New report: Global link between financial exclusion and fringe lending

02 May 2014

Low income people in economies around the world experience higher rates of financial exclusion as a result of a lack of regulation of the fringe lending sector, a new report released today shows.

The report, A Global Snapshot of Financial Exclusion, commissioned by NAB and conducted by the Centre for Social Impact, shows that countries that have a less regulated approach to credit experience higher levels of financial exclusion.

The report measures the level of financial exclusion of 23 countries, including Australia. The countries cover a sizeable proportion of the world’s population and economic activity, and have varied economic development and political systems.

Australia performs well against its peers in all aspects of financial exclusion, except access to credit where it ranks seventh overall.

Director of Research at the Centre for Social Impact, Associate Professor Kristy Muir, said that access to financial products does not always align with just wealth or economic development, with some countries outperforming or underperforming their economic peers.

“There is an emerging trend of access to initiatives such as microfinance improving levels of financial inclusion. Bangladesh, a developing economy, for example, is in the top three countries that were examined when it comes to access to credit. This is likely to have been driven largely by its microfinance initiatives.

“In contrast, Italy and Pakistan were among the worst of the countries examined in relation to access to credit, showing how difficult this issue has become across a wide variety of economies,” she said.

NAB Group Executive, Personal Banking, Gavin Slater, highlighted Australia’s overall positive performance but encouraged continued vigilance to ensure low income Australians are not excluded from mainstream banking.

“Australia’s results are encouraging and are testament to previous regulation reforms in this area, however it is concerning that we fall down the charts when it comes to credit. We know that not having access to a small amount of credit can put people at risk of turning to fringe lenders.

“We are proud to have provided $130 million in capital to Good Shepherd Microfinance to support lending to low income Australians, resulting in more than 90,000 microfinance loans to date. Together, we have set a goal of improving financial inclusion for one million Australians on low incomes by 2018,” he said.

The report follows on from the release earlier this week of the annual Measuring Financial Exclusion in Australia report, commissioned by NAB and conducted by the Centre for Social Impact, found that more than three million adult Australians don’t have access to a moderate amount of credit, a basic transaction account or don’t have general insurance.

To view a copy of both reports, please visit nab.com.au/microfinance

For further information:

Media

Eliza Anderson

M: +61 (0) 477 725 498