April 30, 2014

CSI Research reveals young and working Australians are excluded from mainstream finance

The annual Measuring Financial Exclusion in Australia report, commissioned by NAB and conducted by the Centre for Social Impact, found that more than three million adult Australians don’t have access to a moderate amount of credit, a basic transaction account or don’t have general insurance.

The report also found that of the three million financially excluded Australians, 35 per cent are young people aged 18 to 24 and more than 40 per cent are in employment.

In 2013 more people accessed transaction accounts and general insurance than in previous years but fewer people were able to access a moderate amount of credit.

NAB Group Executive, Personal Banking, Gavin Slater said that greater transparency of the fringe lending sector is required in order to fully understand why people, particularly employed Australians, aren’t accessing mainstream credit products.

“There are many people in our community living pay cheque to pay cheque, without a safety net to help them manage unexpected expenses. When they’re faced with emergencies, such as the car they rely on to get to work breaking down, they do not have any means to repair or replace it.

“Those excluded from mainstream credit are often forced to turn to fringe lenders and can find it difficult to manage basic payments, getting caught in a cycle of debt,” he said.

“Financial exclusion is a serious concern for many groups – young people and the working poor included – but particularly when people are faced with adverse situations that place them at risk of vulnerability to financial exploitation, cycles of debt at high interest rates, high levels of stress and poor health and low social and economic participation,” The Centre for Social Impact’s Director of Research, Associate Professor Kristy Muir, said. “It is a lack of resilience in these crisis situations that have the most significant social and economic implications for individuals, families, communities, governments, not-for-profits and business. To begin to understand and tackle the problem, we need to consider the broader context of financial resilience – including access to appropriate and acceptable infrastructure, products and services.”

Good Shepherd Microfinance CEO, Adam Mooney said that while existing programs assist the most vulnerable, innovation is required to reach more people in our community.

“Microfinance is a viable alternative for people who may otherwise access fringe lenders. We know that four out of five people stopped using fringe lenders after receiving a no interest loan from our microfinance providers.

“This issue is not going away and the Financial Services Inquiry provides a unique opportunity to understand how many Australians are accessing this type of lending and how we can work together with industry and government to provide fair and affordable alternatives,” he said.

NAB has been measuring financial exclusion for four years now and in that time the number of financially excluded adults has grown to three million.

The total number of people financially excluded in 2013 was 3,038,451 (16.9 percent of the adult population), comprised of:

  • 179,790 (1.1 percent) adults who were fully excluded; meaning they had no financial services products.
  • 2,858,661 (15.8 percent) adults who were severely excluded; meaning they only had one financial services product.
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