Mick Johnson DWP Financial Inclusion Team Washington, Tyne and Wear

2 The Financial Inclusion Agenda 1.Access to Bank Accounts 2.Access to free and objective Money Advice 3.Savings 4.Affordable Credit 5.Home Contents Insurance

3 Financial Inclusion – the scale of the problem Average household debt in the UK is £57,810 Average owed by every UK adult is £29,929 Britains interest repayments on personal debt were £66b last year £181m personal interest paid in UK daily The poor pay £1000 more to access credit and purchase services 70 per cent of people aged on low incomes have no savings A million people have no bank account 568k people sought debt advice from CAB in last 12 months

4 Financial Inclusion – the scale of the competition Leading doorstep lender made £125m profit – has 2.3m customers and 11,600 agents visiting 1.8m customers every week Leading rent to buy firm has over 200 shops and £197m in revenue Pawnbrokers – number of shops increased from 500 to 1300 since 2003– loan book £192m Illegal lending valued at £120m. Pay Day Loans – 4.1m loans made valued at £1.2 billion Social Fund made 3.9m budgeting and crisis loans totalling over £700m

5 Affordable Credit – The Growth Fund What is the Growth Fund? A joint HM Treasury/DWP initiative to increase the availability of affordable personal loans made by third sector lenders e.g. Credit Unions and Community Development Finance Institutions. A practical opportunity for people who would otherwise turn to the expensive alternative credit market to have access to loans at affordable rates. Instant loans – not previously available through credit unions. A sum of money available for personal loans – the things people need to borrow money for because they cant always manage to save.

6 For a variety of reasons people can be excluded from sources of mainstream credit and are reliant upon other sources, including high cost doorstep lenders, pawn-brokers and illegal money lenders. The total Growth fund investment to 2011 will be almost £100 million – aimed at increasing the lending capacity of our third sector partners. We work with over 150 Growth Fund contractors in over 400 towns and cities – with contracts in place until To date Growth Fund has made over 318,000 loans totalling over £137million. Affordable Credit – Growth Fund

7 Loan ProviderAmount Borrowed Weekly PayableInterest ChargedTotal Payable Shopacheck (254.5% APR) £500£17.50£375.00£875 Provident (272.2% APR) £500£17.50£410£910 Erewash Credit Union (26.8 % APR) £500£11£62£562 Comparison for a Loan of £500 over 52 weeks between a Credit Union and the leading doorstep lenders

8 Financial Inclusion Champions The objectives of the initiative include: Building the role of local authorities and Local Strategic Partnerships in financial inclusion. Helping develop relevant action plans identifying the most significant issues with the greatest potential for improvement. Helping develop local networks of financial inclusion intermediaries through events and regular stakeholder engagement. Where new third sector lending, savings and banking provision is required, working with local stakeholders and partners (including the banks) to establish steering groups and develop credible proposals for establishing new provision. Working with housing associations and social landlords in particular geographical areas to increase the supply and take-up of appropriate home contents insurance schemes.

9 Reducing the number with no access to Home Contents insurance Many social housing tenants have no house contents insurance: Lack of basic insurance links to dependency, re-enforces poverty and puts pressure on the Social Fund DWP working with the Association of British Insurers, Local Authorities, Registered Social landlords, Credit Unions and CDFIs to look at solutions. Products exist but take up has been poor. Funding from the £12 million financial inclusion Champions to develop solutions and deliver increase in take up.

10 Home Contents insurance DWP have funded a number of Tenant Engagement Initiatives in the North East, North West and Scotland. Tenant Engagement Teams work directly with new and changing tenants, as well as tenant and community groups. To date nearly 8000 policies taken out by tenants through the initiative. The groups also take the opportunity to discuss wider financial inclusion issues – affordable credit, savings, banking, advice, etc. Continuing work with the Association of British Insurers (ABI)

11 Leeds City Council recently commissioned a study into the impact of FI initiatives across the city: FI in Leeds delivers £26 million of additional disposable income. Total operating costs of interventions is £3.3 million. Every £1 invested in FI in Leeds generates £8.40 for the regional economy. And ponder this – The costs affect not just individuals but our communities as well. A Centre for Responsible Credit survey of the Meadowell estate in 2001 found that more money was going out of the estate on payments to door-to-door lenders than the Government were putting in via regeneration budgets. Financial Inclusion – is it worth it?