review

Financial inclusion: Improving the financial health of the nation

Evidence type: Review i

Background
The Study
Key Findings
Points to consider

Background

The Financial Inclusion Commission is an independent body which aims to increase financial inclusion in the UK, to raise awareness of the issues related to inclusion, and to influence stakeholders such as policy makers, regulators and the financial services industry. By 2020, the Commission wants “financial services that are accessible, easy to use and meet people’s needs over their lifetime” and “people to have the skills and motivation to use financial services, and to benefit meaningfully from them” (Financial Inclusion Commission, 2015). The report collates the position of the Commission on the current state of financial inclusion, and sets out its recommendations for what is required to meet its vision. It is particularly relevant as it reflects on the situation since the Government’s Financial Inclusion Taskforce was wound up in 2011.

Research Questions and Aims:

The report set out to:

Understand the current state of financial exclusion and any interventions
Review changes since the Financial Inclusion Taskforce was wound up
Raise awareness of the issue of financial exclusion
Influence policymakers, regulators, the financial services industry and other key stakeholders

The Study

This report comprises a review of existing research supplemented by additional qualitative data from written or oral evidence from representatives of a variety of organisations, and also from private individuals. 84 different organisations or individuals provided oral or written evidence to the Commission, including banks, community finance institutions, trade associations, insurance companies, charities, local authorities, housing providers, academics, other service providers and people who are or have been financially excluded. Experts within the Commission have synthesised this evidence and used it to make recommendations to inform government policy and influence other stakeholders such as regulators and the financial services industry.

Key Findings

Leadership: There is currently no single government department with responsibility for financial inclusion, but there is a need for leadership and coordination of policy and interventions.
Banking and payments: Low income consumers in particular are not well served by existing providers, and alternative suppliers face challenges. However changing technology will provide opportunities to improve inclusion.
Credit and debt: many people are excluded from mainstream credit and the supply of affordable credit may not keep up with demand. Debt solutions and advice are not fit for purpose, or consistently available.
Savings and pensions: Many people are not financially resilient and there is a lack of suitable savings products for those saving small sums. Pension reforms may cause inclusion problems in the longer term.
Insurance: There are not enough suitable products, and insurance is seen as irrelevant or unaffordable for many.
Financial capability: Many people do not understand enough about finances or how to manage their money. Universal Credit is likely to change how people on low incomes manage but the impact is not yet understood.

Recommendations:

The authors made detailed recommendations in each of the key areas above. The overall conclusion to the report was:

“Moving forward in financial inclusion is not a task for government alone, particularly at a time of great pressure on the public finances. But it is an area where government can and should take a lead, working with the regulator, the financial services industry and civil society, to improve the financial health of the nation.” (Financial Inclusion Commission, 2015)

Points to consider

Relevance: This report is particularly relevant as it assesses the state of financial inclusion since the Government’s Task Force ended in 2011. It also considers the impact of recent and ongoing changes such as pension reforms and the introduction of Universal Credit, as well as the effect of changing technology and economic conditions.
Generalisability/transferability: This report covers the UK and isn’t transferable to any other country or area.
Applicability: The report provides information and makes recommendations that can act as a starting point for further discussions about financial inclusion. The recommendations represent the position of the Financial Inclusion Commission, on the basis of the evidence gathered and on the expertise of the Commissioners.
Methodological strengths or limitations: Whilst the report provides a link to transcripts of evidence, and a full list of contributors, it doesn’t give any detail on how the evidence was gathered, nor on how the contributors were selected. This makes it hard to assess the quality of the data and the breadth of opinion that was included. However, the vast expertise and experience of the Commissioners, the diversity and relevance of the organisations that took part, and the contribution of an advisory body drawn from other stakeholder organisations all suggest that both the research and the report are of the highest quality.