Austerity measures are in effect in many parts of the world and the United Kingdom is one of the hardest hit regions. Although the long term fiscal situation looks better as a result of austerity, the short term is often totally destroyed. There are some companies that can do very well within such conditions, which is why the payday lender Wonga is profiting so much lately. As of early September, the Wonga profits were said to have reached nearly 2-3 million dollars per week. Although the United Kingdom market is fairly small compared to the United States, on a per person basis they have more debt.
Wonga and Payday Lending
Wonga has been in the news a lot lately for a number of reasons. First, it is obvious that they are one of the main targets of the libraries in Nottingham and other places across the United Kingdom. The libraries have banned the use of the public computers in order to access these websites. Wonga was among the 190 or so websites that have been banned.
However, the bigger news for Wonga is not that they were banned from some libraries, but that they have been able to make profits that are many millions of times what other small lenders are able to create. That means they are using a wide variety of methods, including some questionable marketing, in order to make their millions every single week.
The Wonga company has reportedly only been able to make such profits within a week for the simple reason that payday loans are soaring.
Payday Lending in UK and Wonga
The payday lending industry has grown tremendously in the past few years largely due to the austerity measures already explained. Still, that does not explain how it is possible for companies like Wonga to be making nearly 2-3 million dollars (1.2 million pounds) in a week.
The real truth is that the number of payday loans has soared by over 70% in the past year. People who need money are not able to go to the government, which is also strapped for cash, but instead are forced to go to these lenders.
At the end of the day, the industry is able to approve tens of thousands of loans every single day just because they are facing such austerity measures at home. The Wonga number approves 10,400 loans every day and is being accused of profiting from the misery of the poor.
However you view the companies in the United Kingdom, the payday lending industry has definitely been able to do quite well from a financial perspective. Just like here in the United States. There are so many variables involved with the austerity aspects of the British system that it is hard to say whether that is a direct correlating factor, but a 70% increase would indicate that it has something to do with it. Wonga is taking advantage and without proper legislation to protect people from predatory lending, it could get even worse for the people in the United Kingdom.
