The banking crisis has dominated our headlines during the past three years. But bank guarantees, recapitalisation, NAMA and debt write-downs don’t mean much to those suffering financial exclusion – those who, for a range of reasons, cannot access the banking services many of us take for granted. The European Commission has estimated that 17 per cent of Irish people live in households with no access to a basic bank account. Ireland’s level of financial exclusion is high relative to other EU countries.
Last year, TASC published Life and Debt 2010 – Financial Exclusion in the Age of NAMA, which included a list of recommendations. More recently, the ESRI published a study on Financial Exclusion and Over-Indebtedness in Irish Households, and the Government published its own Strategy for Financial Inclusion Final Report, which noted that “The low level of financial literacy of most financially excluded people can translate into high margins for providers of financial services, so it is critically important to give people the tools to make wise financial choices, and to protect themselves from predatory lenders/insurance providers".
Promoting financial literacy is thus crucial to combating financial exclusion. Research findings published today by the National Adult Literacy Agency and the EBS show that two-thirds of Irish people struggle to understand financial terms. With that in mind, NALA and the EBS have re-vamped their financial information website www.makingcents.ie, a free resource aimed at anyone who wants to understand different areas of finance.
Showing posts with label financial exclusion. Show all posts
Showing posts with label financial exclusion. Show all posts
Wednesday, 7 September 2011
Monday, 20 December 2010
Moneylending
Nat O'Connor: The Irish Times reports on the €113 million owed to legal moneylenders, who can charge over 180 per cent interest.
This is not a new issue. It was highlighted by Caroline Corr and Dr Pauline Conroy in TASC's publication, Life and Debt: Financial Exclusion in the Age of NAMA, which is an update of earlier work on this issue by the same authors.
For example, "In 2005, 23 per cent of households – or nearly a quarter – had no bank account. Many of these households – a large number of which are headed by women – are therefore forced to access financial products at prices they cannot afford. Such ‘services’ range from high-cost credit to expensive chequecashing facilities."
While a lot of attention has been focused on the ECB's concern about emergency banking legislation, the Government could do much worse that use draconian powers to require banks to provide, as a right, a basic bank account for everyone in this country. This would not necessarily include any overdraft facilities, but simply be an account free of stamp duty and transaction costs, incorporating a cash card (ATM card), with flexible account opening requirements, and no minimum opening or monthly balance.
However, instead of being helped to stablise their finances, it is highly likely that many of the people paying debts to moneylenders are badly affected by the cuts in social welfare and the minimum wage; which will drive ever more people into a cycle of poverty and further debt this Christmas.
This is not a new issue. It was highlighted by Caroline Corr and Dr Pauline Conroy in TASC's publication, Life and Debt: Financial Exclusion in the Age of NAMA, which is an update of earlier work on this issue by the same authors.
For example, "In 2005, 23 per cent of households – or nearly a quarter – had no bank account. Many of these households – a large number of which are headed by women – are therefore forced to access financial products at prices they cannot afford. Such ‘services’ range from high-cost credit to expensive chequecashing facilities."
While a lot of attention has been focused on the ECB's concern about emergency banking legislation, the Government could do much worse that use draconian powers to require banks to provide, as a right, a basic bank account for everyone in this country. This would not necessarily include any overdraft facilities, but simply be an account free of stamp duty and transaction costs, incorporating a cash card (ATM card), with flexible account opening requirements, and no minimum opening or monthly balance.
However, instead of being helped to stablise their finances, it is highly likely that many of the people paying debts to moneylenders are badly affected by the cuts in social welfare and the minimum wage; which will drive ever more people into a cycle of poverty and further debt this Christmas.
Saturday, 29 August 2009
Access must be part of banking equation
Michael Taft: With all the debates over the crucial issues of NAMA, bank recapitalisation, purging impaired assets, etc. – it is sometimes easy to forget that these are instrumental; that we are not repairing broken banks for the sake of it (as if their dereliction constituted an environmental eyesore), but rather in pursuit of the goal of providing credit to the productive sectors of the economy. But there’s another goal that should be equally prioritised; namely, ensuring that all citizens have access to banking services.
TASC has previously highlighted the high levels of financial and banking exclusion. Now we have the findings of the CSO’s Survey of Income and Living Conditions’ Housing Module – showing that huge swathes of the population have difficulties accessing banking services.
More than one-in-five of all households in the state have difficulty accessing banking services. However, this proportion becomes higher in particular categories:
• Rural households: 34 percent
• Single Elderly households: 40 percent
• Lowest 20 percent income groups: 34 percent
• Households Headed by Disabled: 36 percent
• Households Headed by those with primary education only: 32 percent
There are a number of reasons behind the difficulties in accessing banking services: people’s lack of familiarity with financial institutions, literacy levels, personal mobility, etc.
However, many of the reasons are down to the banking institutions themselves: closures of local branches, bureaucratic obstacles to setting up simple accounts, the fact that many banks are not interested in this type of client base.
When the Government announced the bank recapitalisation scheme, it included a clause obliging the banks involved to provide basic bank accounts. That was last December, and little has happened since.
Financial inclusion is an economic and social good. If public resources are being used to repair the banks then the public has some calls to make on banking policy. One of those is that credit become more freely available to businesses and households.
And the other is that banks be required to facilitate access to discriminated groups.
TASC has previously highlighted the high levels of financial and banking exclusion. Now we have the findings of the CSO’s Survey of Income and Living Conditions’ Housing Module – showing that huge swathes of the population have difficulties accessing banking services.
More than one-in-five of all households in the state have difficulty accessing banking services. However, this proportion becomes higher in particular categories:
• Rural households: 34 percent
• Single Elderly households: 40 percent
• Lowest 20 percent income groups: 34 percent
• Households Headed by Disabled: 36 percent
• Households Headed by those with primary education only: 32 percent
There are a number of reasons behind the difficulties in accessing banking services: people’s lack of familiarity with financial institutions, literacy levels, personal mobility, etc.
However, many of the reasons are down to the banking institutions themselves: closures of local branches, bureaucratic obstacles to setting up simple accounts, the fact that many banks are not interested in this type of client base.
When the Government announced the bank recapitalisation scheme, it included a clause obliging the banks involved to provide basic bank accounts. That was last December, and little has happened since.
Financial inclusion is an economic and social good. If public resources are being used to repair the banks then the public has some calls to make on banking policy. One of those is that credit become more freely available to businesses and households.
And the other is that banks be required to facilitate access to discriminated groups.
Thursday, 6 August 2009
Financial exclusion - a lucrative business for some
Paula Clancy: Last December, TASC organised a seminar on financial exclusion. The day before, Sean Fitzpatrick resigned as chairman of Anglo Irish Bank following revelations that, over a period of eight years to 2007, he had temporarily transferred loans with Anglo Irish Bank to another bank. Earlier, it had emerged that Mr. Fitzpatrick and his fellow directors had been granted loans totalling €150 million by Anglo.
The banking crisis which erupted towards the end of last year not only highlighted the crucial role played by financial institutions, both as providers of credit and as investment vehicles. It also showcased the manner in which those at the top of Ireland’s money pyramid reaped rewards from the financial sector during the good times.
Yet while those at the top were enjoying easy access to credit, not to mention generous bonuses for those working in the financial sector, many of those at the bottom of Ireland’s money pyramid were struggling to survive without a transaction bank account, a savings product or access to revolving credit (such as a credit card or overdraft).
They are the ‘financially excluded’, dependent’ for credit on legal and illegal moneylenders (there are currently 52 licensed moneylenders in Ireland, 36 of whom operate ‘doorstep collection’ businesses) charging exorbitant rates of interest. Without access to a bank account, they may rely on cheque-cashing operations for access to cash – at a price. Typically, cheque-cashers charge a percentage of the cheque’s value in addition to a handling fee.
Financial exclusion is a highly lucrative business for some.
Even at the height of the Celtic Tiger, business was also booming for 21st century pawnbrokers. One such operation – a global business with franchise outlets in Ireland - advertises its business in the following terms:
“[...] we provide today’s consumers with a modern, clean, professional and convenient environment in which to sell used or unwanted goods for instant cash. We also offer a great place to shop for pre-owned bargains plus a range of financial services catering for all sectors of the population including [those] who do not have access to bank accounts or mainstream credit facilities.”
And there’s no shortage of customers who have no choice but to avail of their services.
According to the most recent figures, 12 per cent of the Irish population suffers from financial exclusion – the fourth highest level in the EU-15. Financial exclusion is defined by the European Commission as “a process whereby people encounter difficulties accessing and/or using financial services and products in the mainstream market that are appropriate to their needs”.
Estimates of the number of Irish adults who are ‘unbanked’ (without access to any form of bank account, whether transaction or deposit) range from 10 to 19 per cent. While the unbanked may not be financially excluded, since they may have access to non-bank financial products, those who are financially excluded are almost always unbanked.
As the recession bites further, Ireland’s levels of financial exclusion are set to rise.
Research carried out by the Combat Poverty Agency prior to its amalgamation into the Office of Social Inclusion at the end of June has shown that income inadequacy is one of the primary factors factor driving financial exclusion, while research carried out on behalf of the European Commission has found that labour market changes are among the key causes of financial exclusion.
So what can be done?
We need to ensure that the current debate surrounding the role played by our banks also focuses on the banking needs of people living in poverty. In a welcome move, the bank recapitalisation scheme announced by the Government last December included a clause obliging banks to promote basic bank accounts to low-income groups. However, little progress has been made since and, apart from the fact that they will include cash cards free of stamp duty, the minimum features which will be offered by these accounts have yet to be defined, made public and debated.
In accordance with European best practice, the key features of a basic bank account should, in addition to a cash card, include the following: no minimum opening or monthly balance; free transactions, and flexible account opening requirements.
The obligation to provide a basic bank account should apply to all retail banks operating in Ireland, rather than only to those banks being recapitalised – which, in effect, will mean that the financially excluded will be limited in their choice of service provider.
In the short term, there is also an urgent need to ensure that measures taken address the economic crisis do not further exclude those at the bottom of the money pyramid. In this regard, the Government decision not to pay the Christmas Social Welfare bonus this year, which will increase the financial pressures on low income households, is likely to force families to resort to moneylenders in order to meet seasonal expenses during what is generally a bumper month for the moneylending industry. Likewise, the social welfare cuts recommended by An Bord Snip Nua, if implemented, will increase the risk of financial exclusion for many social welfare recipients.
In the longer term, the challenge is to ensure that reducing economic inequality in all its manifestations becomes a cornerstone of public policy.
Originally published as an opinion piece in the Irish Examiner, August 3rd
The banking crisis which erupted towards the end of last year not only highlighted the crucial role played by financial institutions, both as providers of credit and as investment vehicles. It also showcased the manner in which those at the top of Ireland’s money pyramid reaped rewards from the financial sector during the good times.
Yet while those at the top were enjoying easy access to credit, not to mention generous bonuses for those working in the financial sector, many of those at the bottom of Ireland’s money pyramid were struggling to survive without a transaction bank account, a savings product or access to revolving credit (such as a credit card or overdraft).
They are the ‘financially excluded’, dependent’ for credit on legal and illegal moneylenders (there are currently 52 licensed moneylenders in Ireland, 36 of whom operate ‘doorstep collection’ businesses) charging exorbitant rates of interest. Without access to a bank account, they may rely on cheque-cashing operations for access to cash – at a price. Typically, cheque-cashers charge a percentage of the cheque’s value in addition to a handling fee.
Financial exclusion is a highly lucrative business for some.
Even at the height of the Celtic Tiger, business was also booming for 21st century pawnbrokers. One such operation – a global business with franchise outlets in Ireland - advertises its business in the following terms:
“[...] we provide today’s consumers with a modern, clean, professional and convenient environment in which to sell used or unwanted goods for instant cash. We also offer a great place to shop for pre-owned bargains plus a range of financial services catering for all sectors of the population including [those] who do not have access to bank accounts or mainstream credit facilities.”
And there’s no shortage of customers who have no choice but to avail of their services.
According to the most recent figures, 12 per cent of the Irish population suffers from financial exclusion – the fourth highest level in the EU-15. Financial exclusion is defined by the European Commission as “a process whereby people encounter difficulties accessing and/or using financial services and products in the mainstream market that are appropriate to their needs”.
Estimates of the number of Irish adults who are ‘unbanked’ (without access to any form of bank account, whether transaction or deposit) range from 10 to 19 per cent. While the unbanked may not be financially excluded, since they may have access to non-bank financial products, those who are financially excluded are almost always unbanked.
As the recession bites further, Ireland’s levels of financial exclusion are set to rise.
Research carried out by the Combat Poverty Agency prior to its amalgamation into the Office of Social Inclusion at the end of June has shown that income inadequacy is one of the primary factors factor driving financial exclusion, while research carried out on behalf of the European Commission has found that labour market changes are among the key causes of financial exclusion.
So what can be done?
We need to ensure that the current debate surrounding the role played by our banks also focuses on the banking needs of people living in poverty. In a welcome move, the bank recapitalisation scheme announced by the Government last December included a clause obliging banks to promote basic bank accounts to low-income groups. However, little progress has been made since and, apart from the fact that they will include cash cards free of stamp duty, the minimum features which will be offered by these accounts have yet to be defined, made public and debated.
In accordance with European best practice, the key features of a basic bank account should, in addition to a cash card, include the following: no minimum opening or monthly balance; free transactions, and flexible account opening requirements.
The obligation to provide a basic bank account should apply to all retail banks operating in Ireland, rather than only to those banks being recapitalised – which, in effect, will mean that the financially excluded will be limited in their choice of service provider.
In the short term, there is also an urgent need to ensure that measures taken address the economic crisis do not further exclude those at the bottom of the money pyramid. In this regard, the Government decision not to pay the Christmas Social Welfare bonus this year, which will increase the financial pressures on low income households, is likely to force families to resort to moneylenders in order to meet seasonal expenses during what is generally a bumper month for the moneylending industry. Likewise, the social welfare cuts recommended by An Bord Snip Nua, if implemented, will increase the risk of financial exclusion for many social welfare recipients.
In the longer term, the challenge is to ensure that reducing economic inequality in all its manifestations becomes a cornerstone of public policy.
Originally published as an opinion piece in the Irish Examiner, August 3rd
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