Greater collaboration between existing local finance organisations could transform the lives of the millions of Britons excluded from mainstream financial services, according to new research from Responsible Finance. Tackling Financial Exclusion Through Local Finance Partnerships sets out a blueprint for successful partnerships that could be replicated across the United Kingdom. This report provides a step by step approach to achieving the changes needed and is based on successful approaches in the USA.
Two million people do not have a bank account and nine million people do not have access to mainstream credit options. So at least 14% of the UK’s population faces financial exclusion. This impacts on their ability to participate in the economy and build financial resilience through savings, for example.
Tackling financial exclusion and strengthening the UK’s financial capability does not require new entrants to the market. Existing finance and advice organisations with a local focus could strategically engage with each other to achieve far greater scale.
Locally-based finance organisations, such as credit unions, responsible loan funds and debt and money advice charities, offer access to advice, savings and affordable credit. They collectively reach over 3 million consumers and businesses each year.
Jennifer Tankard, Chief Executive of Responsible Finance said:
“In 2016, responsible loan funds lent £20 million to 37,000 people and helped their customers deposit £3 million into savings accounts. Local finance organisations are innovative, responsive and resourceful but, at the moment, they don’t have the reach to provide services to everyone who needs them. By working in partnership with credit unions, advice organisations and other local stakeholders, responsible loan funds could help significantly more people. But this partnership working and expansion requires investment, changes to regulation and for organisations themselves to be open to working together.”
Sara Llewellin, Chief Executive, Barrow Cadbury Trust said:
“Drawing on lessons from the UK and the USA this report highlights what can be achieved by finance providers acting responsibly and in partnership with others to help. The premise of our Economic Justice programme is that financial institutions need to improve their products and services to include and build financial resilience in communities that are currently underserved.”
The research was based on interviews and focus groups with 22 finance providers and was kindly supported by The Barrow Cadbury Trust.
Tackling Financial Exclusion Through Local Finance Partnerships is available to download on the links below:
Tackling Financial Exclusion Through Local Finance Partnerships
This report examines what makes a successful local finance partnership, and how these can be replicated to tackle financial exclusion across the UK. The report draws on experience from the UK and USA.
Tackling Financial Exclusion Through Local Finance Partnerships - Summary
The executive summary of our research into local finance partnerships and how they can be replicated to tackle financial exclusion in the UK.
About local finance organisations
Local finance organisations include:
- Responsible loan funds: Community-based loan funds, sometimes called community development finance institutions (CDFIs) that lend to consumers, small businesses, and social enterprises that cannot access finance elsewhere. Loan funds raise all of their capital to on-lend from external funders and investors, such as grants from local and central government, and trusts and foundations, loans from social and commercial investors and equity from individuals. Responsible loan funds tend to serve consumers that are relatively high risk since they cannot access finance elsewhere.
- Credit unions: Financial cooperatives for consumers and businesses brought together by a common bond, such as residing in a particular geography or working for a specified employer. Credit unions provide a range of products to their members, and the primary ones are savings accounts and loans. Credit unions with a geographic focus that covers deprived communities often have a membership base that overlaps partially with the demographics of consumers that loan funds serve. Credit union customers are referred to as ‘members’.
- Debt and money advice charities: Organisations that provide advice in person, by telephone, or online on reducing debt levels and budgeting. A portion of both credit union and loan fund clients have a need for some sort of money and budgeting advice, as well as a segment of applicants that could benefit from debt advice rather than borrowing credit. Advice charities provide formal advice, although credit unions and responsible loan funds do provide informal advice as well.
 Financial Inclusion Commission (2015), Improving the Financial Health of the Nation, http://www.financialinclusioncommission.org.uk/report
 Based on figures from the Association of British Credit Unions Ltd. (https://www.findyourcreditunion.co.uk/about-credit-unions/),
Responsible Finance (http://responsiblefinance.org.uk/policy-research/annual-industry-report/),
Citizens Advice (https://www.citizensadvice.org.uk/Global/Migrated_Documents/corporate/money-advice-services.pdf), and the Money Advice Service (https://www.moneyadviceservice.org.uk/en/corporate/record-number-of-people-benefit-from-money-and-debt-advice) (all figures as of March 2017)