Almost 3 million adult Australians are entirely or severely excluded from mainstream financial services including bank loans and even bank accounts, and are often instead uninsured and reliant on loansharks and other comparatively unregulated and often unscrupulous lenders.
These are the findings of a report from the Centre for Social Impact at the University of NSW, in conjunction with the National Australia Bank. Measuring Financial Exclusion in Australia was built upon extended face-to-face interviews with 50,000 people and follow up surveys with 661 people previously identified as financially excluded.
The report finds:
Around 17.2% of the adult population in Australia were either fully excluded or severely excluded from financial services in 2011. This figure comprises 1.1% of adults who were fully excluded (they had no financial services products) and 16.1% of adults who were severely excluded (they only had one financial services product).
The total of 2,995,000 adult Australians who were excluded was up slightly from 2010’s total of 2,650,000, or 15.6%. Lead researcher Chris Connolly from the UNSW Institute said that while there were explicit policy recommendations in the report, the findings would be used to lobby government and the finance sector on a number of policy fronts.
One important area of lobbying was for the regulation of “payday lending” and short-term small amount lending, which are available to people on the margins but often have such stiff interest rates that borrowers take out other such loans to pay off previous ones.
Expanding the reach of the mainstream financial services market was also a high priority, Connolly said. “There’s a move on to lobby the banks and insurance companies to do more about developing appropriate and affordable products, and possibly doing that in partnership with community organisations,” Mr Connolly said, giving the No Interest Loan Schemes program as an example, and saying that there was a push to develop similar products for insurance.
The report also gives supporting evidence for “educational and financial literary programs,” Mr Connolly said. The need was highly evident in both marginalised Australians and many immigrants - many of whom were not in financial difficulty: “For reasons we don’t completely understand the survey shows that people who come from overseas have incredibly low levels of insurance coverage, even though they might have good levels of bank account and insurance coverage,” Mr Connolly said. The problem seemed to occur amongst immigrants from non-English speaking countries, and it suggested, in part, that the complexity of information for financial products might be off-puttingly high for non-native speakers.
Another recommendation stemming from the report was to focus appropriate mainstream, regulated services on geographic areas with high levels of financial exclusion. “For example, we can point to very high levels of financial exclusion in southwestern Sydney, and we can map the [need for the] provision of financial counselling, no interest loan schemes, bank branches and ATMs,” Mr Connolly said. “We’re hoping to get people to think more about getting services into areas with high rates of financial exclusion.”
Without duly regulated, and affordable and services available, poor and vulnerable people were all too likely to fall into the trap of the payday lenders, which is an “absolutely huge … and parasitic” industry, Mr Connolly said.