Why data is key to effective community finance

In December 2013, seven of the main high street lenders took a landmark step towards greater transparency in how they serve local economies.  The participating lenders, Barclays, Lloyds, HSBC, RBS, Santander, Clydesdale & Yorkshire and Nationwide, released data on personal loans, residential mortgages and loans to small and medium enterprises (SMEs) at a postcode sector level. Participating banks will release this data quarterly for lending in the previous six months. The second tranche of data is due for release in April.

This disclosure of lending data comes after a long campaign by organisations, including the Community Investment Coalition (CIC), that believed this transparency was essential to support effective interventions in markets under-served by the main high street finance sector, mainly deprived communities.  Many people and organisations working on financial inclusion issues across the UK knew anecdotally that businesses and households in deprived communities found it harder to access affordable financial services, but there was a limited evidence base.  The evidence we had included bank branch closures (see Nottingham university’s work); awareness of clustering of pay day lenders; and the lack of access to free to use ATMs in some areas.

So what does the first tranche of lending data tell us? It is early days and because of the way in which the participating lenders have released the data, analysis at a local authority level is not an easy task.  HSBC, for example, has released its data set in pdf rather than excel format.  A well-known ploy for making use and analysis of data sets difficult.

But Birmingham Council has mapped the data, as part of its financial inclusion work.  Richard Browne’s recent blog for New Start outlines the findings and that the data ‘tells a little but has the potential to tell a lot more’.

One of the key limitations of the data is that the seven participating lenders only cover around 60% of the lending market.  Requiring all financial service providers, including pay day lenders, to disclose patterns of lending and releasing additional information, such as number of transactions, individual loan amounts and where deposits are taken from would give a more nuanced picture about how financial service firms operate in local markets.

What is clear is that although release of this data has been a long time coming, it is here to stay.  At the Community Development Finance Association’s annual conference, treasury minister Sajid Javid stated that the government is looking at how it can go further with the data that banks publish on lending. He said, ‘we’ve made the decision that we are going to ask the banks to go further and if it requires legislation, then it will come, because the more data that can be shared will definitely generate competition and alternatives’.

CIC has always been clear that we didn’t want release of data for its own sake.  Rather we thought it could play an essential role in supporting partnerships between banks, local authorities and community finance providers, to consider how to increase the provision of affordable finance.  We have written to every top tier local authority in Great Britain (Northern Ireland is not currently covered by the voluntary scheme) highlighting the availability of the data, with links to the data sets.  Councils from the Orkneys to Plymouth are now looking at integrating the data into financial inclusion work.  If you would like to know more about the lending data and access the data sets, you can do so here.