Financial Inclusion Learning Point

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Learning Points share what people have learned from their experience in regeneration - from people working or talking together, or from research into issues and evaluation of what is happening. Learning Points can help people and organisations to improve their practice through identifying what works and what doesn't.

The views described in Learning Points do not mean that the Scottish Centre for Regeneration or the Scottish Government necessarily support them. They simply reflect what has been debated and what those involved in the event considered useful learning and lessons from their perspectives.

What is this Learning Point about?

This Learning Point was developed from discussions at an event in November 2009, focusing on financial inclusion. The event was jointly hosted by the Scottish Government and the Department for Work and Pensions (DWP) Financial Inclusion Champions Team, and was supported by the Financial Services Authority. The speakers included:

  • Alex Neil, MSP, Minister for Housing and Communities
  • Stuart Bailey, Financial Services Authority
  • Stephen Sinclair, Scottish Poverty Information Unit
  • Anne Feeney, Financial Inclusion Champions Scotland

Download the speakers presentations

What are the important issues?
  • How can we, as people working in the field of financial inclusion, best plan our activity to promote financial inclusion at a local and national level? What support and facilitation should the Scottish Government offer?
  • How can we tackle financial exclusion in its early stages? How do we balance crisis led work with early intervention?
  • How can we demonstrate the need to dedicate resources to financial inclusion products and services? And how can we shift resources towards preventing financial exclusion and building financial capability?
  • How can we make sure that financial inclusion support is available and accessible to those who are most in need?
  • How can we target support so that people have the skills and knowledge they need at the times that they are making key financial decisions?
  • How can we develop our own skills and capacity, to more effectively support financial inclusion activity? How can we learn from the positive work that is already happening across the country?
What is known already?
  • Financial inclusion is about equality of access to financial services and products for everyone, and ensuring that people have the skills, knowledge and understanding to make good financial choices.
  • People have different access to financial services and products. A key part of financial inclusion work involves supporting people to access the services they need to allow them to manage and save their money in a safe place, to access affordable credit and to insure their belongings.
  • It can be challenging for people to access mainstream financial services. Financial inclusion involves both developing alternative financial products - for example, through Credit Unions - and encouraging the development of more accessible mainstream services.
  • Financial inclusion is at the heart of tackling poverty and inequality, and building a fair and cohesive Scotland. There is a clear correlation between equality and how well societies do economically [1].
  • Although financial exclusion and poverty are linked, they are not the same. Financial exclusion can be both a symptom and a cause of poverty. Financial inclusion activity also aims to support people to maximise their income and reduce expenditure.
  • The economic climate means that many are at greater risk of exclusion. In turbulent times, people need to be able to make the right decisions about money.
  • We need to work together to promote financial inclusion. No one agency can tackle financial exclusion alone.
What have we learned?

Planning activity to tackle financial exclusion

  • Financial inclusion activity plays an important role in meeting national and local outcomes. Activity needs to be linked to the three national frameworks for tackling disadvantage - Equally Well, Achieving Our Potential and Early Years. Early intervention is central to all three frameworks.
  • Responsibility for developing and co-ordinating financial inclusion activity lies at the local level. The Scottish Government wants to support this, but its role is to facilitate rather than direct - due to the Concordat agreement with local authorities. The Government will support local planning through promoting good practice and developing support and guidance at a national level.
  • There is a substantial body of research into financial exclusion, which can inform financial inclusion activity. This is not always used effectively in service planning. It can be difficult to take time to learn from others.

Focus on capability

  • In Scotland, the focus is on tackling the root causes of inequality, not just its symptoms. An important part of this approach is to promote early intervention through financial capability - the ability and confidence to plan and make effective decisions about finances.
  • The economic downturn has revealed that there are issues around financial capability, with many people not having the skills and knowledge needed to plan for and withstand financial difficulties.
  • In addition to a strong focus on financial capability, promoting financial inclusion through improving access to financial services, and income maximisation remains vital.
  • Although there is good information on income inequalities, there is not so much evidence about inequalities in expenditure. Understanding expenditure better would help us to better understand the challenges and issues that people face in financial management.
  • The Scottish Government is currently working with key stakeholders to develop a policy on financial capability, to guide its own activity. This focus on early intervention and prevention fits well with the Government's three frameworks for tackling inequality and disadvantage.

Resources for building financial capability

  • Currently, much financial inclusion activity is crisis led. It responds to the major issues that people are facing in their lives at the moment. Demand for advice and support is outstripping supply in many areas.
  • Focusing on financial capability involves building people's skills and knowledge at key life stages, before they reach crisis stage. This requires either additional resources, or a shift in resources. This is currently challenging as budgets are under pressure.
  • Funding to tackle financial exclusion is no longer ring fenced nationally. In 2008-09 and 2009-10 it became part of the wider Fairer Scotland Fund, aimed at tackling poverty and disadvantage. The Fairer Scotland Fund will itself no longer be ring fenced from 2010-11. This can make it challenging to get financial inclusion and capability on the agenda locally, and to prioritise this.
  • There is a need to look at the wider benefits that can be generated by early intervention and financial capability work. Organisations need to make a business case for funding, showing that activity is making a real difference.

Targeting those most in need

  • Certain groups are most at risk of financial exclusion. UK wide research found that disabled people, people on low incomes, lone parents, people leaving care or prison, people in isolated or disadvantaged areas, minority ethnic communities and housing association tenants are among those particularly vulnerable to exclusion [2].
  • People who are in work can experience poverty and financial exclusion too. Research suggests that 5% people in work are in poverty. Most people experiencing in-work poverty (80%) are low paid [3].
  • Tackling financial exclusion in rural areas can be particularly challenging as people often face different barriers to inclusion than in urban areas.
  • Information and advice needs to be available in a range of accessible formats, particularly in formats suitable for those who are most in need of financial inclusion support.
  • People like to get information in different ways. For example, young people may be more likely to use text and internet information services, and access multiple information sources.

Focusing on transitions

  • To build financial inclusion, it is important to catch people at key transition points and provide support to enable good decision making.
  • To do this effectively, we all need to work together. Organisations like registered social landlords, schools, prisons, and drug and alcohol services can all work with people at key transition points. We should build on the trust that these organisations already have with their service users.
  • Financial inclusion is closely linked to other issues. It can impact on physical and mental health, employment, housing options and a wide range of other issues across people's lives [4].
  • Staff need to have wide ranging knowledge to ensure that people can get basic information, or are referred (or signposted) effectively to the services and support that they need. There is a need both for basic advice and support, and more intensive, specialist services.

Engaging communities

  • Demand for financial inclusion support often outstrips supply. But it is important to ensure that the support available is provided to those most in need - not only those who are most able to seek out support.
  • Some groups and individuals can be more difficult to engage and work with than others. Engaging these groups requires outreach work, taking an active approach to identifying and making contact with your target client group, rather than waiting for them to come to you.
  • Financial inclusion activity should draw on the skills already within communities, through activities like peer support. People may be more likely to trust and work with someone from their own community.
  • This type of work takes a sustained effort, and can be challenging to do when there is high demand from people in crisis situations.
  • Successful activity to tackle financial exclusion involves ongoing consultation with service users, and building their views and experiences into future work.

Learning and skills

  • People working in financial inclusion are keen to share good practice and experiences in financial inclusion. The Community Regeneration and Tackling Poverty Learning Network events are a good forum for this.
  • Links across different sectors can lead to useful sharing of different perspectives, joint work to tackle problems, and access to a range of different funding sources.
What next?

The issues identified at this event will form part of a programme of activities for the Community Regeneration and Tackling Poverty Learning Network. This Learning Network supports Community Planning Partnerships, and their partners, to improve activity to regenerate communities and tackle poverty. It is led by the Scottish Centre for Regeneration, and links up with learning promoted by other parts of the Scottish Government.

You can join the Learning Network online at Partners in Regeneration or contact Heather Smith, Learning Network Co-ordinator, on 0141 271 3734.

At this event, the Minister committed to hosting a strategic forum with key players to discuss how to join up work on financial inclusion. This will be run jointly with the DWP in 2010.

Further information
Scottish Centre for Regeneration

This Learning Point is published by the Scottish Centre for Regeneration. The Centre is part of the Housing and Regeneration Directorate of Scottish Government. We help to achieve Scottish Government's Purpose, Targets and National Outcomes through supporting our public, private and voluntary sector delivery partners to become more effective at:

  • regenerating communities and tackling poverty
  • developing more successful town centres and high streets
  • creating and managing mixed and sustainable communities

We do this through:

  • coordinating learning networks which bring people together to identify the challenges they face in delivering regeneration and to support them to tackle these through organising events, networking and capacity building programmes
  • identifying and sharing learning through undertaking research, developing capacity building tools and highlighting lessons learned and good practice
  • developing partnerships with key players in the regeneration sector to ensure that our activities meet their needs and support their work

Scottish Centre for Regeneration, Scottish Government, Highlander House, 58 Waterloo Street, Glasgow G2 7DA
Tel: 0141 271 3736
E-mail: contactscr@scotland.gsi.gov.uk
www.partnersinregeneration.com

[1] The Spirit Level: Why More Equal Societies Almost Always Do Better - Richard Wilkinson and Kate Pickett - http://www.equalitytrust.org.uk/resource/the-spirit-level

[2] Financial Inclusion in the UK: Review of Policy and Practice, Joseph Rowntree Foundation, 2008
http://www.jrf.org.uk/publications/financial-inclusion-uk-review-policy-and-practice

[3] Low Pay and In Work Poverty in Scotland, Scottish Economic Statistics 2008, Scottish Government, 2009
http://www.scotland.gov.uk/Publications/2009/01/29150444/5

[4] Financial Inclusion Action Plan, Scottish Government, 2005
http://www.scotland.gov.uk/Publications/2005/01/20544/50280

Page updated: Monday, January 11, 2010