Memorandum submitted by East Lancashire
Moneyline
1. ACCESS TO
BANK SERVICES
The position from our perspective in obtaining
access for customers to the "basic bank account" has
deteriorated over the last two years as most of the mainstream
banks appear to have taken the opening process out of the branch
network and redirected it via a "postal" application
to service centres. The consequent loss of "personal service/ownership"
is particularly significant to the customer base at which the
product is aimed. As a secondary point the introduction of the
"post office" account with its very limited facilities
(ie receipt of benefit and cash withdrawals) has contributed little
to the concept of "financial inclusion"
2. ACCESS TO
AFFORDABLE CREDIT
The concept of "affordability" is
subjective. The cost of delivery of credit to a "high risk"
market, ie operational and bad debt, must be fully understood.
There appears to be a lack of clarity as to whether delivery should
be "subsidised" or reflected in interest/fee charges.
3. FINANCIAL
EDUCATION/ADVICE
This represents a significant delivery cost
for the CDFI—our experience is that as many as 40% of individuals
approaching us as a loan company are better served by advice on
managing their existing commitments rather than "consolidating"
credit.
4. BARRIERS TO
SAVINGS
In partnership with HBOS, ELM developed a saving
facility that enables us to open the account "in house"
with savings collected alongside the loan repayment. Approximately
20% of our loan customers this year have opened an account. The
appeal appears to be "ease of saving" rather than "access"
ie research with customers indicated that they wanted limited
withdrawals (two per year in our case) In 2006 we expect 50% of
customers will opt for the saving option.
5. GOVERNMENT
INTERVENTION
Our experience particularly over the last 18
months is that there is a clear strategy based around "development
funding" combined with CITR to encourage "private"
investment and the potential to deduct loan capital arrears at
source fro benefit. This creates an effective "package"
of measures
6. REDUCING BARRIERS
TO EMPLOYMENT
Our experience is that "enterprise loans"
can be delivered effectively alongside personal lending. In the
current year, 51 (out of 1,180) loans were clearly identifiable
as enterprise loans.
January 2006
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