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Celebrating an end to financial exclusion is premature

I went to an excellent conference organised by Runnymede Trust last week on financial inclusion and equality, which included a fine array of speakers and delegates from the financial services sector, community finance organisations and equalities groups.

It was interesting to be, unusually for me, surrounded by people interested in financial inclusion (I’ve got quite used to being the ‘one droning on about financial services and bank reform’).

Runnymede deserve tremendous credit for undertaking really important research looking at racial inequality in the provision of financial services. In Financial Inclusion and Ethnicity Runnymede have started to provide precisely the sort of empirical evidence we need to understand where discrimination in financial services exists.

Disclosure is the foundation of our bank reform proposals, as without available data that is properly disaggregated by equality group, we cannot hope to properly address financial exclusion and systemic discrimination.

However, the burden of measuring and reporting this data should not fall to voluntary organisations. It should be something that banks do routinely through the regulatory framework. However, plaudits must go to Runnymede Trust (and their funders) for the work they have undertaken.

Brian Pomeroy, chairman of the Treasury’s Financial Inclusion Taskforce, announced to the conference that the joint target of the Treasury and the Taskforce to halve the number of people without a bank account had been met.

The 2004 target was agreed between the government and the banks and the latest figures show a fall from 2 million in 2002-3 to less than 900,000 in 2007-08. Even I am not so pessimistic to fail to see that this as good news, but the picture is perhaps not as overwhelmingly positive as it first appears.

The fall is based on a large increase in people with ‘non transactional accounts’ – that is accounts which can’t really be used in the way that most of us expect a bank account to work. You probably wont have a debit card, chequebook, be able to have direct debits or standing orders or withdraw money from an ATM. Does that sound like a bank account to you?

And, really importantly, I understand that it is not considered in your credit rating. So you don’t become ‘more credit worthy’ by having one. Since poor credit ratings are often based on ‘not having a rating’ rather than having a ‘bad rating’, the falling numbers of unbanked adults mask the continued financial exclusion of millions of people. 

Brian Pomeroy – expressing the Treasury’s line on the subject – talked about bank accounts being a ‘gateway’ to other financial services. Perhaps that’s true, but why would you only (deliberately) go for a half measure? Why couldn’t the government and the banks have ensured that bank accounts for unbanked people were ‘fit for purpose’? I certainly wouldn’t have gone about tackling financial exclusion, by offering a half-measure and saying it was a stepping stone to really addressing the problem.

p.s. – There was a great piece from Faisel Rahman (from Fair Finance & a colleague in the Responsible Finance campaign coalition) in Society Guardian on financial inclusion, race inequality and loansharks.

pps – if you’re interested in these issues and want to join the debate, do come to our annual conference ‘It’s the stupid economy’ on 3rd Dec. see – http://www.urbanforum.org.uk/events/it-s-the-stupid-economy  

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