Financial inclusion priorities in Europe
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clusion Financial in n itio EFIN defin
whereby a process to rs fe re and / or exclusion accessing s ie lt u c Financial fi if e mainscounter d ducts in th ro p d n a people en s e eir needs ncial servic riate to th p ro p p using fina a re in their rket that a al social life rm o n a tream ma d a them to le and enab) le (1 . l society at financia ognition th clusion, c re d a re lso widesp er social ex ality There is a a much wid a f o to qu rt a p is a c k a cce s s la o h w exclusion s p ducation ome grou housing, e s, b jo s faced by s a h rvices suc essential se . are or health c
(1) European Commission, Financial Services Provision and Prevention of Financial Exclusion, VC/2006/0183, March 2008.
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nt is importa onditions c ir fit e fa n r e e b d s un rs to ent service nd allows consume m y a p c si a b on a Access to cial inclusi ial and so c n a n fi t. r e fo mark the single fully from
BANKING
1. Access to a current payment account Universal access to a bank current account for people who want it. Which should include: • Affordable cost for low-income people; • Appropriate transaction tools to live a normal life in their own society; • Means of payment - free of charge or lower cost means of payment should be available for all, including people on low incomes. 2. Transparent and comparable financial services terminology, fees and interest rate
SAVINGS A lack of savings is a major cause of financial insecurity which makes households extremely vulnerable, in particular when faced with life’s difficulties. For them, the slightest “accident” can have disproportionate effects and serious consequences, not only economically and financially but also psychologically. 3. Urgent action to understand the needs of low-income savers At the very least, for Member States to develop co-ordinated approaches to financial inclusion across their own jurisdictions, enabling relevant organisations to pool their knowledge and develop coherent recommendations about how to turn these priorities into action (e.g. in working out how to develop truly "appropriate products") 4. Appropriate savings facilities for people on low incomes and adequate products to allow those with low and/or irregular incomes to save small amounts or irregularly
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CREDIT The national market (via its structure, its regulation, its actors,...) should allow anyone to access affordable and adequate credit (fit to the needs and financial capacity of the borrowers) when affordable for them. Credit providers (of all kinds) should comply with rules and regulations and not exploit low-income people. Because of the important differences in each national state, the implementation measures employed to achieve this goal should take a variety of forms.
5. Promote alternative low-cost (social) lending alternatives 6. Support microcredit initiatives 7. Access at a reasonable interest rate for all households (short and long-term credit, leasing and factoring, mortgages) 8. Make affordable personal credit available for all (for limited amount < 5000 â&#x201A;Ź) and promote it widely to counter aggressive marketing tactics e.g. of payday loan companies 9. Regulate revolving credit (for non-term contract) to avoid a debt trap 10. Assess discrimination practices which result in increased profits by products aimed at poor people or people at risk of exclusion (because of high interest rate, fees...)
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Insurance Low-income households use insurance less than average households. People in deprived communities often do not use home contents insurance or other basic insurance. 11. Accessibility to affordable compulsory insurance should be developed and guaranteed Via basic insurance products, ombudsman or out of court agreement
Services of General Economic Interest An option worthy of consideration in addressing the problem of financial exclusion is to consider that basic financial services are services of general economic interest (SGEI) and that access at affordable prices for everyone to these services is at the heart of the European model of society.
12. Appropriate monitoring and studies to identify excluded people / communities and develop appropriate political evaluation measures 13. Appropriate measures to smoothen drops in income (social welfare net) and its consequences on financial inclusion and overindebtedness risk 14. Promote Corporate Social Responsibility (CSR) in the financial sector to address the problem of financial exclusion with the introduction of EU legislation based on the Community Reinvestment Act (CRA) introduced in the United States in 1977 and adapted to the EU situation
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Banking policy
as a way to build up e a secure market, seen iev ach uld sho n tio ula Bank reg development. Regulation cessary for sustainable ne t, rke ma vide the in ce en confid market efficiency to pro compensate for a lack of to d ne sig de be uld sho te price. everyone at an adequa appropriate access for 15. Bank management transparency towards staff 16. Publication of bonuses and sales incentives 17. Disclosure of commissions received by banking staff and intermediaries for each financial product sold to consumers 18. Financial and institutional sustainability of financial inclusion 19. Sound institutions, guided by appropriate internal management systems 20. Sound prudential regulation required 21. Avoid non-transparent products
National market structures Perfect financial inclusion can be described by the capacity to access and use appropriate financial services offered by mainstream providers. Meanwhile, there may be an adequate â&#x20AC;&#x153;second best choiceâ&#x20AC;? to provide appropriate services by alternative providers that comply with rules and regulations and do not exploit low-income people. 22. Regulation should be designed to facilitate the existence of a large range of banks / providers type, such as savings and cooperative banks, credit unions, social-oriented banks/ financial institutions improving quality of the supply, competition and coverage of niche markets
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Education There is a need to clarify what can be reasonably expected from financial education and what cannot be solved by financial education in order to avoid the vagueness surrounding this topic. 23. Financial education should be defined at EU level and objective indicators developed â&#x20AC;&#x201C; research in this field is necessary 24. This will then allow the evaluation of financial education programmes through the use of a common tool which measures the impact of such educational actions
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Gathering all stakeholders involved in financial inclusion is crucial to develop coherent financial policy measures both at local and European level and to increase mutual learning. The aim of EFIN is to create a network with a wide scope both in terms of membership (including financial institution and associations, public institutions, government representatives, NGO,â&#x20AC;&#x2122;s trade unions, consumer organisations,...) and in terms of objectives (promoting all measures and actions favouring financial inclusion in general).
www.fininc.eu
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