Many people, particularly those living on low incomes, cannot
access mainstream financial products such as bank accounts and
low cost loans. This financial exclusion imposes real costs
on individuals and their families - often the most vulnerable
people in our society. It also has costs for the communities
in which they live.
Households that operate solely on a cash budget: are unable
to make savings via direct debits on utility bills, are more
vulnerable to loss or theft and they are far more likely to
use the alternative credit market - and pay interest many times
that of a standard personal loan, often contributing to spiralling
debt. In addition, for those who do get into debt or who struggle
to make payments, the supply of free face-to-face money advice
falls far short of demand.
The Government set out its strategy to tackle financial exclusion
in ‘Promoting
financial inclusion’, published alongside the 2004
Pre-Budget Report. The report sets out a range of measures
- in three priority areas - access to banking, access to affordable
credit, and access to free face to-face money advice.
The Government also established a framework for delivery -
including a Financial Inclusion Fund of £120m over three
years and a Financial Inclusion Taskforce, chaired by Brian
Pomeroy to oversee progress. The Financial Inclusion Taskforce
was formally launched on 21st February 2005 and will monitor
progress on the objectives the Government has set out and will
make recommendations on what more needs to be done.
Third Sector Credit Working Group
The Financial Inclusion Taskforce has established a Working
Group with senior banking representatives to consider how to
achieve a nationwide increase in the coverage and capacity of
third sector lenders.
The Working Group has now submitted a short version of its
report and recommendations to Government. A full word version
of the report will be published shortly.
To inform its recommendations, the Working Group has commissioned
research to map the likely demand for, and current supply of,
third sector affordable credit. This research, undertaken by
Experian, identifies 25 “red alert” Local Authority
areas in the most immediate need of new affordable credit provision,
and a further 56 “amber” areas next in the priority
order.
The Taskforce is continuing to map the supply of other financial
services against indices of financial exclusion, and will publish
a further update on this work in due course.
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