tag:theconversation.com,2011:/id/topics/financial-exclusion-3079/articlesFinancial exclusion – The Conversation2023-07-28T12:52:42Ztag:theconversation.com,2011:article/2102352023-07-28T12:52:42Z2023-07-28T12:52:42ZBank account closures don’t just affect ‘politically exposed persons’ – sex workers have struggled with financial exclusion for years<figure><img src="https://images.theconversation.com/files/539559/original/file-20230726-29-q9sqyp.jpg?ixlib=rb-1.1.0&rect=208%2C126%2C5830%2C3884&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stressed-broke-young-asian-woman-having-2237736495">BongkarnGraphic/Shutterstock</a></span></figcaption></figure><p>The fallout over the closure of Nigel Farage’s bank account has shed light on how financial institutions handle “politically exposed persons”, whom they may view as high-risk clients. </p>
<p>Farage, the former Ukip leader, who held a bank account at the NatWest-owned private bank <a href="https://www.coutts.com/">Coutts</a>, obtained and published a <a href="https://www.telegraph.co.uk/news/2023/07/19/coutts-full-dossier-on-nigel-farage-closed-bank-account/">dossier</a> showing that the bank closed his account after identifying him as a reputational risk. The internal report stated that Farage’s views “do not align with our values”. Two executives at NatWest banking group – CEO Alison Rose and Peter Flavel, head of the bank’s Coutts division – have <a href="https://www.bbc.co.uk/news/business-66328666">since resigned</a>.</p>
<p>But people who occupy prominent public functions are not the only ones to be affected by loss of access to financial products.</p>
<p>For people working in commercial sex, the often unexplained closure or denial of bank accounts is an all too frequent occurrence. And their experiences hardly attract the same quick <a href="https://news.sky.com/story/city-minister-summons-bank-bosses-to-protect-customers-from-being-de-banked-after-farage-account-closure-12926362">government intervention</a> and response from banks as Farage.</p>
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Read more:
<a href="https://theconversation.com/what-is-a-politically-exposed-person-and-why-do-the-likes-of-jeremy-hunt-and-nigel-farage-claim-the-status-prevents-them-getting-bank-accounts-209658">What is a 'politically exposed person' and why do the likes of Jeremy Hunt and Nigel Farage claim the status prevents them getting bank accounts?</a>
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<p>Escorts, in-person sex workers, cam and pornography performers, sexual products business owners and others operating in adult entertainment have discussed their financial exclusion ordeals on <a href="https://www.news.com.au/finance/business/banking/appalling-australian-sex-worker-samantha-x-reveals-huge-banking-blow/news-story/e0d1676aa12c1472ea8c039897ef892c">social media</a> and in various <a href="https://www.theguardian.com/business/2021/oct/16/sex-discrimination-why-banks-shun-workers-in-adult-entertainment">news outlets</a> around the world for years. More recently, <a href="https://www.nswp.org/sites/nswp.org/files/Summary%20Regional%20Reports%20Economic%20Empowerment%2C%20NSWP%20-%20November%202015.pdf">sex worker organisations</a> and <a href="https://academicworks.cuny.edu/clr/vol26/iss1/4/">researchers</a> have begun collecting evidence of the extent and impact of this discrimination.</p>
<p>What is evident from the <a href="https://www.northumbriajournals.co.uk/index.php/IJGSL/article/view/1258">expanding research</a> is that, even though their commercial sex practices are legal and earnings legitimate, sex workers and adult entertainers are frequently denied or revoked access from financial products. This can include <a href="https://www.nzherald.co.nz/business/banks-refusing-services-to-sex-workers-were-easy-picking/N7N74KJGK2SH6TSJQDVQOBLDPY/">business</a> and <a href="https://columbianewsservice.com/2023/02/01/sex-workers-say-they-face-hurdles-to-banking-access/">personal bank accounts</a>, <a href="https://nationaluglymugs.org/wp-content/uploads/2022/01/BDSW_final.pdf">overdrafts</a>, <a href="https://www.9news.com.au/national/banks-blamed-for-sex-worker-slut-shaming/2f4e11bf-e7d8-4719-9237-259a0a8f3bf5">mortgages</a>, <a href="https://www.bbc.co.uk/news/uk-england-south-yorkshire-56758745">loans</a>, <a href="https://www.investordaily.com.au/markets/46043-nab-treated-me-like-garbage-sex-worker-says">merchant banking services</a>, <a href="https://www.bbc.co.uk/news/technology-55551300">credit card services</a>, <a href="https://survivorsagainstsesta.org/platforms-discriminate-against-sex-workers/">e-wallets, e-payments and more</a>.</p>
<p>A <a href="https://nationaluglymugs.org/wp-content/uploads/2022/01/BDSW_final.pdf">2021 report</a> from <a href="https://nationaluglymugs.org">National Ugly Mugs</a>, a UK charity fighting to end violence against sex workers, shows evidence of financial discrimination by various UK-based financial institutions. </p>
<p>The report highlights the experiences of sex workers who were explicitly told by banks that the decision to withhold their services was based on their involvement in the adult industry. Others received no justification for the closure or denial of bank accounts, but did not inquire further about the reasons of their exclusion, for fear of being denied accounts elsewhere.</p>
<h2>‘They do not want you at all’</h2>
<p>My ongoing research on sex work and financial exclusion with colleagues from the University of Nevada shows that people working in the legal adult entertainment industry in the US experience similar exclusions. As a sex worker operating in a legal Nevada brothel told us: </p>
<blockquote>
<p>Once the bank figures out you’re a sex worker, they don’t want to offer you any services at all whatsoever. They do not want you at all. </p>
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<p>Another participant told us that such exclusions can persist even after leaving sex work. She spoke of a friend who had been out of the legal brothel industry for more than a year, but was still unable to open a bank account. </p>
<p>Financial services are indispensable for carrying out most professional and personal activities. But our respondents felt they were not in any position to challenge the exclusions they faced. One told us that the fear of being permanently denied access to financial products stops them from speaking up:</p>
<blockquote>
<p>Generally banks don’t exactly say why, [and] we don’t exactly say why either because it’s so dangerous.</p>
</blockquote>
<p>She also described being “thankful that it’s not worse than that”, after having a bank account closed – but not having her funds seized.</p>
<p>Most of our respondents reported long-term freezing or loss of funds, specifically when dealing with online payment services. As most adult entertainment services are now <a href="https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-4446.12493">facilitated online</a>, access to digital financial infrastructure and e-payments is ever more important. </p>
<p>But many online payment platforms have a <a href="https://www.paypal.com/us/cshelp/article/what-is-paypal%E2%80%99s-policy-on-transactions-that-involve-sexually-oriented-goods-and-services-help384#:%7E:text=We%20don%27t%20permit%20PayPal,or%20appear%20to%20involve%2C%20minors.">ban on “sexually oriented goods or services”</a>. As Natasha Tusikov, an expert on crime, technology and regulation describes, this is a form of <a href="https://www.emerald.com/insight/content/doi/10.1108/S1521-613620210000026005/full/pdf">sexual censorship</a> that leaves people with limited digital payment options, many of which charge high fees. </p>
<figure class="align-center ">
<img alt="Photo of Nigel Farage speaking at an event, against a dark background" src="https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/539763/original/file-20230727-17-ltpufz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Not everyone has the political or media power to speak up about their bank account closure.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/newport-wales-uk-september-21st-2019-1551047501">ComposedPix/Shutterstock</a></span>
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<h2>The toll of financial exclusion</h2>
<p>Having to hide their occupation, living in a constant state of fear of being “debanked” (losing access to bank accounts) has a heavy toll on sex workers’ lives. This even more so for undocumented migrants, or others who face discrimination on the basis of their race, class, gender and sexuality. </p>
<p>Financial exclusion is not only a source of anxiety and depression, but has harmful <a href="https://action.freespeechcoalition.com/files/FinancialDiscriminationandtheAdultIndustry.pdf">ripple effects</a>. It prevents people from accessing loans and mortgages, it reduces opportunities to save, plan finances for the future or change occupation. It can lead to homelessness and loss of financial autonomy. </p>
<p>As one of our respondents told us, missing a rent payment and getting evicted can lead to suicide: </p>
<blockquote>
<p>When someone is debanked, people die, and I want to say this bluntly. This is a deadly issue.</p>
</blockquote>
<p>Sex workers and organisations who advocate for their rights are challenging these practices. In 2021, a group of UK-based sex worker-led organisations <a href="https://drive.google.com/file/d/1GQCV62TnDfq8Pibn9GaRKghIOYCP3u90/view">wrote an open letter</a> demanding the end of financial exclusion by financial institutions. In the US, <a href="https://www.acceptancematters.org">sex workers</a> and civil rights organisations have been campaigning to stop payment platforms from <a href="https://www.aclu.org/news/lgbtq-rights/paypal-and-venmo-are-shutting-out-sex-workers-putting-lives-and-livelihoods-at-risk">shutting down sex workers’ accounts</a> without due process, and to challenge the <a href="https://www.aclu.org/news/lgbtq-rights/how-mastercards-new-policy-violates-sex-workers-rights">exclusionary adult content policies</a> of credit card networks.</p>
<p>But as our participants pointed out, the stigma that surrounds the adult entertainment industry prevents many from coming forward. Some are concerned that publicly challenging financial institutions might result in being permanently banished from them. Unlike well-known political figures, vulnerable people in a stigmatised industry have limited expectations of redress after being excluded from financial services.</p><img src="https://counter.theconversation.com/content/210235/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Isabel Crowhurst received funding from the ESRC Impact Acceleration Account for research mentioned in the article.</span></em></p>Escorts, sex workers and other adult entertainers often do not feel they have the power to challenge debanking.Isabel Crowhurst, Reader in Sociology, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2077772023-06-27T14:47:16Z2023-06-27T14:47:16ZNigeria’s mobile money system has a dark side even though it’s convenient - new study explores the risks<figure><img src="https://images.theconversation.com/files/533690/original/file-20230623-6861-orzj24.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mobile money operators using point of sale machines are increasingly popular in Nigeria.</span> <span class="attribution"><span class="source">Getty Images </span></span></figcaption></figure><p>Financial services play <a href="https://www.emerald.com/insight/content/doi/10.1108/IJBM-07-2020-0379/full/html">vital roles</a> in supporting economic activities. In Nigeria, though, a significant number of people <a href="https://www.emerald.com/insight/content/doi/10.1108/JSM-07-2020-0280/full/html">don’t have access</a> to essential banking services.</p>
<p>A 2021 World Bank report shows that only <a href="https://www.worldbank.org/en/publication/globalfindex/interactive-executive-summary-visualization">45% of Nigerian adults</a> have bank accounts. Another <a href="https://efina.org.ng/wp-content/uploads/2021/10/A2F-2020-Final-Report.pdf#page=43">2021 study</a> shows that nearly one in two adults don’t use any formal financial services. And more than one in three Nigerian adults are completely financially excluded. To be financially excluded means that such adults do not have or use any financial products or services – whether formal or
informal.</p>
<p>They can’t enjoy all the advantages that come with being part of the formal financial system – like keeping their money safe and using credit. </p>
<p>Some turn to alternative systems such as mobile money to meet their financial needs.</p>
<p>Mobile money can simply be described as a mobile human ATM. This is where an individual operates a point of sales machine on a street or in a shop and people go to them to deposit money or withdraw money. The operators charge customers for this informal banking service. This service will often appeal to those without access to internet banking, those who do not have ATM or bank branches around them. It is not just about having bank accounts, but about accessing the money in the account. While withdrawing from an ATM may be free, mobile money operators may charge N100 (14 US cents) for withdrawing N5000 (US$6.79).</p>
<p>By November 2022, <a href="https://nairametrics.com/2022/12/28/deployed-pos-terminals-across-nigeria-hit-1-6-million-in-november-2022/">1.6 million point of sales machines</a> were in use across Nigeria. There were <a href="https://www.statista.com/statistics/1178109/number-of-pos-terminals-in-nigeria/#:%7E:text=Between%202017%20and%202022%2C%20the,Nigeria%20experienced%20a%20great%20increase.">155,000 in 2017</a>. Mobile money operators also have an <a href="https://ammban.org/">association</a>, the Association of Mobile Money and Bank Agents in Nigeria. <a href="https://nibss-plc.com.ng/mobile-money-transactions-volume-rose-by-70-in-feb/">At the end of February 2023</a>, a total of 113.53 million transactions valued at N883.45 billion (US$1.076 billion) was done via point of sale machines, as against the 96.35 million transactions valued at N807.16 billion (US$984 million) recorded in January this year.</p>
<p>Mobile money has its benefits, but it’s also important to be aware of the potential risks. The point is to make sure that financial transactions are safe and consumers are protected from fraud. </p>
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<strong>
Read more:
<a href="https://theconversation.com/nigeria-and-digital-banking-a-revolution-still-waiting-to-happen-203435">Nigeria and digital banking: a revolution still waiting to happen</a>
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<p>In <a href="https://www.sciencedirect.com/science/article/pii/S0040162522005662">our research</a>, we examined the “dark side” of mobile money in Nigeria. We got valuable insights from customers, agents and financial technology (fintech) developers. We found that the mobile money system presents challenges of fraud, insecurity, high costs and poor infrastructure. </p>
<h2>Mobile money risks and challenges</h2>
<p>Our objective was to uncover any risks and challenges associated with these business operations, as well as the implications for stakeholders. We interviewed 41 financially vulnerable consumers ranging from 20 to 70 years old, 19 point of sale operators aged 20 to 49, and 11 fintech developers. </p>
<p>The study revealed several key issues associated with mobile money operations.</p>
<p><strong>Fraudulent activities</strong></p>
<p>Consumers who use point of sales machines acknowledge they are vulnerable when interacting with operators. They know that their card details may be compromised since they are not engaging with traditional banks. But they weigh this against the benefits and convenience, and they exercise caution.</p>
<p>Developers also acknowledge that individuals might fraudulently try to register as operators. They would submit fake documents, thinking the developers would not do a thorough check. This highlights the need for robust security measures. </p>
<p><strong>Lack of security</strong></p>
<p>Operators are aware of the risks they face because they have less robust security measures than traditional banks. They try to avoid the risks by, for example, operating during daylight hours, working in shops with burglar proofing and installing CCTV systems. </p>
<p><strong>High transaction costs</strong></p>
<p>Developers deduct a fee from each transaction, and operators charge consumers for using their services. Though the Central Bank of Nigeria has <a href="https://www.cbn.gov.ng/cashless/POS_GUIDELINES_August2011_FINAL_FINAL%20(2).pdf#page=11">said</a> that the maximum total fee should be 1.25% of the transaction value, subject to a maximum of N2,000.00 (US$2.44), consumers have reported instances where agents charge more. </p>
<p>For example, during the recent <a href="https://punchng.com/traders-in-agony-as-naira-scarcity-grounds-businesses/">naira scarcity</a>, some operators <a href="https://businessday.ng/business-economy/article/pos-operators-reduce-charges-as-naira-scarcity-eases/">charged 30% fees</a> for transactions. </p>
<p>There is little or no monitoring of the operators, especially in areas where there is little or no competition. </p>
<p><strong>Poor infrastructure</strong></p>
<p>Poor infrastructure remains a major challenge for the financial services system in Nigeria. Internet connections and servers are often inadequate, which can impede the smooth operation of mobile money transactions. It can be difficult to process transactions. In some cases, agents have switched developers due to the lack of a reliable support system, which had a negative impact on their sales and resulted in customer losses.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/nigeria-is-making-progress-with-financial-inclusion-heres-how-160947">Nigeria is making progress with financial inclusion: here's how</a>
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<h2>Solutions</h2>
<p>Mobile money has had a positive impact in Nigeria, particularly for individuals and businesses in areas with limited access to traditional banking services. Mobile money systems have effectively replaced cash and traditional bank accounts, enabling financial inclusion and improving the financial well-being of customers. The financial inclusion rate <a href="https://theconversation.com/nigeria-is-making-progress-with-financial-inclusion-heres-how-160947">increased from 56.8% in 2016 to 63.2% in 2018</a>. </p>
<p>But it is important to recognise that these systems are not without challenges.</p>
<p>One aspect that needs attention is security. Customers, especially those who are sceptical about the technology and the agents, prioritise the security of their financial activities. Robust security measures, such as secure encryption, authentication mechanisms and fraud detection systems, are essential to build trust and alleviate concerns. Developers are actively working to implement measures that can detect and prevent fraudulent activities, ensuring a more secure environment for mobile money transactions. </p>
<p>Other steps include increasing transparency, and providing education and awareness programmes to ensure safe and responsible use of mobile money services. </p>
<p>Compliance with regulatory requirements is crucial for maintaining the legality and trustworthiness of these services. Developers must also navigate complex regulatory frameworks to align their operations with <a href="https://www.cbn.gov.ng/cashless/POS_GUIDELINES_August2011_FINAL_FINAL%20(2).pdf">government guidelines and policies</a>. The fintech industry in Nigeria and the increasing point of sale agents, pose challenges in monitoring compliance. Regulators need to catch up with growing trends and provide policies that support and drive financial inclusion. They must also do spotchecks to identify those not complying with the regulations.</p><img src="https://counter.theconversation.com/content/207777/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Emmanuel Mogaji does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>More Nigerians are using mobile money but it is fraught with inherent dangers that must be tackled.Emmanuel Mogaji, Associate Professor in Marketing, Keele UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1692862021-10-19T13:56:21Z2021-10-19T13:56:21ZWhat makes FinTech solutions succeed? We built a model based on Ghana’s experience<figure><img src="https://images.theconversation.com/files/425739/original/file-20211011-25-16te0r.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A woman places her mobile phone over credit card reader at grocery store checkout counter.</span> <span class="attribution"><span class="source">Luis Alvarez via Gettyimages</span></span></figcaption></figure><p>Nearly a quarter of adults in the world do not have access to a basic <a href="https://elibrary.worldbank.org/doi/abs/10.1596/978-1-4648-1259-0">bank account</a>. Financial technology (FinTech) innovations, such as mobile money, are one way to bridge this gap. Examples include M-Pesa in Kenya, Oi Paggo in Brazil and TCASH in Indonesia. All provide individuals with cheaper, easier, faster and more efficient ways of storing and transferring value. These efforts contribute to bridging the financial exclusion gap.</p>
<p>We used the World Bank’s <a href="https://www.worldbank.org/en/topic/financialinclusion">definition</a> of financial inclusion, which is where:</p>
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<p>individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.</p>
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<p>Few FinTech firms in the global south have been able to replicate the success of FinTech innovations to reduce financial exclusion. The question is: why? We explore this question in our <a href="https://www.tandfonline.com/doi/full/10.1080/0960085X.2021.1978342">research paper</a> and provide some answers.</p>
<h2>The Ghanaian FinTech ecosystem</h2>
<figure class="align-right ">
<img alt="Holding a feature mobile phone" src="https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425735/original/file-20211011-26-pj95hh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Mobile money application.</span>
<span class="attribution"><span class="source">Rachel Strohm</span></span>
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<p>As is true in other countries, Ghana’s FinTech ecosystem is a complex and dynamic environment with interdependencies between various actors. </p>
<p>Regulators such as the Bank of Ghana provide policy and regulatory direction for the financial sector.</p>
<p>Traditional financial institutions such as commercial banks offer financial services through digital and physical branches. They are also the custodians of electronic funds transacted on FinTech innovations. </p>
<p>Telecommunications companies (telcos) also play a critical role. They use their mobile network platforms to offer digital financial services, popularly referred to as mobile money. </p>
<p>For their part, FinTech firms develop digital financial services. In Ghana, there are over 30 unique FinTech services. They include Qwikloan, Zeepay, G-money, Slydepay, and eTranzact. </p>
<p>Then there are the agents – small enterprises, acting as “shadow bank branches” or “cash-in, cash-out” points – providing support for digital financial services. </p>
<p>And, of course, the users that use FinTech innovations for financial transactions such as money transfer, securing micro-loans and paying bills. </p>
<h2>Success factors</h2>
<p>There is limited research about how new financial technology entrants and incumbents work together to shape financial inclusion. In our paper we try and bridge that gap. </p>
<p>We study the FinTech ecosystem in Ghana to learn how all the various actors work together to shape financial inclusion. </p>
<p>We did a case study with a range of organisations in Ghana. We identified three practices that are key to a well-functioning ecosystem for FinTech driven financial inclusion:</p>
<ul>
<li><p>innovative and collaborative practices</p></li>
<li><p>protectionist and equitable practices, and </p></li>
<li><p>legitimising and sustaining practices. </p></li>
</ul>
<p><strong>Innovative and collaborative practices:</strong> This involved substituting and refining established financial services and adopting new collaborative models to develop financial services. </p>
<p>We found that by refining and substituting established financial services through mobile money, many unbanked people were able to access financial services. This was because they didn’t need to visit bank branches, or provide strict documentation. </p>
<p>We also found that development and offering of FinTech innovations required unique collaborations. This was done through combination of technological capabilities, resources and relationships. </p>
<p>For instance, to offer microloan mobile money services, FinTech firms developed the mobile money applications, telcos offered the service through the mobile money platform while commercial banks acted as custodian of electronic funds. </p>
<p>This unique collaboration is new to the Ghanaian financial environment. It has led to many unbanked people being able to access financial services. </p>
<p><strong>Protectionist and equitable practices:</strong> We found that the entrance of new actors triggered rivalry and new competition. Initially this stifled the growth of FinTech innovations in Ghana. </p>
<p>To address this impasse, the Bank of Ghana intervened with different policies such as the “E-money issuers” guidelines. </p>
<p>We find these policies to be both protectionist and equitable. They protected the interest of incumbents, like the banks. But they also ensured equity by recognising telcos and FinTech as ‘semi-autonomous’ financial institutions. </p>
<p>The introduction of the policies liberated the financial space and enabled rapid growth. </p>
<p><strong>Legitimising and sustaining practices:</strong> These practices are symbolised by top-down revision of institutional arrangement and bottom-up trust building to create trust and sustain FinTech innovations. </p>
<p>We found that there was reorganisation at various levels. For instance, previously, FinTech firms were not legally recognised within the financial environment. But the Bank of Ghana introduced the <a href="https://www.bog.gov.gh/wp-content/uploads/2019/08/Payment-Systems-and-Services-Act-2019-Act-987-.pdf">Payment Systems and Services law</a> (Act 987 of 2019) to legitimise their operations. </p>
<p>Similarly, we also found that the inclusion of mobile money agents enabled bottom up trust building and financial inclusion success. </p>
<p>Agents, as mediators between users and telcos, played a critical bridging role by offering direct access to services and support. Because agents live in communities they were able to build trust, and drive adoption.</p>
<p>We went on to explain how these practices shape financial inclusion. From this we propose theoretical propositions of how financial inclusion in developing countries is being scaled and shaped in terms of actors, relationships, and practices.</p>
<h2>Big take-aways</h2>
<p>Our study sheds light on the critical ingredients, but also suggests that more can be done to reduce financial exclusion further.</p>
<p>The big take-aways are that the development of FinTech services for financial inclusion requires pulling together capabilities between independent yet complementary competitors from three different traditional sectors. These are: information technology (for FinTech firms), telecommunication infrastructure and reach (for telcos) and banking (for banks). </p>
<p>We also lay out how regulations need to strike a balance between three competing interests: <a href="https://doi.org/10.1111/isj.12333">incumbents, new actors and citizens</a>. Our findings suggest regulations that are both protectionist and equitable to incumbent and new actors can help balance the regulation of FinTech ecosystems.</p>
<p>Lastly, we set out how accounting for – and enabling – localised trust building can normalise practices to shape financial inclusion. We established the role of bottom-up trust building in the form of legitimising local mobile money agents and merchants to operate in the FinTech ecosystem. </p>
<p>This insight also explains why some FinTech initiatives from incumbents like branchless and mobile banking have not eliminated <a href="https://doi.org/10.1016/j.elerap.2018.05.009">financial exclusion</a>. Bottom-up trust building and building users’ trust is key to the successful use of FinTech services for financial inclusion. </p>
<p>From our work, it is evident that Ghana’s FinTech ecosystem practices are so far successful at reducing financial exclusion. But more can be done in terms of financial infrastructure expansion, literacy, elimination of transaction charges and developing solutions specifically for unbanked people.</p>
<figure class="align-center ">
<img alt="Fintech written on a phone" src="https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/425736/original/file-20211011-27-1qg9t2e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">FinTech.</span>
<span class="attribution"><span class="source">Investment Zen</span></span>
</figcaption>
</figure><img src="https://counter.theconversation.com/content/169286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The FinTech ecosystem in Ghana provided the basis for understanding how various actors work together to shape financial inclusion.PK Senyo, Associate Professor in FinTech & Information Systems, University of SouthamptonStan Karanasios, Associate professor, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1681212021-10-05T15:18:22Z2021-10-05T15:18:22ZSouth Africa needs to up its game when it comes to financial inclusion for women<figure><img src="https://images.theconversation.com/files/423877/original/file-20210929-16-15q32kr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
A woman running her stall on Vilakazi Street, Orlando West. Soweto, Johannesburg.</span> <span class="attribution"><span class="source">Hoberman Collection/Universal Images Group via Getty Images</span></span></figcaption></figure><p>The financial gap between men and women is a <a href="https://globalfindex.worldbank.org/">global problem</a>. It’s a problem because excluding women financially prevents them from participating and contributing to society’s social and economic activities. This is bad for women, and for society.</p>
<p>In South Africa, the government has put in place different measures to address gender equality. But policies on financial inclusion have always been generalised and not gender specific. <a href="https://www.worldbank.org/en/topic/financialinclusion/overview">Financial exclusion</a> is when people don’t have access to – or can’t afford – financial services. Financial inclusion means being able to access credit and manage or mitigate risks with products that satisfy an individual’s basic needs. </p>
<p>In the case of women entrepreneurs, financial inclusion involves being able to save and invest, and having products that help them manage their businesses sustainably. </p>
<p>The focus of my doctoral <a href="https://repository.up.ac.za/handle/2263/78103">research</a> was to analyse conditions that explain financial inclusion among women-owned businesses. </p>
<p>My findings show that South African women are financially included in terms of bank account ownership. But they are not financially included in, and don’t make use of a range of, other financial products or services.</p>
<p>I also found that there’s a huge gender gap in terms of policies and interventions that would help women entrepreneurs. Government policies haven’t been designed to address the particular situations faced by women running a business.</p>
<h2>Financial inclusion and women</h2>
<p>My study involved 30 women entrepreneurs in South Africa’s economic hub Gauteng, as well as five policy makers.</p>
<p>My findings align with <a href="https://www.mfw4a.org/publication/gender-and-financial-inclusion-analysis-financial-inclusion-women-sadc-region">earlier research</a> that shows that South African women are more financially included than those in other countries in the Southern African Development Community.</p>
<p>This has been attributed to the fact that South Africa has an extensive programme of distributing grants. Over <a href="https://www.groundup.org.za/article/everything-you-need-know-about-social-grants_820/">18 million are paid out every month</a> by the South African grant agency <a href="https://www.gov.za/services/social-benefits/social-relief-distress">SASSA</a>. Most are paid into bank accounts and recipients use a Mastercard to cash out money at ATMs and to swipe at shops.</p>
<p>But having a bank account doesn’t equate <a href="https://www.researchgate.net/profile/Ashenafi-Fanta/publication/305875551_Gender_and_Financial_Inclusion_Analysis_of_financial_inclusion_of_women_in_the_SADC_region/links/57a4457908aee07544b1b816/Gender-and-Financial-Inclusion-Analysis-of-financial-inclusion-of-women-in-the-SADC-region.pdf">to using it</a>. Research has shown that 28% have active bank accounts – defined as those with a monthly deposit and where transactions occur monthly. A higher proportion transacted on their accounts only twice a month or had dormant accounts. </p>
<p>Most of the female entrepreneurs in my research said they struggled to access financial services and had to partner with a man before being heard by financial stakeholders. Most of the women also attested to the fact that they remained restricted to the household’s financial responsibilities. They also said they had limited exposure to the benefits of financial institutions and the products they had to offer. </p>
<p>Other constraints that surfaced in my study were:</p>
<ul>
<li><p>Lack of information</p></li>
<li><p>Issues such as race, class and family values that prevented women from taking responsibility for finances</p></li>
<li><p>Related themes such as discrimination, insufficient networks and lack of collaboration, a lack of skills and illiteracy.</p></li>
</ul>
<p>Participants also pointed to the fact that they tended to be declared insolvent by financial institutions as they have a higher tendency to be in debt and their businesses going into liquidation than their male counterparts. </p>
<h2>What’s in place</h2>
<p>Different institutions are working on financial inclusion in South Africa. </p>
<p>The first is National Treasury. The Financial Sector Conduct Authority also has <a href="https://www.fsca.co.za/Documents/FSCA%20Financial%20Inclusion%20Strategy.pdf">a mandate</a> for financial inclusion.</p>
<p>The Financial Sector Charter was another initiative implemented by the government and financial service providers to transform the sector by increasing the use – and access to – financial services. Part of this has been an ongoing commitment to <a href="https://journals.co.za/doi/abs/10.1016/j.rdf.2015.04.001">financial literacy efforts</a>. </p>
<p>But none of the interventions pursued so far have decisively dealt with the issue of financial inclusion for women. </p>
<h2>What needs to be done</h2>
<p>The critical answer that stood out from the study is that the government should facilitate and have straightforward programmes aimed at women. This initiative would enable the government to add policies that empower women financially and motivate equal access to financial services for women. </p>
<p>Women should also be helped to become economically empowered and self-sustainable through financial literacy on opportunities accessible for them.</p>
<p>Secondly, there should be sufficient financial aids available for female entrepreneurs. The list includes credit systems, access to loans, financial grants and other financial products. </p>
<p>There should also be equal access to financial services, mentoring and support systems. </p>
<p>Lastly, the government should provide more programmes for monitoring and facilitating women entrepreneurs to help them sustain their businesses. This could be achieved by government departments collaborating with the different networks to ensure constant monitoring and evaluation on the gender mainstreaming programs. </p>
<p>A number of developing countries, particularly India, Brazil, Philippines and Malaysia, have signed gender budgeting programs that track how budgets respond to gender equality and women’s rights requirements. <a href="https://www.afi-global.org/sites/default/files/publications/2018-06/National%20Financial%20Inclusion%20Strategies.pdf">The results have been</a> higher rates of financial inclusion and women becoming active participants in the economic sector. </p>
<p>Gender budgeting leads to financial inclusion because it promotes gender equality in fiscal policy making and administration . </p>
<p>This should be replicated in South Africa.</p>
<p>India has also adopted a range of financial inclusion initiatives. <a href="https://www.researchgate.net/profile/Parul-Agarwal-11/publication/314823121_Financial_Inclusion_in_India_-_a_Review_of_Initiatives_and_Achievements/links/59e2b312aca2724cbfe01abb/Financial-Inclusion-in-India-a-Review-of-Initiatives-and-Achievements.pdf">The Indian government</a> has initiated schemes such as “No-frills Account”. It also created a system to help people access loans and credits. This was implemented to ensure credit applications comply with basic requirements before credit is issued to people.</p>
<p>It has also been pro-active in terms of technology, encouraging mobile banking and branch-less banking. In addition, <a href="https://www.researchgate.net/profile/Parul-Agarwal-11/publication/314823121_Financial_Inclusion_in_India_-_a_Review_of_Initiatives_and_Achievements/links/59e2b312aca2724cbfe01abb/Financial-Inclusion-in-India-a-Review-of-Initiatives-and-Achievements.pdf">financial education</a> is a big part of what’s being done. This is designed to help people understand financial services products.</p>
<p>The success of these strategies has led to greater inclusive development for the women entrepreneurs. As a result, accessibility to finance has boosted the long-term macroeconomic performance for Indian women. Particularly, in low-income areas the initiative <a href="https://www.researchgate.net/profile/Parul-Agarwal-11/publication/314823121_Financial_Inclusion_in_India_-_a_Review_of_Initiatives_and_Achievements/links/59e2b312aca2724cbfe01abb/Financial-Inclusion-in-India-a-Review-of-Initiatives-and-Achievements.pdf">brought benefits</a> associated with greater gender equality and social cohesion in communities.</p>
<p>Similar initiatives could ensure better financial inclusion opportunities for South African women entrepreneurs.</p><img src="https://counter.theconversation.com/content/168121/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tinuade Adekunbi Ojo works as a research fellow for the Department of Politics and International Relations, University of Johannesburg. She is also affiliated with the African Association of Political Science (AAPS). She is a recipient of the Global Stature Award at the University of Johannesburg. </span></em></p>South Africa has a huge gender gap in terms of policies and interventions that would help women entrepreneurs.Tinuade Adekunbi Ojo, Post-Doctoral Research Fellow, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1408952020-07-08T16:00:39Z2020-07-08T16:00:39ZCOVID-19 exposes why the Postal Service needs to get back into the banking business<figure><img src="https://images.theconversation.com/files/346168/original/file-20200707-194405-ll7fwv.jpg?ixlib=rb-1.1.0&rect=68%2C68%2C4498%2C2971&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The USPS could do more than deliver mail.</span> <span class="attribution"><span class="source">AP Photo/Matt Rourke</span></span></figcaption></figure><p>Financial services play a major role in the economic lives of most Americans, from the moment their paychecks are directly deposited into a bank account to the loan taken out to buy their first home or car. </p>
<p>Yet over 12 million people – about 6% of U.S. adults – <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-banking-and-credit.htm">cannot access these services</a> because they do not have a bank account. Economists call these individuals financially excluded or the “unbanked.” Being unbanked is <a href="https://www.innovations.harvard.edu/sites/default/files/CarrSchuetz2001_0.pdf">costly</a>, both financially and in terms of missed economic opportunities, and afflicts communities of color most.</p>
<p>The coronavirus recession exposes these costs even further. For example, the unbanked have had to <a href="http://www.louisianaweekly.com/48-9-million-unbanked-consumers-may-wait-20-weeks-for-federal-stimulus-checks/">wait much longer</a> than those with accounts to get <a href="https://www.irs.gov/coronavirus/economic-impact-payment-information-center">“economic impact” checks</a> – and some are still waiting. Prompt access to emergency lending is vital to helping poorer Americans endure the crisis. </p>
<p>As an <a href="https://wooster.edu/bios/_files/mlong-cv.pdf">economist who studies financial exclusion</a>, I believe there’s a solution to the problem, and one that the U.S. has tried before: postal banking.</p>
<h2>The costs of financial exclusion</h2>
<p>Financial exclusion is not a new problem. </p>
<p>Its <a href="https://scholarship.law.uci.edu/cgi/viewcontent.cgi?article=1387&context=ucilr">roots in the U.S.</a> can be traced back to the New Deal’s Federal Housing Administration, which limited mortgage lending to middle-income, predominantly white suburbs. The problem grew worse in the 1980s and ‘90s, when deregulation allowed banks to operate across state lines, leading to a <a href="https://www.fdic.gov/regulations/resources/cbi/report/CBSI-2.pdf">decline in the number of community banks</a>. National banks were less willing to lend in low-income neighborhoods.</p>
<p>Today, Black and Hispanic Americans are <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-banking-and-credit.htm">three times more likely</a> to be unbanked than whites. This is partly because the number of bank branches in <a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/bank-branch-closures-take-greatest-toll-on-majority-black-areas-52872925">communities of color</a> and <a href="https://www.federalreserve.gov/pubs/bulletin/1997/199709lead.pdf">low-income communities</a> has fallen. Overall, the number of bank branches has <a href="https://banks.data.fdic.gov/explore/historical?displayFields=STNAME%2CTOTAL%2CBRANCHES%2CNew_Char&selectedEndDate=2018&selectedReport=CBS&selectedStartDate=1934&selectedStates=0&sortField=YEAR&sortOrder=desc">shrunk by 6% since 2012</a>. </p>
<p>While some people <a href="https://www.nytimes.com/2014/10/30/opinion/are-banks-too-expensive-to-use.html">avoid banks</a> because of the fees, being left out of the banking system has other costs. With less access to other lines of credit, the unbanked are <a href="https://evans.uw.edu/sites/default/files/public/NWAF%20AFS%20review%20FINAL.pdf">more likely</a> to use expensive alternatives such as title loans – in which a borrower uses a vehicle title as collateral – for emergency expenses. Annual interest rates on such loans can be <a href="https://www.cnbc.com/2020/03/27/americans-may-soon-have-more-loan-options-heres-what-to-know.html">as high as 300%</a>.</p>
<p>And being unbanked means it’s harder to develop a credit history. Without one, it is more difficult to get a mortgage loan – and <a href="https://www.nar.realtor/sites/default/files/documents/2019-home-buyers-and-sellers-generational-trends-report-08-16-2019.pdf">thus much harder to buy a home</a>. </p>
<p>Black Americans in particular are more likely to <a href="https://www.urban.org/sites/default/files/publication/101160/explaining_the_black-white_homeownership_gap_2.pdf">lack credit scores</a> and are 40% less likely to be <a href="https://www.census.gov/housing/hvs/files/currenthvspress.pdf">homeowners</a>. Since homeownership is one of the <a href="https://www.census.gov/library/stories/2019/08/gaps-in-wealth-americans-by-household-type.html">main sources of wealth</a> for middle-class Americans, this contributes to the <a href="https://socialequity.duke.edu/wp-content/uploads/2019/10/what-we-get-wrong.pdf">large racial wealth gap</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=417&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=417&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=417&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346154/original/file-20200707-194396-1d8y1ub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The unbanked had to wait longer for their stimulus checks and had to find unconventional ways to cash them.</span>
<span class="attribution"><span class="source">AP Photo/Bebeto Matthews</span></span>
</figcaption>
</figure>
<h2>COVID-19: Worse for the unbanked</h2>
<p>The COVID-19 pandemic, by causing a dramatic collapse in economic activity and <a href="https://fred.stlouisfed.org/series/UNRATE">skyrocketing unemployment rates</a>, has compounded these problems. </p>
<p>Even in good times, more than <a href="https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-dealing-with-unexpected-expenses.htm">10% of Americans</a> report they are unable to pay for an unexpected US$400 expense – and would struggle even more without access to credit. </p>
<p>Those without a banking account have even fewer options to get emergency cash, such as title or payday loans. Another option, which my research shows is especially true among women of color, is asking friends or family for money. Yet with unemployment rates reaching a <a href="https://www.nytimes.com/2020/06/06/business/economy/jobs-report-minorities.html">staggering 19.5% for Hispanic women and 17.5% for black women</a>, community resources will be stretched thin. </p>
<p>[<em>Get the best of The Conversation, every weekend.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybest">Sign up for our weekly newsletter</a>.]</p>
<p>Financial exclusion also hampered the rollout of part of the <a href="https://home.treasury.gov/policy-issues/cares">coronavirus bailout</a> that promised stimulus payments of up to $3,400 per family. Americans with checking accounts received the payment within a few weeks via direct deposit, while those without one had to wait <a href="https://www.cbsnews.com/news/stimulus-checks-delays-bank-accounts-payment/">far longer</a>. As of early June, <a href="https://www.nasdaq.com/articles/what-to-do-if-youre-still-waiting-for-your-stimulus-check-2020-06-20">13 to 18 million Americans</a> who were expecting a check still had not received one.</p>
<p>This delay is more than an inconvenience for households living paycheck to paycheck. Many Americans urgently <a href="https://www.nytimes.com/2020/06/16/health/coronavirus-insurance-healthcare.html">need prescriptions</a> they can’t afford and are at risk of <a href="https://www.usatoday.com/story/money/2020/06/10/coronavirus-eviction-worries-mount-moratoriums-lifted/5286368002/">being evicted from their homes</a>.</p>
<h2>How postal banking works</h2>
<p>Conventional banks claim they cannot <a href="https://law.emory.edu/elj/content/volume-62/issue-3/articles/poor-cut-out-of-banking.html">serve the unbanked</a> because small-dollar loans and accounts with low balances aren’t profitable.</p>
<p>Postal banking, however, could serve the unbanked and do so efficiently. While there are <a href="https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-007_0.pdf">various</a> <a href="https://www.doi.org/10.1080/01603477.2020.1734462">ways</a> to do this, a basic postal banking system would allow every United States Postal Service branch to act as a limited-service bank, offering services like checking and saving accounts, pre-paid debit cards and small loans.</p>
<p>As a public corporation that doesn’t need to worry about rewarding investors, the USPS could offer financial services to more Americans at a lower cost than banks. USPS branches are already located in virtually every neighborhood in the U.S., and <a href="https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-007_0.pdf">over half</a> are in banking deserts. This existing network would reduce overhead. And the USPS is in a better position to handle a loan default because it could <a href="https://harvardlawreview.org/2014/02/its-time-for-postal-banking/">garnish tax refunds</a>, reducing the cost of collecting on unpaid loans.</p>
<p>What’s more, this would also offer a financial lifeline to the postal service, which has <a href="https://www.zerohedge.com/news/2014-08-11/us-postal-service-over-47-billion-losses-past-decade-and-counting-44-billion-capital">been losing money for over a decade</a>. The USPS predicts that offering postal banking services could provide between <a href="https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-007_0.pdf">$8 billion and $10 billion</a> in additional revenue a year, which would offset at least some of its <a href="https://www.govexec.com/management/2019/11/postal-service-doubles-annual-losses-88-billion/161317/">current shortfall</a>.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=266&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=266&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=266&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=335&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=335&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346181/original/file-20200707-194413-1lcsnvw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=335&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A Postal Savings Certificate of Deposit from 1941.</span>
<span class="attribution"><span class="source">Smithsonian National Postal Museum</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>History and current practice show that postal banking is feasible. It is <a href="http://www.campaignforpostalbanking.org/know-the-facts/">already used</a> in 139 countries around the world, such as France, <a href="https://www.globalresearch.ca/saving-the-post-office-and-postal-banking-the-models-of-kiwibank-and-japan-post/28563">New Zealand</a> and Italy. </p>
<p>And in the U.S., Congress created a government-guaranteed savings scheme in 1910 to encourage people to put their money in the financial system – as <a href="https://about.usps.com/who-we-are/postal-history/postal-savings-system.pdf">opposed to their mattresses and cookie jars</a>. According to “How the Other Half Banks,” by banking law expert <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674983960">Mehrsa Baradaran</a>, the United States Postal Savings System was quite popular. As its peak, it held $3.4 billion in deposits. </p>
<p>But after World War II, conventional banks began to offer much higher interest rates on their deposits – with the same government guarantee. And banks began to open up branches in more underserved neighborhoods. The postal savings system stopped taking new deposits in 1966. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346179/original/file-20200707-18-1ej4jbh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Depositors stand in a queue at a postal savings window.</span>
<span class="attribution"><a class="source" href="https://postalmuseum.si.edu/collections/object-spotlight/postal-savings-system">Smithsonian National Postal Museum</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Reducing financial service inequality</h2>
<p>Now, a <a href="https://newrepublic.com/article/158080/dont-just-save-postal-service-reinvent-it">growing</a> <a href="https://www.atholdailynews.com/FCCPR-to-demonstrate-in-support-of-U-S-Postal-Service-funding-34750811">chorus</a> of <a href="https://altamontenterprise.com/05012020/gillibrand-pushes-postal-banking-serve-poor-and-save-post-office">voices</a> suggests the time has come to bring it back. </p>
<p>The details differ from proposal to proposal. Some proponents – <a href="https://www.uspsoig.gov/sites/default/files/document-library-files/2015/rarc-wp-14-007_0.pdf">including USPS itself</a> – see postal banking as a complement to private sector banks, which would continue to offer a wider range of services. <a href="https://www.doi.org/10.1080/01603477.2020.1734462">Others</a> support a public bank that would compete directly with private banks through a financial services marketplace.</p>
<p>Banks, including <a href="https://www.newsweek.com/postal-banking-what-1438341#:%7E:text=Community%20Banks%20Voice%20Opposition%20to,than%20solving%20an%20existing%20one">small community banks</a>, have generally opposed postal banking. Yet the experience of other countries suggests that a postal bank <a href="https://www.finews.com/news/english-news/33147-postfinance-swiss-government-mortgages">can coexist</a> with a thriving financial services industry – while ensuring fewer Americans are left behind.</p><img src="https://counter.theconversation.com/content/140895/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Melanie G. Long does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Millions of Americans are financially excluded from the banking system, which makes them even more vulnerable during the current crisis.Melanie G. Long, Assistant Professor of Economics, The College of WoosterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/832152017-08-31T06:52:57Z2017-08-31T06:52:57ZDon’t expect the Grameen Bank’s microfinance model to pay off for Australians<p>The Grameen Bank, a pioneer in lending to the financially vulnerable in the developing world, is <a href="http://www.abc.net.au/radionational/programs/breakfast/micro-finance-for-australias-poor/8847872">partnering</a> a community bank in rural New South Wales. Grameen Bank specialises in <a href="http://www.grameen.org.au/wp-content/uploads/2013/10/CaseStudy1_Rowena_Dec141.pdf">giving small loans</a>, also called microfinance, to people who use it to pay for things such as a new roof or to small businesses, to buy stock for example.</p>
<p>But to be legally allowed to access capital markets, and accept and lend out customer savings, microfinance providers like Grameen Bank have to follow the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2797409">same regulations</a> as large financial institutions. These conditions are too hard for many microfinance providers to meet, so the sector relies on donations and grants for funding. This is unsustainable. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-microfinance-reduces-gender-inequality-in-developing-countries-73281">How microfinance reduces gender inequality in developing countries</a>
</strong>
</em>
</p>
<hr>
<p>Grameen Bank’s model does have potential to help a lot of Australians. While we have one of the strongest financial sectors in the world, <a href="https://www.nab.com.au/content/dam/nabrwd/About-Us/corporate-responsibilty/docs/measuring_financial_exclusion_in_australia_2014_final.pdf">millions</a> of Australians lack access to basic financial services and products, such as transaction accounts, general insurance and a credit card.</p>
<p><a href="http://journals.sagepub.com/doi/abs/10.1177/000312240907400402">Studies</a> also show the benefits of microfinance are wider than just giving people access to finance. Women especially benefit from microfinance as many loans are made <a href="http://www.sciencedirect.com/science/article/pii/S0305750X10002330">to</a> and <a href="https://academic.oup.com/ajae/article/96/5/1291/2738773/Are-Women-Better-Bankers-to-the-Poor-Evidence-from">by women</a>, so it puts money and decision-making in the hands of women who otherwise wouldn’t have it. </p>
<p>There is also a debate over the trade-off between more financial inclusion and the risk of people <a href="http://www.sciencedirect.com/science/article/pii/S0167487011001735">taking on debt that they can’t pay back</a> due to microfinance. In the Indian state of <a href="http://onlinelibrary.wiley.com/doi/10.1002/jsc.1921/full">Andhra Pradesh</a>, for example, many rural farmers repeatedly took out loans, using one loan to repay another. The crisis resulted in <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1471-0366.2011.00330.x/full">series of suicides</a> by farmers caught in a cycle of debt. </p>
<p>Without regulation that protects borrowers from taking on debt they can’t afford, this could occur in Australia as well. </p>
<p>What’s different about the Grameen Bank model is that it doesn’t ask for collateral as security for the <a href="https://jlc.law.pitt.edu/ojs/index.php/jlc/article/view/78">loans</a>, as a “payday lender” or a pawn shop might. Instead, loans are made to borrowers who have five references from people in the community (not relatives) regarding their ability and intent to repay the loan. </p>
<p>The loans are generally for one year, with <a href="http://karlan.yale.edu/sites/default/files/rigidmicrofinance.pdf">strict weekly repayments</a>, and interest set at around 30%. The five references provide what’s called “<a href="http://www.tandfonline.com/doi/pdf/10.1080/13545700210125167">social collateral</a>” or peer pressure, resulting in repayment rates of <a href="https://www.researchgate.net/profile/Arup_Daripa/publication/238623004_Social_Capital_Individual_Incentives_and_Loan_Repayment/links/02e7e534d720abaa2b000000.pdf">around 99%</a>. </p>
<p>While this model works in close-knit communities in Bangladesh, it does not translate exactly to countries like Australia. </p>
<p><a href="http://www.sciencedirect.com/science/article/pii/S0305750X16304077">Studies</a> show borrowers benefit from feeling more empowered and being financially included in society because of access to microfinance.</p>
<p>But there are many critics of microfinance. <a href="http://economics.mit.edu/files/5993">Studies</a> have found that because of the high interest rates charged by microfinance providers, the increases in business investment and profitability don’t lead to higher consumption or improved health and education. Researchers have also found that microfinance means children are kept home to help run the expanded businesses, so their <a href="https://www.ifs.org.uk/wps/wp1215.pdf">school attendance</a> is reduced.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/microfinance-could-wind-up-being-the-new-subprime-59001">Microfinance could wind up being the new subprime</a>
</strong>
</em>
</p>
<hr>
<p>When it comes to developed countries like Australia, microfinance also has mixed <a href="http://onlinelibrary.wiley.com/doi/10.1002/jid.3205/full">results</a>. One of the problems is that in developed countries microfinance lenders are often subsidiaries of large banks, such as <a href="http://www.bancaprossima.com/scriptWeb20/vetrina/bancaprossima/ita/home/ita_home.jsp">Banca Prossima</a> in Italy. These banks often aren’t successful in delivering microfinance because of their focus on profits. </p>
<p>The Grameen Bank has had some success in the <a href="http://eds.b.ebscohost.com/abstract?site=eds&scope=site&jrnl=20754124&AN=92947567&h=tG0vZ2ya1BeIbgE5eBMH%2bTXfBiE67bptQyD7iqUgrOIEII3gxAFEyabISOtUW0Be63N5qP1DPJOCj2daYsaJwQ%3d%3d&crl=c&resultLocal=ErrCrlNoResults&resultNs=Ehost&crlhashurl=login.aspx%3fdirect%3dtrue%26profile%3dehost%26scope%3dsite%26authtype%3dcrawler%26jrnl%3d20754124%26AN%3d92947567">United States</a>. But this success has come in niche areas, with many <a href="http://www.nytimes.com/2013/10/29/business/microcredit-for-americans.html">customers</a> being illegal immigrants, <a href="http://abcnews.go.com/Politics/Voices/story?id=3670338&page=1">Latino communities</a> and those who are historically persecuted. </p>
<p>When this niche success is considered in the Australian context, Grameen’s potential is less apparent. Australia has few illegal residents, and not many Indigenous Australians live in the rural hubs that Grameen Bank is targeting.</p>
<p>But the regulatory hurdles are the biggest issue facing Grameen Bank in Australia. On top of the need to protect borrowers, Grameen Bank faces a problem funding its operations. In developing countries like Bangladesh, microfinance providers have access to savings and capital markets to fund their operations. This is also how our mainstream banks, such as the Commonwealth Bank, fund themselves.</p>
<p>But because of the heavy financial regulations in Australia, the few microfinance providers, such as <a href="https://www.foresters.org.au/">Foresters</a> and <a href="http://www.manyrivers.org.au/">Many Rivers</a>, are forced to fund themselves through grants and donations. Grameen Bank will need to follow a similar model in a shrinking grant environment. </p>
<p>For Grameen Bank and organisations like it to be viable in Australia, separate regulation is needed. The microfinance sector in Australia needs to be able to take deposits and lend them out, and to access capital markets and equity partnerships. This would put Grameen Bank and other microfinance providers on a more sustainable footing. </p>
<p>We can take some guidance from <a href="https://www.mof.gov.bd/en/budget/pr/gp_press.pdf">Bangladesh</a>, where Grameen Bank is from, and which has specific microfinance regulations. The government has legislated this because of the important role Grameen Bank plays in financial inclusion, and because it is partially owned by the government.</p><img src="https://counter.theconversation.com/content/83215/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katherine Hunt advises GlobalSisters on social impact measurement from their enterprise training programs. </span></em></p>Grameen Bank has potential to increase financial inclusion in Australia but regulation is holding it back.Katherine Hunt, Lecturer in Accounting, Finance and Economics, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/749442017-03-24T16:24:04Z2017-03-24T16:24:04ZYou’ve got to fight! For your right! … to fair banking<figure><img src="https://images.theconversation.com/files/162366/original/image-20170324-12149-1m8kj1x.jpg?ixlib=rb-1.1.0&rect=729%2C259%2C3954%2C2531&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/miniature-people-on-coins-finance-concept-501126454?src=f7b_jGM45GFzRlwdF5aDNw-1-51">noppawan09/Shutterstock</a></span></figcaption></figure><p>British governments have been trying to improve financial inclusion for the best part of 20 years. The goal is to make it easier for people on lower incomes to get banking services, but this simple-sounding target brings with it a host of problems. </p>
<p>A <a href="https://www.parliament.uk/business/committees/committees-a-z/lords-select/financial-exclusion/news-parliament-2015/minsiters-evidence-/">House of Lords committee</a> will shortly publish the latest report on this issue, but the genesis of financial inclusion policy <a href="https://www.parliament.uk/financial-exclusion">can be traced back</a> to the late 1990s as part of the Labour government’s social exclusion agenda. The scope and reach of this strategy has since expanded beyond a focus on access to products and now seeks to improve people’s financial literacy to help them make their own responsible decisions around financial services.</p>
<p>The goal of increasing the availability of basic banking has become a tool for tackling poverty and deprivation worldwide, among governments in the global north and global south and among key institutions. In 2014, the World Bank produced what it described as the world’s most comprehensive <a href="http://www.worldbank.org/en/programs/globalfindex">financial exclusion database</a> based on interviews with 150,000 people in more than 140 countries.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=448&fit=crop&dpr=1 600w, https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=448&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=448&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=563&fit=crop&dpr=1 754w, https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=563&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/162357/original/image-20170324-12145-klj82f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=563&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Retaliation?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mobiledisco/6069211542/in/photolist-abvbfm-afji9j-rmLUcr-63Pa5j-j2ieie-9iZxG1-9twb2J-Nwgnh-fJPAR-oNvXV5-5KHy6n-6kJmHQ-6zYi6s-72EFpf-4TcP8C-nRiZ1c-5KHwKK-5wrddH-9ja96J-9twb17-dH69DB-dodqFA-4Hz6ah-6epiZW-grCpLb-4Hz5rm-6CN8Nq-4d6Vqv">mobiledisco/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<h2>Muddy waters</h2>
<p>However, broad and enthusiastic acceptance of such policy efforts has prompted doubts about the simplistic narrative of inclusion and exclusion. This way of thinking does not capture the complexities of the links between the use of financial services and poverty, life chances and socio-economic mobility. It also ignores the sliding scale of financial inclusion, from the marginally included – who rely on basic bank accounts – through to the super-included with access to a full array of affordable financial services. </p>
<p>You can see the complexity and contradictions clearly in innovations such as <a href="http://news.bbc.co.uk/1/hi/business/7073131.stm">subprime products</a> and <a href="https://theconversation.com/uk/topics/payday-lending-5686">high-cost payday lenders</a>. They have made it increasingly difficult to draw a clear distinction between the included and the excluded. Mis-selling scandals and concerns over high charges have also shown us that financial inclusion is no guarantee of protection from exploitative practices.</p>
<p>Even the pursuit of better financial education offers a mixed picture. Critics <a href="https://www.routledge.com/Debtfare-States-and-the-Poverty-Industry-Money-Discipline-and-the-Surplus/Soederberg/p/book/9780415822671">have raised concerns</a> that this shifts the focus away from structural discrimination and towards the individual failings of “irresponsible and irrational” consumers. There is a grave risk that we will fail to tackle the root causes of financial exclusion, around insecure income and work, if policy follows this route.</p>
<p>In the midst of this focus on customers, the government’s role has been reduced to supporting those <a href="https://www.moneyadviceservice.org.uk">education programmes</a> and cajoling mainstream banks, building societies and insurers into <a href="https://theconversation.com/banking-shake-up-relies-too-much-on-customers-shopping-around-63743">being more inclusive</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/162361/original/image-20170324-12132-ze5438.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Vested interests. The Square Mile in London.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/mikepaws/10657936013/in/photolist-heNH4t-dA54HX-5zw2U-dJzeAF-7sFLdJ-aBm9AH-9STYST-53wHep-ekR4jf-cHZn1C-qKtram-K5cZDU-8HUDf-aeyLfj-aq2BdD-ahtNwe-6HFJoU-986W2T-qFuT8W-dAaxdu-bAixTj-4cLR9L-fKu9zy-7RD78C-dQBZPj-5vNkF1-nQkp38-9ojk7-5LA3A4-fmtbHY-8y4xPZ-Etgosw-5u18Ud-8tMPwD-8LCNW2-b9ydf6-5yVhsD-dazQkG-fPxGqz-zre7M-oYnMVT-3wStQ-bz7jEf-ahM4qb-8mkQi2-b9ydZH-b9yekz-8Mjbpv-5tRa5X-9htwiK">Michael Garnett/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>Given the central role that financial services play in shaping everyday lives, a hands-off approach from the state is inadequate. It fails to address the injustices produced by a grossly inequitable financial system. Our <a href="http://www.coventry.ac.uk/research/research-directories/current-projects/2016/financial-citizenship-building-financial-security-capability-and-inclusion-in-communities/">recent research</a> examined how the idea of financial citizenship might offer a route to improvements. In particular, we looked at the idea of basic financial citizenship rights and the role that might be played by UK credit unions, the organisations which, <a href="https://www.gov.uk/government/news/credit-union-38-million-expansion-deal-signed">supported by government</a>, seek to bring financial services to those on low incomes.</p>
<p>The idea of establishing rights was put forward by geographers <a href="https://www.jstor.org/stable/622654?seq=1#page_scan_tab_contents">Andrew Leyshon and Nigel Thrift</a> in response to the growing lack of access to mainstream financial services. The goal would be to recognise the significance of the financial system to everyday life and set in stone the right and ability of people to participate fully in the economy.</p>
<p>That sounds like a laudable aspiration, but what could a politics of financial citizenship entail in practice?</p>
<p>Drawing on the work of political economist <a href="http://www.ilcuk.org.uk/index.php/publications/publication_details/financial_citizenship">Craig Berry</a> and researcher <a href="http://independentresearcher.academia.edu/ChrisArthur">Chris Arthur</a>, we argue that the policy debate should move on to establish a set of universal financial rights, to which the citizens of a highly financialised society such as the UK are entitled regardless of their personal or economic situation.</p>
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<ol>
<li><p><strong>The right to participate fully in political decision-making regarding the role and regulation of the financial system</strong>. This would entail, for example, the <a href="http://positivemoney.org/">democratisation of money supply</a> and of the work of regulators. Ordinary people would have to be able to meaningfully engage in debates about the social usefulness of the financial system.</p></li>
<li><p><strong>The right to a critical financial citizenship education</strong>. Financial education needs to go beyond the simple provision of knowledge and skills to understand how the financial system is currently configured. It should provide citizens with the tools to be able to think critically about money and debt, as well as the capability to effect meaningful change of the financial system.</p></li>
<li><p><strong>The right to essential financial services</strong> that are appropriate and affordable such as a transactional bank account, savings and insurance. </p></li>
<li><p><strong>The right to a comprehensive state safety net of financial welfare provision</strong>. This could include a real living wage to prevent a reliance on debt to meet basic needs and could go all the way through to the provision of guarantees on the returns that can be expected from private pension schemes. </p></li>
</ol>
<p>Establishing this set of rights would be a major step towards enhancing the financial security and life chances of households and communities. The weight of responsibility would shift from individuals and back on to financial institutions, regulators, government and employers to provide basic financial needs. As one example, just as people in the UK are given a national insurance number when they turn 16, so the government and the banks could automatically provide a basic bank account to everyone at the age of 18. </p>
<p>The UK credit union movement does make efforts towards these goals, but it cannot fully mobilise financial citizenship rights largely due to its limited scale and regulatory and operational limitations. For the rights to work, they will need the support of the state, of financial institutions, regulators and employers. That would enable the country to build something less flimsy than the loose structure we have right now, which piles blame onto the consumer and relies on voluntary industry measures to pick up the slack.</p><img src="https://counter.theconversation.com/content/74944/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lindsey Appleyard receives funding from Arts and Humanities Research Council, Barrow Cadbury Trust and the Money Advice Service. </span></em></p><p class="fine-print"><em><span>Shaun French receives funding from the Australian Research Council. In the past he has received funding from the Economic & Social Research Council, the Wellcome Trust, and the British Academy. </span></em></p>Banking in a highly financialised society like Britain could be seen as akin to a fundamental human right.Lindsey Appleyard, Research Fellow, Coventry UniversityShaun French, Associate Professor in Economic Geography, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/573762016-04-20T15:26:40Z2016-04-20T15:26:40ZUniversities must do more to become a home for vulnerable students<figure><img src="https://images.theconversation.com/files/119234/original/image-20160419-13898-1tirdrt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Universities can be alienating spaces, particularly for students from poorer backgrounds.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>There are more <a href="http://www.economist.com/node/21546062">black African</a> students from poor or working-class backgrounds at South Africa’s universities than ever before. But <a href="http://www.che.ac.za/media_and_publications/research/proposal-undergraduate-curriculum-reform-south-africa-case-flexible">research</a> shows that very few of them actually finish their degrees. Many drop out at undergraduate level. This leaves them and their families in debt and dashes their hopes of climbing the economic ladder.</p>
<p>The same research shows that the socially and economically privileged counterparts of these students fare far better. It is this structural inequality that lies at the heart of <a href="http://mg.co.za/article/2016-01-20-fees-are-just-the-start-of-change">student protests</a> that rocked the <a href="https://theconversation.com/africa/topics/feesmustfall">country’s universities</a> in late 2015 and early 2016. Universities must challenge this inequality if higher education is to experience genuine social change. </p>
<p>Of course, any such response will require a significant <a href="http://www.politicsweb.co.za/news-and-analysis/behind-the-university-funding-crisis?utm_source=Politicsweb+Daily+Headlines&utm_campaign=3b24c3e2df-DHN_20_Oct_2015&utm_medium=email&utm_term=0_a86f25db99-3b24c3e2df-140192113">injection of resources</a>, such as more teaching staff being made available to undergraduate students. But not all aspects of inequality are rooted in <a href="https://www.washingtonpost.com/posteverything/wp/2016/01/20/first-generation-college-students-are-not-succeeding-in-college-and-money-isnt-the-problem/">physical resources</a>. Plenty can be achieved if universities start dismantling the deep-seated assumptions and hierarchies that <a href="http://www.iol.co.za/the-star/we-still-dont-belong-here-1912238#.Vlng_HYrK00">maintain inequality</a> within their structures. </p>
<p>I have conducted <a href="https://www.researchgate.net/profile/Talita_Calitz/timeline">research</a> that draws on students’ own experiences to try understand how universities can cultivate the conditions that enable equal participation, regardless of race or economic status.</p>
<h2>The value of student experiences</h2>
<p>All individuals bring a number of advantages or disadvantages to university as their <a href="http://www.dhet.gov.za/summit/Docs/2015Docs/Annex%2012_Wilson-Strydom_Access%20%20%20Success.pdf">bundle of resources</a>. Ideally, they should be able to draw from this bundle to adapt and succeed. But it can also hinder them.</p>
<p>Students are marginalised when they have to negotiate factors that complicate their academic success and social integration. These include belonging to a low-income household, being historically excluded because of race, being a woman, identifying as a sexual minority or living with a physical disability. </p>
<p>I interviewed eight undergraduates at a South African university that historically catered only for white students. They were all the first in their immediate families to attend university. </p>
<p>These students arrived at university with a precarious and less-valued bundle of financial, academic and social <a href="https://www.amazon.co.uk/Disadvantage-Oxford-Political-Theory-Jonathan/dp/0199278261?ie=UTF8&*Version*=1&*entries*=0">resources</a>. Most were from low-income families, with one or more unemployed parent or guardian. <a href="http://mg.co.za/article/2015-07-10-punished-twice-for-being-poor/">Financial pressure</a> made it difficult for them to know where money for the next meal, rent payment, taxi fare or textbook would come from. In the privileged, middle-class university space they felt anxious, ashamed and stressed. They internalised their struggles to cope as individual failure. </p>
<p>My research used a <a href="https://books.google.co.za/books/about/The_Idea_of_Justice.html?id=enqMd_ze6RMC&redir_esc=y">“capability approach”</a> to assess students’ experiences. This evaluates how available resources are converted into opportunities to achieve valued outcomes, or what are called <a href="https://www.youtube.com/watch?v=AoD-cjduM40">“capabilities”</a>. This could mean, for example, interrogating whether attending university automatically equips the student to become critically engaged in acquiring knowledge. If the student is only attending lectures and regurgitating information, has deep learning taken place? What structures need to be in place to ensure that the resource – in this case, education – is converted into a meaningful academic outcome for vulnerable students?</p>
<p>In other words, resources are an important but insufficient measure of equality. Structural inequality has not been adequately addressed if the environment does not offer equal opportunities for all students to convert their resources into valued outcomes.</p>
<p>The students we interviewed came up with several recommendations that might help universities become more inclusive, equitable environments.</p>
<h2>Doing things differently</h2>
<p>The students had three main concerns:</p>
<ul>
<li><p>they wanted spaces in which to build positive relationships with their lecturers;</p></li>
<li><p>they felt there should be more sustained platforms for voicing their frustrations without being dismissed as emotional or ignorant; and</p></li>
<li><p>they said it was not helpful for lecturers to constantly highlight poorer students’ failures. </p></li>
</ul>
<p>These students felt alienated, fearful and silenced. They said most lecturers weren’t open to sharing the implicit lessons and insider information needed to navigate any university experience. For example, knowing where to find free online sources, or unspoken “etiquette” about approaching or communicating with lecturers. Their more privileged peers were confident enough to approach lecturers, and so found this information more readily available.</p>
<p>Students also complained that there was no real chance for them to have fertile dialogues with teaching staff about their academic challenges. Lecturers should strive to make their classrooms a place where critical engagement with knowledge meets a humane approach to vulnerable students’ challenges. Some lecturers may need to rethink their approach to daily teaching. They could even take the process further by spending an hour a week mentoring a first-generation student.</p>
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<figcaption><span class="caption">US academic Martha Nussbaum explains the capability approach.</span></figcaption>
</figure>
<p>There’s also a broader need for spaces where lecturers and students can collaborate in ways that challenge the traditional meritocracy of a university environment. One example of this would be involving undergraduate students in research projects so they can develop academic skills. </p>
<p>The students we interviewed struggled with being constantly reminded of their struggle and academic failure. They found this demoralising and it created doubt in their ability to succeed. To overcome this, lecturers should recognise the capabilities and resources these students bring to university. Lecturers could foreground students’ agency and resilience instead of reminding them of what they cannot yet accomplish.</p>
<h2>Creating equitable universities</h2>
<p>There is no need for universities to wait for more physical resources. All of the work I’ve described here can begin immediately. These suggestions can go a long way towards making universities more welcoming, equitable environments for disadvantaged students. </p>
<p><em>Author’s note: All of the references in this article to race reflect persistent post-apartheid racial classification.</em></p><img src="https://counter.theconversation.com/content/57376/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Talita M.L. Calitz receives funding from the National Research Foundation. </span></em></p>Students from poorer backgrounds feel anxious, ashamed and stressed in the middle-class environment of a university.Talita M.L. Calitz, Postdoctoral Research Fellow in Higher Education and Human Development, University of the Free StateLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/393112015-04-08T01:42:29Z2015-04-08T01:42:29ZPayday lending trap requires a credit supply rethink<figure><img src="https://images.theconversation.com/files/76708/original/image-20150401-1229-2eerg1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There will always be lenders happy to fund customers at high interest rates. But alternatives are needed for the financially excluded.</span> <span class="attribution"><span class="source">Image sourced from Shutterstock.com</span></span></figcaption></figure><p>Payday lending is booming in Australia. The industry has around <a href="http://www.smh.com.au/business/westpacs-risky-dealings-with-payday-lender-cash-converters-20131108-2x76c.html">one million customers</a> and over <a href="http://asic.gov.au/regulatory-resources/find-a-document/reports/rep-426-payday-lenders-and-the-new-small-amount-lending-provisions/">1,100 loan providers</a>. ASIC <a href="http://asic.gov.au/regulatory-resources/find-a-document/reports/rep-426-payday-lenders-and-the-new-small-amount-lending-provisions/">estimates</a> the number of loans more than doubled between 2008 and 2014. But when a small loan of A$1,000 can come at an annualised cost of up to 288%, why are people choosing it?</p>
<p>Simply put, people on low incomes lack easily accessible alternatives.</p>
<h2>Falling short</h2>
<p>For households living at or below the margin, this isn’t just a household budgeting problem. By 2012 there were 2.55 million people living <a href="http://www.acoss.org.au/policy/poverty/">below the poverty line</a> in Australia (13.9%). </p>
<p>The cost of living has increased - between 2006 and 2013 the cost of utilities, health, housing and food and non-alcoholic drinks <a href="http://www.csi.edu.au/media/uploads/Eight_Years_on_the_Fringe_FINAL_FINAL.pdf">increased</a> well above the 2.8% pa rise in CPI (9.5%, 4.8%, 4.7% and 3% pa respectively). This has left low-income households having to spend a <a href="http://business.nab.com.au/nab-quarterly-australianconsumer-anxiety-index-q3-2014-8034/">higher proportion</a> of their income on life necessities leaving little to no savings to deal with unexpected expenses. </p>
<p>The <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4159.02010?OpenDocument">ABS found</a> around 13% of households could not raise A$2,000 in a week for something important and 17.9% had at least one cash flow problem in the last 12 months.</p>
<p>Without savings, what happens when large bills need to be paid? What happens when the fridge, washing machine or car breaks down, or an unexpected health bill arises? The answer is familiar to most of us: people rely on credit.</p>
<p>Mainstream forms of credit, like credit cards, are <a href="http://cr.nab.com.au/docs/measuring_financial_exclusion_in_australia_2014_final.pdf">not accessible</a> or available to everyone. Over <a href="http://www.financialliteracy.gov.au/media/465159/nab_csi_measuring_financial_exclusion_in_australia_2013.pdf">three million adults</a> in Australia are severely or fully financially excluded; that is, they do not have access to appropriate and affordable financial products and services (most lack access to a moderate amount of credit and basic insurance).</p>
<h2>Limited options</h2>
<p>The severely or fully financially excluded are more likely to be <a href="http://esp.sagepub.com/content/23/3/332.abstract">unemployed</a>, on low incomes, single parents, receiving social assistance, young and have a <a href="http://www.csi.edu.au/media/uploads/Eight_Years_on_the_Fringe_FINAL_FINAL.pdf">lower educational attainment</a> than the financially included. They may have been refused mainstream financial credit because of insufficient identification, ineligibility, low credit scores or <a href="http://esp.sagepub.com/content/23/3/332.abstract">poor credit history</a>. They might have also avoided mainstream financial services because of an <a href="http://www.emeraldinsight.com/doi/full/10.1108/01443330610674297">“unfriendly”</a> or <a href="http://www.emeraldinsight.com/doi/full/10.1108/02652321211262221">“intimidating” service"</a>.</p>
<p>The common alternatives to mainstream credit are family and/or friends, layby or not-for-profit loan providers. Layby is generally only an option if someone is buying a product, can afford the deposit and can wait until the item is paid off before they need to use it; generally not the case for the <a href="http://www.researchgate.net/profile/Dean_Wilson2/publication/252423503_Payday_Lending_in_Victoria_-_A_research_report/links/00b7d53726976bf6d9000000.pdf">payday lending customer</a>. Poorer households often don’t have access to family or friends with ready cash or are <a href="http://www.researchgate.net/profile/Dean_Wilson2/publication/252423503_Payday_Lending_in_Victoria_-_A_research_report/links/00b7d53726976bf6d9000000.pdf">unwilling to ask</a>.</p>
<p>There are some not-for-profit alternatives, for example, the Good Shepherd Microfinance [No Interest Loan Scheme](http://goodshepherdmicrofinance.org.au/sites/default/files/GSM-Annual-Report-2014-LOWRES-141120.pdf](http://goodshepherdmicrofinance.org.au/sites/default/files/GSM-Annual-Report-2014-LOWRES-141120.pdf) provided almost 27,000 loans in 2014. But these options represent a drop in the ocean; consider, for example, that Cash Converters alone lent 626,555 short-term loans at a <a href="https://independentaustralia.net/business/business-display/asics-payday-lending-problem,6372">value of over A$257 million</a> in 2011, and the total value of its loan receivables <a href="https://www.cashconverters.com/Investors/AnnualReports">increased by 43%</a> in two years since. NILS and other not-for-profit loan options generally come with <a href="http://goodshepherdmicrofinance.org.au/sites/default/files/GSM_NILS_Report.pdf">slower application processes</a> and higher barriers to accessibility than the payday lending market offers.</p>
<p>Short-term credit loans, which provide <a href="https://www.moneysmart.gov.au/borrowing-and-credit/consumer-credit-regulation">up to $2,000</a>, are readily available,<a href="http://goodshepherdmicrofinance.org.au/sites/default/files/GSM_NILS_Report.pdf"> easy and quick to access</a> (they can be obtained online and are often approved in an hour or the same day). Their size, simplicity, speed and repayment periods (16 days to 1 year) make them <a href="http://www.researchgate.net/profile/Dean_Wilson2/publication/252423503_Payday_Lending_in_Victoria_-_A_research_report/links/00b7d53726976bf6d9000000.pdf">attractive</a>. They may also help maintain some <a href="http://www.researchgate.net/profile/Dean_Wilson2/publication/252423503_Payday_Lending_in_Victoria_-_A_research_report/links/00b7d53726976bf6d9000000.pdf">feelings of dignity</a> because, unlike banks, there is little risk of receiving a “no” and people aren’t asking for “handouts”.</p>
<h2>Caught in a cycle</h2>
<p>For the majority, these high-cost short-term loans are not a one-off issue. A <a href="http://www.researchgate.net/profile/Dean_Wilson2/publication/252423503_Payday_Lending_in_Victoria_-_A_research_report/links/00b7d53726976bf6d9000000.pdf">report</a> for the Consumer Law Centre Victoria found 65% of payday lending customers had taken out repeat loans, with an average of six loans over 12 months. The repeat loan cycles are a reflection on need and an inability to obtain credit from elsewhere, but they are also a reflection on the client-focused, relational nature of payday lenders.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=203&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=203&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=203&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=256&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=256&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76707/original/image-20150401-1245-1jnc5mb.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=256&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">*The cost of a one-month loan at 24% is equivalent to an interest rate of 288% pa.</span>
<span class="attribution"><span class="source">Author provided.</span></span>
</figcaption>
</figure>
<p>This is a thriving market benefiting from people who can least afford expensive credit. Suppliers typically operate right at the margin – most loans charge the maximum permissible rates under relevant law, and many <a href="http://asic.gov.au/about-asic/media-centre/find-a-media-release/2015-releases/15-056mr-asic-puts-payday-lending-industry-on-notice-to-lift-standards/">flirt with the boundaries</a>. ASIC has so far found more than 10,000 people have been overcharged for their payday loans. As Marston and Shevellar <a href="http://www.academia.edu/5884099/In_the_shadow_of_the_welfare_state_The_role_of_pay-day_lending_in_poverty_survival_in_Australia">claim</a>, “the growth of fringe lenders is a consequence of market supply meeting increased demand, when that demand is not being met by other segments of the financial services industry”.</p>
<p>Demand is not going to fall when the cost of living exceeds household income, precluding savings, and when bills need to be paid to keep a roof, turn on the lights, provide food and clothe the kids. </p>
<h2>A supply problem</h2>
<p>That leaves us with the question of supply.
To seriously challenge the market, realistic <a href="http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2012/Strategies-for-reducing-reliance-on-high-cost-short-term-small-amount-lending">alternatives must be available</a> to these households; alternatives that match the accessibility and awareness of the payday lending competition. </p>
<p>So far “mainstream lenders” have not responded directly to this challenge; arguably, these consumers are not a very attractive future market. It will take a different point of view for mainstream lenders to engage – one that goes beyond simple commercial rates of return.</p>
<p>This is an opportunity and a challenge for Australia’s mainstream lending market, for-purpose organisations, governments, and potentially social investors to work together to create and market a simple, accessible, affordable product. Leveraging the capabilities of multiple sectors to address a social issue and deliver social impact and financial return has been done before (e.g. <a href="http://socialventures.com.au/assets/Goodstart-report-Final.pdf">Goodstart Early Learning</a>).</p>
<p>It is time to create a new market for short-term credit that reduces the cost for Australia’s most disadvantaged households, and builds financial resilience for the future. This could be Australia’s next great social enterprise.</p><img src="https://counter.theconversation.com/content/39311/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kristy Muir receives funding from the Australian Research Council; the Australian Government Departments of Education and Training, Social Services & Health; the NSW Department of Family and Community Services; the National Australia Bank; the Macquarie Group Foundation and the National Council of Social Services (Singapore). </span></em></p><p class="fine-print"><em><span>Andrew Young is the CEO of the Centre for Social Impact, which receives/has received funding from the Australian Research Council; the Australian Government Departments of Education and Training, Social Services & Health; the NSW Department of Family and Community Services; the National Australia Bank; GoodShepherd Microfinance, the Macquarie Group Foundation and others.</span></em></p><p class="fine-print"><em><span>Axelle Marjolin previously received funding from the National Australia Bank and Good Shepherd Microfinance.</span></em></p><p class="fine-print"><em><span>Fanny Salignac receives funding from the National Australia Bank. </span></em></p>The number of Australians getting caught in a repetitive cycle of payday loans is growing, but in many cases they have little choice.Kristy Muir, Associate Professor of Social Policy / Research Director, Centre for Social Impact, UNSW SydneyAndrew Young, CEO, Centre for Social Impact, UNSW SydneyAxelle Marjolin, Researcher at the Centre for Social Impact, UNSW SydneyFanny Salignac, Research Fellow - Centre for Social Impact, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.