Supporting Financial Education and Inclusion

The Central Bank of Ireland’s Financial System Conference took place in Dublin this week on the 2nd and 3rd November 2022 on the theme of Supporting the Economy, Delivering for the Consumer. Trust in the banking system, the importance of financial inclusion and how best to deliver on financial education or literacy were threads that were woven through the discussions. 

Financial Inclusion

Access to financial services is key to inclusion in society. Money and finance impact every aspect of our modern lives. Financial exclusion is not just about access to bank accounts but access to reasonable, affordable credit that takes account of the financial position of the consumer while cognisant of the need for people on low incomes to meet contingency expenditures without resorting to high-cost credit, ‘pay day loans’ and ‘home credit companies’ which can charge APRs of up to 287 per cent. Illegal moneylenders are also in operation. Credit unions have traditionally provided low-cost credit to members within their ‘common bond’ area charged at 1 per cent interest per month, or 12 per cent per annum. These loans are provided as an alternative to high-cost credit from legal and illegal moneylenders for families having difficulties saving for life events such as a child’s communion, home improvements or the unexpected breakdown of an essential appliance.

In 2018, almost four in ten people (37.3 per cent of the population) reported being unable to face an unexpected financial expense.[1] The pandemic closely followed by a sharp rise in everyday costs has exacerbated this with many who found it hard to manage household expenses before finding it even harder now. [2] The ‘It Makes Sense’ loan or Personal Micro Credit Loan, introduced in 2016 and operated through participating credit unions, is already in existence for borrowers with impaired credit. This allows a member of a participating credit union to access a moderate loan, of between €100 and €2,000, with payments deducted at source from their social welfare payments via the Household Budget Scheme. Not all credit unions provide this loan, with some citing regulatory and macroprudential lending issues and others providing a similar product to existing customers. The ‘It Makes Sense’ loan is an interDepartmental initiative and, as such, should be subject to monitoring and review, focused on consumer protection and financial inclusion.

Trust 

A key concern about the move towards digital banking is safety and security. Reported cases of fraud, mostly cases of unauthorised transactions and attempts to obtain personal or banking information online or by phone, more than doubled to 16,929 by the end of 2021. [5] As more and more make the move to online and digital money services, especially those who may be unused to using these services, effective education and fraud prevention measure must be enhanced. However, it must be noted that there is still a commitment to ensuring access to cash across the country with the traditional security risks attached. 

Financial Skills

While there are several organisations available to provide support for those in financial difficulties, there is not enough emphasis on prevention and money management education. Discussions at the Central Bank of Ireland Civil Society Roundtable in November 2019, acknowledged that further investment in the area of financial literacy was required, with agreement that this should be incorporated into mainstream education.[3] MABS, the State’s Money Advice and Budgeting Service, did provide money management education as part of its community supports, however, the future of the support is unclear given the restructure of the MABS companies and the replacement of the MABS National Development Company with a National Support Company. More needs to be done to develop this skill from an early age, with classes in late primary and secondary schools. In light of the severity of its impact, Social Justice Ireland welcomed the inclusion of financial literacy in the Roadmap for Social Inclusion 2020-2025 and urges Government to build a module on financial literacy in to the primary and secondary curricula. It is incumbent on Government to track levels of financial exclusion and to build and monitor policies and practices aimed at eliminating it in its entirety by 2025. It is important also to be clear what money management education is trying to achieve, the aim is not simply providing information about buying the correct financial products. This monitoring must also be agile enough to take account of changing demographics. With both the publication of the White Paper to End Direct Provision and to Establish a New International Protection Support Service [4] committing to facilitating the opening of bank accounts for International Protection applicants - the Basic Payment Account -and the arrival of thousands of households from the Ukraine, the spotlight is once again on the importance of financial inclusion.
 

[1] Eurostat Database [ilc_mdes05]

[2] Society of St. Vincent De Paul. (2022). “The Cost of Surviving” An analysis of the financial impact of Covid-19 and the rising cost of living. Dublin: SVP.

[3] 5 https://www.centralbank.ie/events/event-detail/2019/11/29/default-calen…

[4] https://assets.gov.ie/124757/ef0c3059-b117-4bfa-a2df-8213bb6a63db.pdf

[5] https://www.cso.ie/en/csolatestnews/pressreleases/2022pressreleases/ pressstatementrecordedcrimequarter42021/