Memorandum submitted by ippr north
SUMMARY
1. Introduction
Disparities in access to the mainstream financial
system (financial exclusion) have become a concern for both government
and wider society in modern day Britain. However, rarely have
the gendered consequences of financial exclusion been considered
and visibly incorporated within policy developments. This submission
highlights how women and their attendant household management
roles and responsibilities, particularly within low-income households,
mean that women are not only more likely to be financially excluded
but has important implications for participative financial inclusion
policy.
i. Linking access to banking services to
wider participation within the financial system.
Access to basic banking services, due to their
wide-scale introduction through welfare support, is likely to
be feminised. This has particular implications for women's situation
at the lowest levels of financial inclusion within the mainstream
financial system and their potential vertical and horizontal movement,
for example access to other financial services that will benefit
both women and those individuals whose welfare is dependent of
the women's financial behaviour and access to financial products.
ii. Raising access to affordable credit by
women.
Women often take on debt commitments and these
are often to meet immediate/short term needs, usually related
to their caring roles. Access to credit is a prerequisite for
many households budgeting decisions, affordability based on repayment
costs rather than interest rates, as choice of regulated affordable
credit provider was rarely a feature of such decisions.
iii. Financial capability is more often possessed
than resources.
Women, through long-standing and prevailing
gender role expectations, possess considerable financial knowledge
and capabilities, which should be recognised. The "success"
of their capabilities are hindered often through a lack of financial
resources/income rather that practical financial capability.
iv. Recognition of the gendered opportunities
and incentives for saving.
Saving is important for future financial security.
However, while this is recognised by many individuals in low-income
households or difficult financial situations active saving is
not feasible. In addition, savings behaviour is often influenced
by cultural expectations of what savings should provide, thus
within traditional communities the expectation for many women
was that their savings would meet family and household short-term
needs rather than considering longer time horizons, which some
felt was not relevant to them and so placed emphasis on helping
children. Thus, the rollout of savings gateway could help many
women and households in the short term but also longer time horizons
may be considered in women's financial strategies. However, compulsion
should be avoided in the savings gateway, as this could enhance
women's poverty when many are faced with urgent spending priorities
in the present.
1. INTRODUCTION
TO THE
SUBMISSION: PROMOTING
WOMEN'S
FINANCIAL INCLUSION
1.1 The female face of financial exclusion
is illustrated by the following figures:
— Women are less likely than men to
have a current bank account (79%, compared with 83% (Graham and
Warren, 2001).
— The gender difference is more pronounced
when we consider women's diversity. For example, among Bangladeshis,
women are twice as likely as men to access no financial products,
31% compared with 14% (Graham and Warren, 2001).
— Financial exclusion is most likely
in households headed by a person in a full time caring role. Research
has shown that only 22% of lone parents save regularly, in comparison
to 47% of couples with children (Barnes et al., 2004).
Moreover, 55% of lone parents have no savings at all, compared
to only 20% of couple families (Middleton, 2002).
— In addition, women and men prioritise
differently how and why they save and spend their money. For example,
it has been found that women are more likely to spend money on
their children than men (Rosenblatt and Rake, 2003).
1.2 About the submission
The submission is based on original research
undertaken by Dr Jane Midgley during 2000-03, involving an analysis
of intra-household financial behaviour drawn from the British
Household Panel Survey (1990-2000) and interviews conducted with
women possessing varied demographic and socio-economic circumstances
and backgrounds within the Northumberland Rural Coalfield (Midgley,
2004), and subsequent research and analysis on the topic of financial
inclusion.
This submission highlights four priorities for
the Committee's inquiry:
i. Linking access to banking services to
wider participation within the financial system.
ii. Raising access to affordable credit by
women.
iii. Financial capability is more often possessed
than resources.
iv. Recognition of the gendered opportunities
and incentives for saving.
2. LINKING ACCESS
TO BANKING
SERVICES TO
WIDER PARTICIPATION
WITHIN THE
FINANCIAL SYSTEM
2.1 The introduction of basic bank accounts
has been an important mechanism for bringing individuals into
the financial mainstream. However, the operation of basic bank
accounts and wider participation within the financial system needs
further policy attention, particularly with regard to gender and
within household behaviour.
2.2 The use of basic bank accounts is likely
to be feminised, even though no data is in the public domain,
it is likely that the majority of basic bank account owners will
be female based on the numbers of women in vulnerable financial
positions, whether through reliance on welfare payments (such
as the elderly or lone parents) due to care responsibilities and
current or historic formal labour market disengagement, the recent
recruitment of individuals to basic bank accounts following welfare
payment modernisation, or requiring banking products following
relationship breakdown when access to financial services may have
been secured through joint product ownership which is no longer
tenable (Midgley 2004).
2.3 Increased access to banking services
for women provided by basic banking products is important and
should be recognised. However, the potentially gendered nature
of basic banking product ownership and the implications for women's
vertical and horizontal progression within the financial system
should receive greater policy attention.
2.3.i The possible long-term nature of basic
bank account ownership and the limited likelihood of `migration'
to more inclusive banking holds important consequences for access
to, and use of, other mainstream financial products, as current
account ownership is recognised as the gateway to inclusion (Office
of Fair Trading, 1999). Many women who possess basic bank accounts
and who due to caring responsibilities may not be formally engaged
in the labour market or may work part-time, in insecure positions
for the minimum wage subject to what benefit guidelines permit,
may lack attributes required to progress to more inclusive banking
products.
2.3.ii The gendered nature of basic bank
account ownership and the opportunity to progress to more fully
featured banking products or wider financial products is important
given the traditional and highly gendered responsibility for household
budget management normally lies with women, particularly within
low-income households, whether single adult or couple households
(Goode et al., 1998; Midgley 2004). As such the ability
to access other financial products, such as affordable credit,
even on a basic level, is important for the welfare of other household
members.
RECOMMENDATION:
That consideration to increase women's access
to a wider suite of financial products to assist their participation
and inclusion within the financial mainstream.
3. RAISING ACCESS
TO AFFORDABLE
CREDIT BY
WOMEN
3.1 The research revealed that regardless
of household type most debt commitments were undertaken on a sole
basis, with higher proportions of women taking on debt commitments.
3.1.i Women in more vulnerable financial
positions, including those within couple households, frequently
used more informal and costly forms of credit (such as, catalogues,
door to door credit) to meet what were often short-term needs.
This continued traditional gender roles and patterns of women's
household budgeting and short-term credit use, particularly in
areas such as rural coalfields where incomes had been historically
variable.
3.1.ii The decision to use credit was made
on the availability of credit, particularly the convenience of
door to door sources, and the cost to their budgeting cycle for
the household. Knowledge of the "cost" involved in using
the more informal credit sources was highly evident, yet women
did not have
RECOMMENDATION:
Consideration be given to enable affordable
and regulated credit to be offered on a "basic" level
by or through mainstream financial institutions for small short-term
loans.
4. FINANCIAL
CAPABILITY IS
MORE OFTEN
POSSESSED THAN
RESOURCES
4.1 Many women in low-income households
with responsibility for household budgeting exhibited great capacity
for budgeting, utilising a small and finite amount of money to
provide the basic necessities for themselves and others. Skills
and practices are frequently picked up from observation, if not
from direct introduction, from mothers' behaviour and expectation
of female responsibility for household budgeting within low-income
households where traditional gender roles prevail.
4.2 Due to the dependence placed on women's
budgeting skills women are often ready to recognise financial
difficulty and take actions to remedy this, for example approaching
creditors to develop a debt repayment schedule rather than risk
losing that credit source. Thus, knowledge of providers and availability
of financial advice, whether debt management or greater familiarity
with mainstream services providers is of continuing importance.
4.3 In many cases it is not limited financial
capacity or budgeting skills that affects women's financial inclusion
but rather the limited financial resources that they possess in
order for "successful" budgeting, the level of state
support being a different but still related matter. As a consequence
policy developments aimed at engaging with individuals responsible
for meeting their household's needs should recognise the capacities
of those financially marginalized rather than assuming limited
financial inclusion equates to limited financial capacity.
RECOMMENDATION:
That the government, FSA and other institutions
recognise the in many instances it is the limited resources of
women that affect their financial marginalisation and in turn
their capacity to participate more inclusively within the financial
system, rather than lack of financial capability.
5. RECOGNITION
OF THE
GENDERED OPPORTUNITIES
AND INCENTIVES
FOR SAVING
5.1 The research revealed that most individuals,
regardless of level of financial inclusion, did not actively save,
even though savings accounts may have been possessed.
5.2 Individuals who were in difficult or
vulnerable financial situations did not save.
5.3 Limited incentives for saving were found
based on the current structure of means tested welfare support.
5.4 A gendered variation in savings behaviour
was observed which holds potential implications for individual's
financial strategies.
5.4.i Many women did not actively save from
their current income. Moreover, those women that possessed saving
accounts (regardless of whether they were actively saving or not,
or their household type) did not save with a long-term strategy
or time horizon in mind, instead they were more concerned with
saving for shorter-term needs, often family or household related.
This holds important consequences for a general inequality between
women and men with regard to long-term financial security based
on their saving motivations but also the reproduction of perceived
financial responsibilities, which limits women's role to spending
on children/immediate household needs (as mentioned above).
5.4.ii The short-term saving focus was often
more extreme in the instances of women who were lone-parents and
possessing low-incomes. Despite aspirations for themselves, they
also stated that their futures were limited and so focused their
financial strategies to benefit their children.
5.4.iii The foregoing suggests the potential
that a national rollout of the savings gateway may have for both
enabling longer term financial strategies to be contemplated and
encouraged, however appropriate levels will have to be set to
encourage active savings behaviour so returns can be anticipated.
5.5 However, we urge government to refrain
from having compulsion on low-income earners to save for the future,
when they have urgent spending priorities in the present.
RECOMMENDATION:
That the government recognise a desire to save
but that in many instances women, and particularly those on low-incomes,
face competing pressures for the use of limited resources, often
based on short-term welfare decisions of the household.
6. CONCLUSION:
The importance of recognising and emphasising
women's financial inclusion has been highlighted. Greater attention
should be paid to encouraging greater participation of women in
the financial mainstream: horizontally through greater access
to affordable credit and other products and vertically through
encouraging individual transitions to more inclusive current accounts
and encouraging financial institutions to assist in making these
transitions possible. This has important implications for the
wider welfare of those who are dependent on women's financial
responsibilities and actions.
January 2006
REFERENCES:
Barnes M, et al. (2004) Families and
Children in Britain: Findings from the 2002 Families and Children
Study. Department for Work and Pensions, London.
Goode J, Callender C and Lister R (1998) Purse
or wallet? Gender inequalities and income distribution within
families on benefits. Policy Studies Institute/Joseph Rowntree
Foundation, London.
Graham M and Warren R (2001) Women and personal
finance: the reality of the gender gap, Financial Services
Authority, Consumer Research Report No. 7. FSA, London.
Middleton S (2002) How People on Low Incomes
Manage Their Finances. ESRC, Swindon.
Midgley JL (2005) Financial inclusion, universal
banking and post offices in Britain, Area 37(3): 277-285.
Midgley JL (2004) The dynamics of access
to the financial system: a study of rural women in the north of
England. Unpublished PhD thesis, University of Newcastle upon
Tyne.
Office of Fair Trading (1999) Vulnerable
consumers and financial services: The report of the Director
General's Inquiry, Report No.255. OFT, London.
Rosenblatt and Rake K (2003) Gender and Poverty.
Fawcett Society, London.
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