Memorandum submitted by Fern Computer
Services Ltd
Fern Computer Services Ltd is a software company
that specialises in systems for credit unions, microfinance institutions
and development banks. Fern has been incorporated since 1979 and
has over 200 customers in 20 countries around the world, including
UK, Ireland, South Africa and Central America.
Through implementing our systems in many different
organisations in many different countries we have built up a good
hands-on knowledge of different types of savings and loans organisations
and of those that have been successful and those that have failed
even though millions of dollars were spent in setting them up.
The company is based in Belfast and employs
10 people.
ACCESS TO
BANKING SERVICES
1. The commercial banking industry has provided
a reasonable access to banking services to its clients who are
mostly employed and in receipt of wages through their bank account.
2. The unemployed through the Basic Bank
Account may have access to their cash when needed.
3. Flat rate bank charges are proportionately
onerous on the smaller value transactions exercised by the less
well-off bank clients.
ACCESS TO
AFFORDABLE CREDIT
4. Banking Services does not necessarily
extend to affordable credit for the poorest in our community.
This is due to the perceived risk of lending to this group plus
the cost of administration of small value loans.
5. There are a number of existing non-government
avenues for mobilising credit to the less well-off:
— community development financial initiatives
(CDFIs); and
— microfinance organisations.
6. Credit unions have been very successful
in mobilising savings to provide a self-sustaining revolving credit
facility to their members—particularly for consumer lending.
However, the voluntary nature of the personnel involved and separate
corporate status makes it difficult for them to provide a cohesive
national service. Professional standards of management do exist
but more as an exception. High standards of monitoring must be
implemented and the need for continuous training is often overlooked.
Some initiative to raise standards and to formulate a national
strategy for growth would be a useful adjunct to the monitoring
services provided through the FSA. The Government should keep
recognising credit unions as an asset to a community and not as
another financial institution operating primarily for financial
gain.
7. CDFIs were an idea borrowed from the
USA and have not as yet made a significant impact albeit they
are spread out nationally and have a single point of focus. It
should be easier to mobilise them to provide affordable credit
but they will need a significant injection of capital for their
loan fund.
8. Microfinance organisations are a combination
of savings mobilisation and lending for entrepreneurial purposes.
They can be very effective on a regional basis where they are
more sensitive to local issues. They require a start-up loan fund
until such times as they can mobilise savings to provide this
capital. There are very few microfinance organisations in the
UK but those that exist are doing a good job.
9. In Thailand there is an example of savings
mobilisation and affordable credit to the poor through the Government
Savings Bank http://www.gsb.or.th/english/profileENG.pdf. The
Government Savings Bank of Thailand is a state bank that began
as a government institution primarily to encourage thrift and
savings habits of the Thai people, especially those earning a
low to medium income.They have over 600 branches including an
office on board a boat linked by satellite to the main computer
and they service over two million clients. The reason for its
success is the national economies of scale, attention to individual
office performance, high professional standards and commitment
by the government to its success.
FINANCIAL EDUCATION
AND ACCESS
TO FINANCIAL
ADVICE
10. Each of the organisations mentioned
above provide ongoing advice and education to their clients.
INCENTIVES AND
BARRIERS TO
SAVING FOR
PEOPLE ON
BELOW AVERAGE
INCOMES
11. You may wish to visit the site for the
GSB Thailand for some ideas on the range of savings products and
incentives for their clients to choose this bank for their savings
http://www.gsb.or.th/english/profileENG.pdf. This will give you
some insight into what can be achieved with the right approach
to the problem .
THE ROLE
OF THE
GOVERNMENT, THE
FINANCIAL SERVICES
AUTHORITY AND
OTHER BODIES
AND ORGANISATIONS
IN PROMOTING
FINANCIAL INCLUSION
12. The Government has by its inactivity
encouraged an attitude of ignorance and neglect of the needs of
the poor. What is required is a shift in attitude by all government
agencies and departments involved in regulating and promoting
financial inclusion for all UK citizens.
THE BENEFITS
OF FINANCIAL
INCLUSION AND
THE EXTENT
TO WHICH
FINANCIAL INCLUSION
MEASURES CAN
CONTRIBUTE TO
COMBATING POVERTY
AND REDUCING
BARRIERS TO
EMPLOYMENT
13. The least well-off in our society are
also the most vulnerable to unscrupulous loan sharks and unregulated
lending institutions. Aside from the blatant exorbitant charges
many of these organisations manipulate their client base with
fear and prey on their clients' ignorance of what other means
of credit is available.
14. Self-help groups such as credit unions
encourage local support and dissemination of accurate information
to their clients. Their motto "Not for profit but for service"
gives you an idea of their attitude to providing a sympathetic
social service within their community. No amount of government
spending can emulate this contribution to the quality of life
in difficult times for people needing credit for normal living
needs.
15. The Thai government's commitment to
the GSB is an integral part of their overall strategy of promoting
growth in the home market. By mobilising savings and loans for
extra economic activity they increase the home demand for goods
and services and consequently increase employment. Special attention
is given to providing loans for SMEs that will also increase employment
by encouraging entrepreneurial development.
January 2006
| 
