Financial Inclusion – How you can make it work

Sylvia Korn, DWPBernadette Sweeney, QXHA

Fiona Richardson, SIMLU

Why bother? Because UK Debt Figures show:

• UK wide debt is £1.3 Trillion (including mortgages)

• We owe £221 billion on credit cards

• Average total household debt is £13,153 (+ or -)

• 8 out of 10 financially excluded people live in socially rented accommodation

• Poverty has a bearing on an individual’s health

• Money spent on interest – better spent in local economy

Indicators of Financial Exclusion

• No access to bank account/h’hold insurance• Debt (including rent arrears)• Problematic credit history• Paying more for services and fuel (fuel

poverty)• Reliance on extortionate credit• Lack of confidence & limited aspirations• Health problems – as a consequence of debt

Fuel Poverty

High InterestLoans

Health problems

Rent arrears

PoorFinancial Capab.

NoSavings/Debts

Noinsurance

ExcludedPerson

There is also a business case to help

• Money spent on “high interest rates” better spent in the LOCAL economy

• For credit union’s – more people saving – more dividends – fulfilling social help ethos

• For social landlords – less defaulters – less rent arrears - less voids

• For the individual – step towards asset ownership, inclusion and better employment prospects

Responses to Financial Exclusion

• Access to mainstream services (basic bank accounts, savings accounts, insurance) NLTM

• Money/Debt advice services - £5M+ pa• Income maximization (benefits) advice • Financial literacy education/advice (CABx)• Links to affordable credit providers• Recognition of broader social exclusion issues • Financial Inclusion Funding of 11 LA’s

So How does financial exclusion manifest itself?

Tenants unable to sustain a tenancy

Rise in voidsHealth Problems

Payment arrears

Demand letters/ Threats

Difficulty in leading a normal life

Family relationships breakdown Borrow money

from “anyone”

Local economy suffers

Fuel Poverty

(419,000)H’holds

No household insurance

UK wide government funded “financial inclusion”

initiative

• November 2006 – April 2008• Focuses on areas of high

exclusion• Seconded Stakeholder

Managers – UK wide• work with “intermediaries”

at a local level

NLTM Objectives:– Encourage take up of financial products &

services– Increase awareness of affordable credit & move people away from loan sharks– Raise awareness of availability of money

advice– General awareness raising with those who

work with the financially excluded-what is available

Money & Debt AdviceMyths and legends – it’s only “the poor”

• Half of debt problems unplanned “Life events” (divorce/ill health/redundancy)• People bury their head in the sand• Don’t know where to turn• Aren’t confident seeking advice• Don’t know what they are entitled to• Important to seek help asap – it’s FREE• Range of alternatives available …

Any Citizens Advice Bureau

Citizens Advice Direct – 0844 848 9600

CCCS (Consumer Credit Counselling Service) – 0800 138 1111

National Debtline – 0808 808 4000

Now Let’s Talk Money – 0800 012 1656

And ……….

Bernadette Sweeney

QUEENS CROSS HOUSING ASSOCIATION

MONEY AND DEBT ADVICE SERVICE

Queens Cross Housing Association

Queens Cross Housing Association

Money And Debt Advice Service

Financial Inclusion Service

Queens Cross Housing Association is a social landlord who provides

accommodation to over 2128 tenants, also factor 1200 owner occupiers along with factoring 110 commercial properties

a) Housing Supportb) Volunteer Projectc) Youth Projectd) Welfare Rights

Welfare Rights

In 2006/2007 150

new clients referred

Estimated £576,400 in benefit income for local residents

Partnership Working Queens Cross Housing Association work in

partnership with Blue Triangle Housing Association, Move On and Glasgow Simon Community

This service is aimed at people who are homeless or faced with homelessness

Since July 2002- 765 clients referred to the project, total debt £1,706,968

Project funded until March 2008 from Homelessness Partnership and DRS

Financial Inclusion Service

Provide a money and debt advice service to Queens Cross Housing Association and Glasgow Housing Association residents living within the Maryhill area and in North and North West Glasgow

Service will target vulnerable, low income families and individuals.

Recruit/train volunteers in basic money/debt advice

Financial InclusionVolunteers will be crucial in providing

people with skills and knowledgeIncrease volunteers practical skills and

knowledge in both volunteering and future employability

Provide a volunteer hub centre, which will be used for volunteers to address local issues within the community

Financial Inclusion Service Financial Responsibility

Managing on a low income

Budgeting

Bank accounts

Other financial products

Financial Inclusion Service

Build a customer base

Consolidate and sell the service to other agencies

Refine the service tailoring to a range of differing customers

Affordable Credit – people often get into the “debt cycle”for small amounts (£500)

55% of low income households have no savings

“1.5 million people in the UK are falling behind with bills or credit card commitments” (FSA research)

Where are your tenants, customers or clients going? Could you help signpost them on…………..

CREDIT - WHERE CAN I GET IT IF I NEED IT?

• Oldest and largest lender in the UK• 1.5 million customers(60% market share)• 11,500 agents• £940.8m credit issued (2006) - APR of 177%• Shopacheck - APR 246.5%• Greenwoods - APR 399.7%

Amount of Loan Typical APR

Term of loan no. weeks

Weekly repayment

amountTotal

RepayableTotal interest

payable

Illegal lender £300 1000% 52 £57.50 £3,000.32 £2,700.32Shop-A-Cheque £300 246.50% 52 £17 £884 £584Provident £300 177% 55 £9 £495 £195Credit Union £300 26.80% 52 £6.55 £340.44 £40.44

Comparison Table

Typical doorstep customer:

• Working age but not working• Women aged 25-34 years old – with children• 50% will have an income under £13,000• Within the most disadvantaged

neighbourhoods

Growth Fund - £42M UK wide• Pollok credit union• Western Isles Credit Union• Glasgow Credit Union*• Dumbarton Credit Union• Capital CU, Edinburgh & the

Borders• Scotcash, Glasgow (CDFI)• 1st Alliance CU, Ayrshire*• North East Scotland CU,

Aberdeen

Scottish Government - SGEI• Livingston Credit Union• Dalmuir Credit Union• Yoker Credit Union• Craigmillar Credit Union,

Edinburgh• Scottish Transport Credit

Union (Scotland wide)

“AFFORDABLE CREDIT” AVAILABLE VIA VARIOUS GOVERNMENT SCHEMES

Check with your local Credit Union what products & services they offer

Fiona Richardson

Scottish Illegal Money Lending

Unit

0141 287 6655

Basic Bank Accounts – can be a stepping stone to wider inclusion

Background - 2M people unbanked

– Because its safer (Farepak)– Paying by Direct Debit entitles you to a discount on

utilities – It gives you a credit history– You can cash cheques for free – unlike Cheque Cashing – POCA’s are being phased out (2010) – to be replaced

by?– Local Housing Allowance – direct to tenants– Tenants who pay by direct debit are less likely to

default

GETTING STARTED …………

• Make a business case for getting involved• What can you contribute• Identify key organisations you will need to work with – can only

be done with a multiple approach• Work up a FI action plan(can get help with this)• See if LA/government support is available• What is going on locally • What are national organisations doing?• Practically, what can you do internally• How can you get people interested?

Generally…….

• Find out where the local credit unions/housing associations are in your area

• Do they offer the “white goods” scheme/£1 start up?• How and where to signpost for money advice?• Speak to your local CAB• What are the benefits of opening a basic bank/CU

account – to individual & org?• Targeted intervention?• There are lots of goods web sites – check them out

What can you do to make financial inclusion work?

• Identify what the benefits are• Think of how you will turn your ideas into action• Try and “mainstream” your ideas into everyday practices• Don’t re-invent the wheel - speak to people in the same

“area” who are already working with the financially excluded

• Train frontline staff to identify “danger” signals• Get help in drawing up an action plan (NLTM)• Adopt “preventative” approaches• Think about targeted intervention?• Are your client/tenants getting the benefits they deserve?

Contd…….

• Find out if your local authority is doing anything locally

• Speak to the Financial Inclusion team within Scottish Government

• Speak to the Now Let’s Talk Money rep • Would you like to hold a staff training workshop,

small local seminar or even get some flyers printed?

Housing Associations• Impacts on housing – 29% move on within 20 weeks of

seeking debt advice• Case for HA intervention: 8 out of 10 financially excluded

people live in socially rented accommodation – your problem

• Move away from:

ActionTenancy Rent arrears Eviction Voids

Newsletter item/leaflet

Direct mailing to tenants

Verbal information

Partnership with local CU

Staff Training/ Local action planning

Pre tenancy engagement

Independent Advice Project

Rent paid by direct debit

Pay £1 joining fee

Do you offer Insurance with rent?

Further points ……

• Joint working is key• Someone to co-ordinate services• Don’t expect a quick fix (chaotic lifestyles)• Mainstream into everyday working• What are Loc Govt and Central Govt doing• Where can I get funding• Don’t be afraid to adapt/adopt best practice• Remember there will be a ‘time’ commitment

Summary

• Financial Exclusion is related to broader social exclusion issues

• It is about lack of access to mainstream services (A, B, C)• Upskilling intermediaries and their frontline staff• Letting public know there are choices• Giving people the confidence to make informed decisions• Freeing people from Loan sharking and illegal money lending • Health implications• Putting money back into local economy• Encouraging dialogue/Joint working