The Finance Innovation Lab welcomes the publication of the government’s Financial Inclusion Strategy, and is particularly pleased to see that it recognises the crucial role of credit unions and Community Development Finance Institutions (CDFIs) in affordable lending for communities, with some practical measures to scale credit unions in England, and a pilot for small sum lending led by Fair4All Finance in partnership with one mainstream bank. However, questions remain as to whether it really shows the level of vision and ambition needed to tackle the scandalous scale of financial exclusion in the UK.
Responding to the government’s new strategy, Sam Rex-Edwards from Finance Innovation Lab, said:
“We have to ask whether the government has really grasped the scale of the problem of exclusion from affordable credit. There’s a £2 billion gap in the UK affordable credit market, and 3.2 million people were refused credit in the past two years. People are resorting to pay day lenders or loan sharks because they have nowhere else to turn. While the new strategy highlights the need for mainstream banks to do more to help address this – including through partnerships with credit unions and CDFIs – there is no indication that they will be monitoring what banks actually are doing. A commitment to a Fair Banking Act – which is being called for by community finance institutions, charities and people with direct experience of financial exclusion – would have shown that the government is serious about driving change at scale, rather than just hoping that banks will step up”.
Zahida, from Glasgow, has experience of being refused credit when she needed it most. Of the strategy, she says:
“People have waited far too long for real progress on access to affordable credit, and so many of us have shared our stories with policymakers again and again. This strategy could have gone further – for example, by pushing mainstream banks to partner with community lenders and setting a framework and targets for that through a Fair Banking Act – but it hasn’t. We’ll have to keep fighting, because I’m not convinced this strategy will bring the change we need”.