I was however invited to stay, and I am happy to say I did as the talk provided a great insight into what it means to be financially excluded in the UK. In particular, Fair Finance’s talk highlighted for me two significant issues in our society - financial exclusion and over-inclusion.
Financially excluded individuals are those who simply cannot get ‘into the system’. They don’t have a utility bill, they don’t have any assets, they don’t have a financial history, and as a result they don’t have a credit score. These people are usually exploited by payday loan providers and credit merchants, taking advantage of the current economic environment and charging them interest anywhere from 300 to 4,000% for loans. Fair Finance supports these financially excluded individuals by working closely with them to provide personal and microcredit loans at much more manageable rates.
The talk also highlighted the problems caused by financial over-inclusion, people having too much access to credit. In November 2011 total UK personal debt stood at £1.45bn, with average household debt amounting to £7,900. In such circumstances it is clear that a more personalised approach to financial wellbeing is required to help people get back on track.
The WAM event was one in which I could have been excluded myself, by not meeting the most basic of criteria. However, the warm welcome I received reinforced to me the importance of giving everyone, including financially vulnerable people, a second chance. Fair Finance’s bad debt rate of just 8% reinforces that there are benefits and a growing demand to revolutionise personal finance in the UK. Perhaps this is a space for greater social enterprise growth?
David Bartram
@DavidBartram100
A regular advertisement with puppets that promotes the use of sliders to establish loan amounts and payback times is telling. It's to make the service accessible to the financially illiterate and help people commit to arrangements they don't understand.
ReplyDeleteThat said, although these sites profiteering is abhorrent I still prefer a regulated market to my experience of loan sharks.
When I was younger I had a co-worker who borrowed from a loan shark to buy christmas presents.
It quickly turned nasty, at least these services aren't offering physical violence to defaulters.
It would be interesting to see if there are any figures to show if payday lenders have cut out traditional loan sharks.
Thank you Niall, loan sharks are certainly a big issue.
DeleteFair Finance is, I suspect, however trying to combat exactly that.
As ever, much of the distinction between a social enterprise that operates at what's sometimes called the bottom of the pyramid and commercial companies profiteering from customers is the motivation and the attitude that these organisations are set up with.
For example, Fair Finance is set up to "to make a modest profit as a result of our business activities, all of which is reinvested in the company to allow us to serve more customers." (see http://www.fairfinance.org.uk/who/what-we-do/)