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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 8, 2021

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Beneath the religious texts and weekly church services, there exists a business model in organized religion. Some churches exist simply to help others, whereas others have more hidden agendas.

Recently the Church of England began a long-term battle against the highly disputed payday lender Wonga. Even though some experts believe there is a positive value in their campaign, others worry about the visible impact that mixing religion and business can have on a country’s economy.

The Church of England’s Plan

The current Archbishop of Canterbury, Justin Welby, wants to hit lenders financially rather than on a legislative level. According to an interview with Total Politics, Welby told the CEO of Wonga that he plans to “compete them out of business.”

The church plans to develop credit unions for UK borrowers to use when they need short-term loans. Credit unions offer borrowers lower interest rates and longer repayment period than most in the payday loan industry can offer.

This new competition will be over the current UK payday loan industry, which has an annual value of £2 billion.

Welby predicts that the plan will take about a decade to implement.

The idea and recent fervor has spread to other areas as well. The Church of Scotland also announced that they support credit unions and are looking for a new initiative similar to the COE’s plan.

Overseas Support

Payday loans are big businesses in both the United Kingdom and in the United States.

One of the most powerful educational groups in the USA is the Center for Responsible Lending. Ginna Green, spokesperson for the CRL, said it is gratifying to know there is a growing opposition to payday loans.

Green said that payday lending can be fought in three different ways. The first way is to legislate them out of business with interest rate caps. The second way is for regulators like the Consumer Financial Protection Bureau to oversee the industry. The final way to limit payday lending is by providing other options for borrowers.

Instead of regulating or legislating payday lenders out of the UK, the COE decided to compete with them on a financial level. Green believes this method is logical for the time period.

“It makes sense that the Church would take such a position, especially in trying economic times,” she said.

The concept of turning to religious outlets for loans is a newer one, but the religious opposition to high interest loans has historical roots.

“Payday loans are clearly a form of usury — a term with biblical beginnings — so it makes perfect sense for religious institutions to flex their values in regard to these high-cost debt traps,” Green said.

Redefining the Role of a Church

The COE’s plan to expand credit unions was received positively, until a financial decision arose from the past. Late last month, the COE found out that they had indirectly invested in Wonga, the payday loan company they so vocally opposed.

Despite a recent recovery statement from Archbishop Welby, the controversy opened up an area that had not been highlighted.  

Michael Mandala, a former financier and born again Christian, does not agree with the credit union expansion plan. He said that this venture into credit unions is likely “just the tip of the iceberg.”

A church must collect money through donations in order to survive. But the Wonga investment mistake shows that even religious institutions can think with their wallets, instead of their heads.

And this is causing some concern among consumers.

Mandala said that once religious organizations mix business and investment aspects, it becomes like oil and water.

“It draws away from the focus of what the church is really about,” he said. “If money can get between friends, imagine what it can do to a large organization.”

In 2008, the COE had assets worth £4.4 billion. A smaller religious organization might be able to operate without greed, but when billions of dollars are at stake, it becomes more difficult to distinguish between spreading a religious message and ensuring investors are content.

Mandala said that regardless of its size, a church is supposed to be nurturing and donating to the community. He said that is impossible to do while holding onto billions of pounds.

“To take money from the congregation and invest it in vehicles is not what the church is about,” he said.

Mandala believes the money received from churchgoers is supposed to assist the poor, not increase the bank account of the church. This new venture has broken down the “illusion of the separation of religion and the economy.”

Beyond the social factor, he worries about the effect of credit unions on the economy. He predicts that this move is corrosive and could decimate the economy.

“When it trickles down … the impact is going to be incredible,” Mandala said. “If they want to invest, invest in the community with which they are placed. That is the greatest investment they will see.”