The Scottish Government is to provide £1 million to the Carnegie Trust’s Affordable Credit Loan Fund, doubling the size of the fund.

Announced as part of the Tackling Child Poverty Delivery Plan, the funds are aimed at providing low income families greater access to affordable credit by creating a new £2 million fund.

Holyrood leaders said the support could help grow the sector, opening up more options for those that need affordable credit, reducing the cost of borrowing and making sure that people can access financial products and services that meet their needs in a responsible way.

Equalities secretary Angela Constance said: “Insecurity of income is one of the biggest challenges faced by those in poverty. By investing £1m in the Carnegie Trust’s Affordable Credit Loan Fund, we are doubling the amount available for social lenders to offer affordable loans.

“We are showing how Scotland is leading the way on tackling the problem of access to affordable credit. We want to provide a clear alternative to organisations, such as payday lenders, that can often charge extortionate interest rates and can leave people trapped in a cycle of debt.

“We will continue to work with the Carnegie UK Trust and the community lending sector to ensure that everyone who needs it has access to the financial products they need to help them get on in life.”

Martyn Evans, chief executive of the Carnegie UK Trust, said: “The launch of the first Child Poverty Delivery Plan is a hugely significant milestone in the drive to eradicate child poverty in Scotland. At present, those in poverty have to pay a significant premium whenever they borrow money. This has to change. We need to make more affordable, socially-motivated credit, linked to other services, far more widely available. We are therefore delighted that the Delivery Plan includes a commitment to invest in the Carnegie Affordable Credit Loan Fund and provide new investment to those not-for-profit lenders giving people a much fairer deal.”

Actor and activist Michael Sheen who has been leading a campaign to increase access to affordable credit, said: “High cost credit can be really detrimental to people’s finances and their wellbeing. Tackling the problem is complex and a vital part of the solution must be to provide people with fairer, more affordable borrowing alternatives which are delivered for social good. We need to make these alternatives much more widely available than they are currently, so that all who need them can benefit from them.

“The Scottish Government’s investment in the Carnegie Affordable Credit Loan Fund is a hugely welcome announcement to help grow the affordable credit sector in Scotland and achieve this goal. Through the End High Cost Credit Alliance that I’ve founded I am looking forward to working closely with partners in Scotland to help make more affordable credit available for all.”