Financial inclusion index
Many people, particularly those living on low incomes, cannot access mainstream financial products such as bank accounts and low cost loans. This financial exclusion imposes real costs on individuals, their families and the communities in which they live.
Households that operate without mainstream banking services: are unable to make savings via direct debits on utility bills, are more vulnerable to loss or theft and may face additional barriers to employment. In addition, they are far more likely to use the alternative credit market - and pay interest many times that of a standard personal loan, often contributing to spiralling debt. In addition, for those who do get into debt or who struggle to make payments, the supply of free face-to-face money advice falls far short of demand.
The Government set out its strategy to tackle financial exclusion in ‘ Promoting financial inclusion ’, published alongside the 2004 Pre-Budget Report . The report sets out a range of measures - in three priority areas - access to banking, access to affordable credit and access to free face to-face money advice.
The Government also established a framework for delivery - including a Financial Inclusion Fund of £120m over three years and a Financial Inclusion Taskforce, chaired by Brian Pomeroy, to oversee progress. The Financial Inclusion Taskforce was formally launched on 21st February 2005 and will monitor progress on the objectives the Government has set out and will make recommendations on what more needs to be done.
27 September 2005
The Financial Inclusion Fund
The Financial Inclusion Fund of £120 million over three years was announced in the 2004 Pre-Budget Report in December 2004. The Fund will support initiatives to tackle financial exclusion:
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£45million will be used to support an increase in provision of face-to-face money advice and will be administered by the Department of Trade and Industry.
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£6million will be used by the Legal Services Commission to pilot mechanisms of money advice outreach aimed at those who do not normally present themselves to debt advisors.
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The Financial Inclusion Taskforce will have a budget of £3million with which to pursue their objectives, including improving the knowledge base of financial exclusion issues.
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£10 million will be available to provide the necessary support to administer the scheme whereby, under certain circumstances, lenders could apply for repayment to be made by deduction from benefit where normal repayment arrangements have broken down, and the administration of the growth fund for third sector lenders.
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£36 million will be made available for a growth fund to support the coverage, capacity and sustainability of third sector lenders. The growth fund will be administered by the Department of Work and Pensions .
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£20 million will be made available for broader financial inclusion objectives, including stimulating demand for mainstream financial services.
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