Next UK government must take the lead on financial inclusion, Commission set to conclude
The government elected into power this May must take the lead in making financial services more inclusive, the chair of the Financial Inclusion Commission told the UK's annual community finance conference.
The Commission is set to publish its final report this week, but its chair and former British diplomat Sir Sherard Cowper-Coles told the Community Development Finance Association’s (CDFA) annual conference that it will call on the government to introduce a ministerial post responsible for financial health.
Cowper-Coles said: “There needs to be a clear and unambiguous lead from central government, something there hasn’t been over the past four and a half years.
“We will be recommending that a minister be delegated the responsibility for financial health – so that someone in government is the clear policy leader promoting financial inclusion.”
He also stated that “every government department interested in financial inclusion, ranging from the Cabinet Office, the Department for Communities and Local Government, to the Department for Education and the Department for International Development” should have a designated individual responsible for promoting financial inclusion.
According to research by the Commission, there are almost two million adults in the UK who don’t have bank accounts, just over eight million regarded as seriously in debt and 15 million who have reported themselves as being in serious financial distress.
If there’s any doubt in the room about whether demand for community finance exists, it is absolutely there.
The CEO of Big Society Capital, Nick O'Donohoe, said that one of the main causes of this financial exclusion was that the UK’s banking market was “too concentrated”.
He said: “I don’t think there’s any other country in the world that has a more concentrated banking market than we have here, where 70-80% of loans and deposits are controlled by just five banks.
“That is why it is important the Community Development Finance Institutions (CDFIs) grow as a community.”
CDFIs are social enterprises that provide finance to individuals, businesses and organisations unable to access finance from high street banks. There are approximately 60 active CDFIs in operation across the UK.
The reasons certain groups might be excluded from mainstream finance are numerous. A start-up social enterprise, for example, might be seen as too risky to be eligible for a loan, or an individual on a low income might not be able to afford the interest rates of loans on offer from high street banks.
CEO of Yorkshire-based CDFI Moneyline Diane Burridge said that demand for alternative and responsible finance was increasing.
"In our business, demand between October and December last year was 35% above the previous year so if there’s any doubt in the room about whether demand exists, it is absolutely there. Demand in January and February of this year is 40% above that last year," she said.
Another of the Financial Inclusion Commission’s conclusions expected to be announced this week is around education.
“Much more should be done to promote financial capability. It is not just about teaching people how to use a contactless payment card and to access their bank account online, it is also about changing financial culture,” said Cowper-Coles.
“You don’t hear today, ‘I’m saving up to buy this’. Financial education cannot start too early,” he concluded.
Header photo: Bank of England. Photo credit: Ronnie MacDonald