Addressing financial inclusion: why it matters to us
Financial inclusion matters because money is a means to an end; not being able to use even simple tools to manage it marginalises people from society and acts as a barrier in their lives. These people are often the poorest and most vulnerable in other ways, so financial exclusion is both a product and a symptom of poverty and disadvantage.
Trustees of the Friends Provident Foundation have been supporting projects and research to address financial exclusion for the last five years. Over this time, Trustees have concluded that unregulated market forces do not serve the poor well in terms of the provision of financial services.
A report by New Philanthropy Capital (the full version of which can be downloaded by following the link on the right hand side of the screen) suggests that:
- There are cyclical, social policy and long-term trends in financial services that, unfettered, would drive more people into financial marginalisation.
- Cyclical factors can be seen in the current recession, with the general contraction of credit availability as well as the growth of unemployment contributing to the increased fragility of existing financial arrangements for low-income households.
- Recent social policy in general can be characterised by a move toward requiring individuals to take more responsibility for the management of financial resources. This includes the move toward personal accounts in pensions, local housing allowance, direct payments for care and individualised budgets.
- Long-term trends suggest further marginalisation of poor people as financial services become more automated, more remote and more complex. Technological change has moved mainstream financial transactions away from the use of cash and cheques and toward more electronic and abstract forms of money. Those who are perceived risky - due to previous problems or lack of previous financial records - are simply denied access.
As a consequence, Trustees have concluded that the Foundation should develop work focused on very specific areas in the final three years of our programme in order to bring about lasting change in terms of access to financial services.
Some of the changes that are needed include an infrastructure for delivering effective and appropriate services and measuring their impact on low-income communities. Our giving programmes to date suggest that financial inclusion activity is patchy in provision and largely unproven in efficacy. A common system or set of systems for monitoring progress, performance, geographical spread, outcomes and impact is required.
