Alternative Finance: included on whose terms?
The workshop we attended looked at questions like whether financial inclusion ought to be encouraged when there are still problems which need to be repaired in the financial sector or if both activities could work together?
One of the first subjects discussed was the current and likely future condition of financial and financial products in the UK. We heard in Sarah Lyall that currently, the average household debt was #9,000 and that consumer debt is to take more mortgage debt in the following calendar year. More specifically we discovered about the hardship of students since changes in university fees. It may be safe to say that adopting or accepting this type of behavior at this early period in adult life may be damaging and only encourage individuals to take on additional debt later on.
Another place touched on was how changes in coverage would impact future reliance and need for credit products. With the introduction of Universal Credit, many households will see their incomes decrease but may nevertheless have the same outgoing bills to pay and consequently may have a higher reliance on credit products to make ends meet. Further to this, something that has already been obvious is that those with fluctuating income will find it hard to plan financially and this may also lead to reliance on credit products. Overall it was suggested that a declining wellbeing budget would lead to people having to source welfare from elsewhere and this could create a dependence on credit.
Taking a look at the present and future landscape of people’s financial needs it looks likely that reliance on credit is to increase. So how can this requirement be met while still ensuring individuals are fairly treated and get an excellent service from the financial sector? It brings us back to the question; if we promote financial inclusion when changes still need to be made from the commercial industry? Among those things we discussed was promoting existing more decent options and how they might become more mainstream and available to customers. Even with increased regulation in the way payday lenders can advertise their goods you can still not escape their adverts whether it is on the TV or even a bus shelter whereas credit unions use more conventional means such as word of mouth which may not reach the identical number of people. However, there are many advantages of word of mouth as we discussed in our group. In Hackney, churches are involved in encouraging credit unions and had boards outside to market them. Messages coming from a reliable community source similar to this could be crucial to promoting credit unions as an ethical alternative and work have been done with this in the Southwark (with London Mutual) and Liverpool with all the ‘Credit Champions’ job. Another trusted community link which could be and was utilized to promote credit unions is schools. We spoke about the way credit unions have seen schools to construct awareness in communities and also to educate children about saving. Not only are credit union visits to colleges beneficial through providing financial education but introducing good behavior for example saving at a young age will hopefully positively influence future attitudes towards money. Further fiscal incentives also have been used by credit unions like giving those that open a savings account #10. Additionally, some credit unions have partnered together with mainstream banks for them to make referrals for those who have been declined and partnerships like this are something we are also working on at Fair Finance.
So apart from promoting ethical choices what could be achieved contemplating how people’s needs and reliance on financial products is very likely to change later on?
My ideas are first to consider the groups of people which are currently facing dependence on charge; students and self-employed. The research discovered that pupils were reliant on credit products as they did not find their student loans enough to stay off. Further research could look at whether this is actually because the amount of investment given is not enough to reside off and this needs to be revised or if the problem is because of things such as poor budgeting and money management skills. When it’s the last fiscal education for students just before they go to college might be useful and work such as it is currently being done by the ‘Money Mentors’ project.
For self-employed and people with uncertain incomes, a thought has to be taken to create financial products work for their circumstances. Seeing individuals on 0hr contracts or low wages which may also be reliant on charge further campaigning and action should take place to prevent dangerous employment practices, some of which is being done by the Living Wage Foundation.
Finally to reduce the likeliness of consumers accessing exploitative financial providers or considering the use of payday lenders as usual more can be done around advertising. It was reported that children had asked the parent to take out payday loans to pay for things that demonstrates the way the notion of utilizing them has dangerously become typical for young people. Further campaigning to stop payday advertisements in specific spaces particularly on TV when children are likely to be viewers is required. Citizens UK have already campaigned around this issue and been successful in receiving some councils to prohibit payday lending within their borough.
Entire work towards creating the financial products function for people’s conditions is needed pairing with action to eradicate other societal issues which are leading to be reliant on charge.