I was delighted to attend the launch of Responsible Finance in Wales at the Welsh Senedd on Wednesday, 12th October and would like to thank Jane Hutt AM for sponsoring and hosting the event.
We launched a name change rather than the introduction of a new sector. Our members in Wales – Robert Owen Community Bank, Moneyline, Purple Shoots and Social investment Cymru are all long established players in the Welsh financial services sector, with a track record in providing finance to under-served markets, using people centred and innovative approaches. Their impact is significant – you can read the facts and figures in our briefing.
Even before the banking crisis and financial recession the main retail banks were withdrawing services from communities and business sectors across Wales.
Eight years on there is a tendency, in some quarters, to believe that the causes of the crisis and immediate impact are resolved. That increased competition and fin-tech solutions have provided all the answers. But we know that simply isn’t true. This week’s shocking revelations about RBS business lending practices, losses at Nutmeg, a robo adviser and once the darling of the fin-tech world and concerns about the stability and long-term viability of P2Ps show that as the banks continue to retreat the real alternatives are few and far between.
And this is what makes Responsible Finance providers so critical to the economy. For many people our members are the only option. With a local presence so they can better understand risk, a personal approach that ensures people get the right type of finance structured in the most appropriate way, with transparent pricing so people aren’t hit by hidden fees and charges.
The need for the services our members provide is greater than ever.
In terms of business finance, there is lots of good news in Wales at the moment, which we all welcome. Recent reports have highlighted that:
Wales has the fastest growing digital economy outside London, according to a report on the sector.
Business confidence in Wales has soared while slumping in the rest of Britain and the jobless rate fell to a record low in September.
A 2015 report found that fast growing small businesses are responsible for a third of economic growth in Wales but that a 25% increase in the number of fast growing small businesses could generate 5,000 extra jobs and £150m additional economic output.
Greater availability of business finance could ensure this trend continues, allowing many more people to follow their dream of innovating and entrepreneurship.
Enabling individuals to have access to appropriate and affordable financial products and services also plays a critical role in economic growth. Households weighed down by debt not only have less spending power but there is now a considerable body of research that shows that stress caused by financial worries results in a significant loss of work place productivity.
A recent National Survey of Wales showed 36 per cent of people had difficulty in paying bills and repaying loans and as bank branches continue to close, access to finance remains a significant issue. And another recent survey found that five of the top areas in the UK for bank branch closures are in Wales. Access to finance for rainy day items as well as improvements to quality of life can make a critical difference to people’s welfare and their ability to participate in the mainstream economy.
We know that there is growing interest in whether businesses can be socially responsible as well as profitable. This is especially true of young people, many of whom want to be entrepreneurs while also being a force for good in their communities. In 2015 Welsh social enterprises added £1.7 bn of value to the economy, with 40% operating in rural areas.
Our members are active in all these areas but we know there is much more that we could do to support the Welsh economy.
The two main challenges we face are awareness of the sector and access to capital.
It is worth remembering that in the year before pay day lenders were regulated, the top 4 spent around £36 million on advertising to reach their customer base. We have to rely on much cheaper methods of raising awareness! Signposting, referrals and partnership working are all critical to this.
The sector in this country was modelled on the USA responsible finance sector, yet in the US, the sector continues to have access to a national fund of $200 million a year. Most of our EU counterparts also receive significant government support and subsidy in one way or another. Without this support we have to think creatively about how we build reach and impact. And this is exactly what are members are doing. Working together and with others, for example to shape a Welsh development bank that serves all markets and communities in Wales.
There is a Welsh saying ‘Money is the key that opens locks’. Responsible finance providers play a critical role in ensuring that everyone can have a key, to help unlock their potential to support the Welsh economy to flourish and grow.