Financial exclusion remains a pressing challenge for millions of people across the country. And when people can’t access necessary financial products and services, it limits lives and holds back economic growth.

Our latest research found over 20 million people are living in financially vulnerable circumstances in the UK. But momentum for greater financial inclusion is building and there is a big focus on the issue from the Government, regulators and industry.

We see the optimism from leaders across the financial services sector, with plenty of solutions to financial exclusion well within reach. And the Government’s commitment to a National Financial Inclusion Strategy offers a huge opportunity for the whole industry to work together to crack this stubborn issue once and for all.

We were delighted to see the Government recently publish its Dormant Assets Strategy allocating £132.5m in dormant assets funding to financial inclusion through Fair4All Finance. This means future funding from the scheme will continue to help people in vulnerable circumstances access fair financial products and services.

We’re pleased that for the first time, this includes funding to help build financial capability so that people can manage their money with confidence. To support the development of this work, we will be launching a consultation over the summer to seek views from financial education providers in particular.

Our Strategy

We know it will take the combined skills of the whole industry, government and regulators to boost financial inclusion. Fair4All Finance has several roles to play. As well as investing in organisations and funding pilots, we work a great deal with others, collaborating, convening and influencing.

Together we’ve achieved a lot. And we know there’s more to do.

Our strategy is focused on three key opportunities to change the financial services system, so it provides what people need to manage their money, build their resilience and improve their lives:

• Influencing key actors across the system to prioritise, enable and deliver financial inclusion
• Transforming the market to test and deliver the right products to all customers who need them
• Scaling fair and affordable products to meet the needs of millions of customers

As we move into the next phase of our work, we want to accelerate the impact we have for people in financially vulnerable circumstances and to create financial services markets that work for everyone.

Alongside our ongoing work with the community finance sector we aim to be bolder: working with more commercial and mainstream organisations, increasing our focus on insurance and building resilience, and prioritising delivery of fair and affordable financial products at scale.

We also have the opportunity to build on the Government’s Financial Inclusion Strategy, to be published later this year, and design new programmes which directly address the challenges and opportunities that the strategy identifies.

Our plans for this year and beyond

Opportunity is a key word for us right now and our three areas of focus include:

Influence

Creating the conditions for change

Alongside direct delivery, our role is to work with others, collaborating, convening and influencing to create the conditions for a significant shift in financial inclusion.

We’ll continue to support the development of a bold and ambitious National Financial Inclusion Strategy with a key role for banks, insurers and mainstream providers. We’ll do this through our role on the Financial Inclusion Committee and our wider relationships with the industry, regulators and civil society.

And we’ll work alongside government and regulatory policy to further support financial inclusion. We will explore where policy can enable small sum lending through banks, credit union growth, merger support and common bond reform, and implementing savings auto-enrolment nationally.

Transform

Testing more product solutions

We have tested different ways of providing affordable credit through no interest loans and debt consolidation lending. We’ll continue to learn from these pilots and develop the case for scaling what works.

We’ll also look at trialling new product areas to fill the gaps in the market, including developing propositions for particularly hard to reach or vulnerable customer groups. And in insurance, where we see stark differences in available cover between people in financially vulnerable circumstances and the general population, we want to work with government and the insurance industry to help bring more equitable products to the market.

The Small Dollar Loan scheme in America has seen big US banks triple the amount of sub $1,000 loans provided to borrowers who were previously excluded from mainstream credit. We will explore whether a version of small dollar loans could work in the UK ecosystem, to help match an increasing need with appropriate supply.

Further leveraging our funding

Where possible, we look to structure our investments in partnership with other commercial funders to leverage our dormant assets funding and extend the impact as far as possible.

We’ve had some success with both funding and lending guarantees, where we’ve been able to bring in additional funds for organisations we invest in and enable lenders to extend loans to customers outside their usual risk appetite.

But in the coming years we want to see our banks, building societies and major financial institutions doing more to support our key target customer groups, supported by an appropriate regulatory environment which balances consumer protection and access to services.

We have multi-million pound plans to develop further funding and lending guarantees to leverage additional finance and enable more lenders to expand their lending to customers in financially vulnerable circumstances. We’ll also continue to encourage mainstream, commercial and social investment into not for profit lenders.

Scale

Building on our work with community finance

Credit unions and CDFIs do a vital job of serving people in financially vulnerable circumstances, particularly those who are excluded from mainstream finance. While some are successfully growing and are ambitious to do much more – like the community finance organisations we have invested in through our Scale Up programme, who have scaled their affordable lending by 33% year on year – others are less able or willing. The transformational growth needed requires substantial investment.

We’ll continue to support the sustainability and more rapid growth of community finance organisations through our existing Scale Up and Community Finance Resilience Fund investment and grant portfolios.

We have also earmarked significant funding over the next few years to explore opportunities to help grow the provision of affordable credit through credit unions, including looking at ways to ensure they are adequately funded and capitalised, and funding strategic consolidation opportunities that build growth and sustainability. 

Scaling what works through commercial delivery

We’ve learned a lot about what works over the last five years. We’ve seen the impact having access to a small loan can have for people in financially vulnerable circumstances. And we’ve seen the difference it can make to families when they’re able to claim all the discounts, benefits and financial support they are entitled to.

We want to scale up this good practice to reach more customers. To do this we’ll prioritise delivery at scale, including encouraging retail banks and commercial lenders to offer affordable credit and embed income maximisation tools in their customer journeys.  

Banks in particular have a unique opportunity to play a bigger role in financial inclusion and we’ll continue to work to establish partnerships that enable them to this.

An opportunity to input

As well as supporting our current plans, the new dormant assets funding and the Financial Inclusion Strategy give us an opportunity to think differently and explore new areas of potential impact.

To support this, we will be launching a consultation this autumn, shortly after the publication of the Financial Inclusion Strategy. We want to seek input from partners on our future plans, understand where the best opportunities to make an impact on financial inclusion are, and hear what else we should be thinking about going forward.

In the meantime, we’ll continue to share more details on the programmes we already have underway as they are launched.

Working together to create a market that serves everyone

All our work is in collaboration with others and we’re thankful for the generosity and insight of each of our stakeholders.

We’re proud of the difference our collaborative work has already made through the organisations we support, to the people they serve and across the wider financial services system.

Together we can keep making a difference to the lives of millions of people.