Sheffield Money will vet companies offering loans of up to £7,500, credit for white goods, savings and bank accounts and provide independent money and debt advice.
It is backed by the Church of England, which is setting up its own credit union, business leaders and companies such as Frees, which offers basic bank accounts to people with poor credit history.
Rev Peter Bradley, dean of Sheffield cathedral and chairman of Sheffield Money, said: “Sheffield Money is a bold and innovative solution to the problem of high-cost credit in our city.
“More people are struggling to make ends meet and for many, trapped in a cycle of borrowing more to cover extortionate loan repayments, this becomes a living nightmare.”
