Financial Inclusion

Karen Rowlingson

Professor of Social Policy

November 5th 2015

Financial Inclusion: Talk Outline

Defining financial inclusion

Broader context of labour market and austerity

Access to bank accounts, saving for short and long term, credit and debt

Causes and consequences of financial exclusion

What can be done?

Defining financial inclusion

Most definitions focus on access to appropriate and affordable financial products

Some focus more on the ends rather than the means; and thereby highlight broader picture

Academics debate whether financial inclusion is a progressive response to financialistion or seeks to advance it

Unemployment fell in 2014 and is nearly down to pre-crash levels

Underemployment dropped very slightly in 2014 but remains high, LFS

Levels of real pay (adjusted by CPI)

Means-tested, out-of-work benefits (IS/PC) as a percentage of Minimum Income Standards

Number of people given 3-days emergency food and support by the Trussell Trust

How are households managing?

Numbers (millions) without bank accounts

Savings

The proportion of households with different kinds of savings accounts fell from 68 to 58% from 2008/10 to 2010/12

The amount held in these accounts has increased

Amounts held in ISAs has increased from £7k to £9k, UK shares from £17k to £20k

Private pensions

Credit

Fewer people are using unsecured credit (60% in 2014, down from 63% in 2012 and 2013) and mortgage lending fell 2013-2014

Payday lending increased from 2006-2012 but has now declined after reforms/cap

More people are using credit unions

Support from local welfare assistance has reduced

Problem debt

10% of those with unsecured credit found it a ‘heavy burden’ in 2014 (13% in 2013)

Mortgage repossessions fell from 33,00 in 2009 to 11,000 in 2014

Evictions from rented properties (especially social landlords) has increased to 42,000 in 2014 (from 28,000 in 2009)

Causes of financial exclusion

Low and insecure incomes

Policy and practice of• Mainstream banks

• High-cost financial services providers

• Regulator

• Local authorities, utility providers

Consequences of financial exclusion

The poor pay more• Pre-payment meter fuel costs 10% more

• Equivalent loans can cost 50%-150% more

Poverty and debt cycle

Impact on physical and mental health

What can be done?

Tackle the root causes

Further reform of mainstream banking and alternative providers

Action from local authorities, housing associations, money advice agencies

Improve incentives and support for savers

See Financial Inclusion Commission report