Debt and financial exclusion

Introduction

This programme aims to understand the links between poverty, debt and financial exclusion and develop joined-up practical and policy responses that tackle the problems caused. It highlights where there are gaps in the provision of help, and develops feasible alternatives.

Issues

• People outside mainstream financial services suffer financial disadvantages including: higher-interest credit; lack of insurance; no account into which income can be paid; and higher-cost utilities.
• Much financial exclusion is caused by a complex set of factors. Consequently, initiatives must address many different issues. These include: geographical exclusion, such as due to branch closures; failure to qualify because of poor credit history or problems in supplying identity documents; the relative cost of financial products and services, such as charges for unauthorised overdrafts; and cultural and psychological barriers.
• Commercial home credit has many features that are liked by its customers - but even providing it on a not-for-profit basis incurs high interest charges (APR).
• In an increasingly cashless future economy, the consequences of not holding a bank account will increase exclusion.

Forthcoming in 2010

• Where does the money go? Credit and debt today.  This is a qualitative longitudinal study of the interaction of poverty and debt for different families.
• Understanding constraints to credit access among low-income tenants.  This will examine how far rent payment records can be used as a guide to credit scoring.

Links

• Financial Inclusion Taskforce 
• Financial Services Authority 
• Money Advice Trust Information Hub 
• Transact - the national forum for financial inclusion 
• BIS Overindebtedness pages 
• Association of British Credit Unions Ltd 
• Friends Provident Foundation
• Personal Finance Research Centre, Bristol University 
• Liverpool John Moores University Research Unit for Financial Inclusion