of investments and through the influence the church has over its flock – how it ought to wield it.
A campaign against usury
Appearing Tuesday at a Christian festival in Shepton Mallet, a small town in the English county of Somerset, Welby said that despite the pension-fund embarrassment, he has seen strong initial support for his initiative, which will involve expanding credit unions as an alternative to financiers charging enormous interest on payday loans.
"For a start, the positive comments have outweighed the negative – which in the letters that come to me is unusual,” he said. “What people have commented on is a church speaking for the poor. And when the Church is real, people pay attention."
Welby – a former oil trader who has been highly critical of banking practices while serving on Britain's Banking Standards Commission, a cross party group consisting of MPs and members of the House of Lords – wants to drive payday lenders out of business by launching a network of credit unions.
Struggling families and individuals unable to get credit from banks are among the customers of the pay lenders, who provide loans of up to £1,000 ($1,500) to be repaid when weekly or monthly wages come through. Though meant to be short-term, the loans involve astronomical annualized interest rates – for example, those offered by Wonga, which Welby specifically criticized, amount to 6,000 percent.
Welby’s initiative is the centerpiece thus far of a markedly more activist approach to his role from predecessors. But can he really hope to compete the lenders, whose business he describes as “morally wrong,” out of existence?
'It could deliver'
Elizabeth Oldfield, the director of Theos, a London-based religion and society think tank, says that plans come with significant risks, particularly for an institution juggling a range of other challenges, not least declining church attendances. But “at the same time, if the church threw its weight and resources behind it, it could deliver,” she adds.
“You are still talking about an organization with billions of pounds behind it, people in every parish, a high amount of social and volunteer capital, and a more energizing connection with community organizations.”
Oldfield also says that the church has bounced back quickly from last week’s controversy, helped by Welby’s public mea culpa and very evident annoyance with an investment that he had been unaware of. Welby ordered an independent inquiry into investments by the Church’s £5.2 billion ($7.9 billion) investment fund, which holds a small, indirect stake in Wonga via a US venture capital fund it has invested in.
“Holding up his hands and saying ‘we should not have done this,’ in PR terms, was much better than trying to justify it. We have also had five to 10 years of realizing that the economy is much more complex than we thought and that it’s sometimes unclear where our money is. A lot of people may have thought, ‘Gosh this could somehow have happened to me as well.'”
Now, the Church could well look to speed up divestment of the more questionable interests in its investment portfolio, which grew in value last year by 9.7 percent.
Under existing rules, it cannot invest in firms that make more than 10 percent through arms dealing, more than 3 percent from pornography, or more than 25 percent through payday lending or gambling. Those limits, and particularly the 25 percent one, are now expected to be reconsidered.
And it is already facing calls to divest for other moral reasons.
Last year, the church sold its £1.9 million ($2.9 million) share in News Corp after concluding it was not satisfied with the media company’s handling of the scandal surrounding allegations of phone-hacking. A Conservative member of Parliament, Claire Perry, has urged the Church to disinvest from Google in protest at a perceived failure to tackle online child pornography. And environmentalist members of the church want it to end investments with connection to fossil fuels.
“Having a church that does not have an involvement with fossil fuels means that it can then speak about climate change from a real position of integrity,” says Siobhan Grimes, a young campaigner and worshiper in the London diocese of Southwark.
Grimes was involved in a vote by the diocese’s local assembly on July 5 to call on the Church of England’s general synod to ensure that the Church’s investment policy was “in line with its theological, moral and social priorities including the Christian responsibility to care for the planet.”
Grimes says that the Church should be actively thinking about what genuinely progressive sectors it should be invested in. “It is possible not to invest in fossil fuels, and I think that’s infinitely more sensible from an environmental and theological viewpoint."