If you’re poor and you can’t borrow money from a bank, how do you buy a bucket and a ladder to set up as a window cleaner? Or pay to have your husband properly buried? Or take a holiday for the first time in five years? All too often the answer has been to go to a loan shark, who will charge extortionate rates of interest and may get you locked into a spiral of debt.

But initiatives such as the Portsmouth Area Regeneration Trust, which recently won two Business in the Community awards, are trying to make the options a little less stark.

PART was set up as a joint initiative of Lloyds TSB Bank, the University of Salford and Portsmouth Housing Agency, after it became clear to the latter that people unable to pay their rent were having to borrow money from unorthodox sources and at extortionate rates of interest.

“We know of people borrowing at 50 per cent and sometimes up to 180 per cent,” says Robin Macdonald of PART. “One woman borrowed £200 to bury her husband. Twelve months later, she owed £1,200.” With around 6,000 people unemployed and over 25 per cent of households earnings less than £10,000 a year, Portsmouth had a clear need for fairer forms of lending.

High street banks in the late 1990s were also encouraged by the government to address the needs of those who were excluded from the mainstream financial system.

“In 1998 Lloyds took a number of initiatives in this area,” says Geron Walker, head of social exclusion within Lloyds’ retail distribution division. “We introduced a basic bank account so that nearly anyone who wants a current account could have one.”

“But we needed to be realistic as well. Whatever Lloyds did, it was not going to reach everybody.” Lloyds provided rent-free offices for PART, which was set up in July 2000, £25,000 in funding and, even more importantly, seconded a senior manager to the project.

PART provides a range of services – one of the most important being the in-depth interviews and analysis carried out by its loan officers.

“We don’t decide to lend to people based on any income limit or on their credit history,” says Robin Macdonald. “Each case is decided on individually.”

PART provides small scale loans, the majority around £500, at a standard 15 per cent annual interest rate. Loans are used for a variety of causes – for people getting back to work, home improvement loans for the elderly, small business funding and cheque cashing facilities. Robin Macdonald says some of the people PART has lent to have been able to transform their lives.

“We made a loan to a disabled woman who wanted to start up her own sandwich business,” he relates. “None of the banks would consider it. Now she’s bought a van and is employing someone – and she paid our loan back months in advance.”

But PART is keen not to be regarded as a soft touch. “We chase arrears as hard as any bank,” Robin Macdonald says.

PART advertises its services by talking to local charities like Help the Aged, benefit agencies and the probation service. Portsmouth Council has just agreed to include information about the service with its council tax reminders – 2,000 of which it sends off each month.

Founded only seventeen months ago, PART now has £160,000 in loans outstanding, nearly 300 clients and has attracted £1.75m of funding. This comes from a range of sources – local private investors, Rotary Clubs, government grants, and Portsmouth City Council – and PART hopes to become self–sustaining within the next three years.

Those involved also hope the project will be replicated elsewhere. “We didn’t want to do something that was just a one–off,” says Geron Walker. “Lloyds is pleased with the success of PART but we want the model to be replicable on a larger scale.” Bob Patterson, senior visiting research fellow at the University of Salford, who has been involved in PART since its inception, says pilot projects like PART are being attempted in five other areas.

Both Lloyds and the University of Salford are adamant about the advantages their involvement in PART has brought. “PART is educating people financially,” says Geron Walker of Lloyds. “It can help people make the transition to a bank.” Robin Macdonald of PART hopes its success will make doorstep lending redundant. “Doorstep lending has been allowed to proliferate,”he says. “It’s a national scandal.”