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Launch of the Better Banking Campaign This week sees the launch of the Better Banking Campaign. The Better Banking coalition are meeting with policy makers at 10 Downing Street, and members of the Shadow Cabinet, to discuss solutions to the problem of financial exclusion. The campaign is gathering momentum, with well over 100 charities supporting us.
The Better Banking Campaign, hosted by ACEVO, is led by a coalition of third sector organisations:
ACEVO, Urban Forum, Development Trust Association, Fair Finance, the Centre for Responsible Credit, CCLA, and the CDFA. They came together to tackle the problem of financial exclusion – the lack of fair and equal access to financial services – which is a social and an economic concern. Better Banking are calling for the following legislative changes: - To gain a clear idea of who is financially excluded,and direct government spending more appropriately, we need finnacil institutions to fully disclose who they lend to;
- We need a cap on credit interest rates to stop the averse affects of non-mainstram lending to those who can’t access credit through mainstraem routes,: 180% apr is average for Home Credit lenders, and over 1,000% apr for pay day lenders
- Incentives for banks to lend to those communities and orgaisations who warrant it, to bring them into the finnacial mainstram in the first place..
- Obligations on financial institutions such as the introduction of a legal cap on credit interest rates. As the largest Home Credit lender -Provident Financial- charges £82 for every £100 lent, enforcing lower interest rates would have a dramatic impact on helping borrowers escape from a cycle of debt.
- Incentives for financial institutions (via e.g.a CRA: see attached document) to show that they are engaging with those who are unfairly denied access to credit and financial services. This would decrease the number of financially excluded people/organisations.
The government recognise the need to address the problem of financial exclusion: for over 12 years they have been working to tackle the issue, through a number of initiatives (for details, see attached document). But still the problem persists, as these solutions have not sufficiently addressed the root cause: the unavailability of credit and financial services to those who warrant it.
The wide range of third sector organisations that form the core campaign coalition, the wider coalition, and the numerous campaign supporters show that a broad spectrum of people and organisations recognise need for the campaign's objectives. Equally, a number of other organisations have (or have had) campaigns aimed at addressing the problem of financial exclusion, such as Oxfam's FRED campaign and Save The Children's campaign for a CRA. - Around 9 million people in the UK don't have access to credit from banks, so must borrow from other sources, (with loan interest rates av. 180% for Home Credit lenders, and over 1,000% for pay day lenders.)
- Home Credit lenders lend to around 2.3 million people a year, making an excess profit of £75m. Given the average Home Credit loan is £300, were these loans made at 130% through CDFIs, (which Fair Finance estimates to be sustainable), that would save the average borrower £156- a saving of more than half the original loan. Home Credit customers are typically female, under 35, with young families.
- Many ethnic minority groups suffer financial exclusion: 68% of those financially excluded live in the 10% most deprived areas, and ethnic minorities are more likely to live in the most deprived area.
Financial exclusion affects:- Communities: By increasing poverty levels amongst the lowest-income groups, hugely impacting on those already struggling with debt, poor housing, old age, ill-health, physical and mental disabilities, and social exclusion.
- Third sector orgnisations and small businesses: Because third sector funds are spent helping those affected by these issues, financial exclusion indirectly drains third sector funds. It also directly impacts on third sector organisations and small businesses serving or operating in less wealthy communities, who often struggle to access capital from miantream lenders: 25,000 businesses a year with viable propositions are unable to access finance, which negatively affects the economy as a whole.
To find out what legislative changes are needed to fix the problem, and to register your support, please visit the Better Banking website, or contact Lucy Marples.
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