New report shows young Australians locked out of mainstream finance
A significant number of young and working Australians are unable to access mainstream finance according to a new report issued today by NAB.
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.
The report also found that of the three million financially excluded Australians, 35 per cent are young people aged 18 to 24 and more than 40 per cent are in employment. In 2013 more people accessed transaction accounts and general insurance than in previous years but fewer people were able to access a moderate amount of credit.
NAB Group Executive, Personal Banking, Gavin Slater said that greater transparency of the fringe lending sector is required in order to fully understand why people, particularly employed Australians, aren’t accessing mainstream credit products. “There are many people in our community living pay cheque to pay cheque, without a safety net to help them manage unexpected expenses. When they’re faced with emergencies, such as the car they rely on to get to work breaking down, they do not have any means to repair or replace it. “Those excluded from mainstream credit are often forced to turn to fringe lenders and can find it difficult to manage basic payments, getting caught in a cycle of debt,” he said.
Good Shepherd Microfinance CEO, Adam Mooney said that there is a strong economic case for greater investment in microfinance in Australia. While existing programs assist the most vulnerable to move towards financial stability and resilience, investment and innovation is required to reach more people. “Microfinance, as a safe alternative to fringe lending, is enabling people to achieve substantial social and economic improvements. We know that four out of five people stopped using fringe lenders after receiving a no interest loan from our microfinance providers. “This issue is not going away and the Financial Services Inquiry provides a unique opportunity to understand how many people are accessing this type of lending and how we can work together with industry and government to provide fair and affordable alternatives,” he said.
NAB has been measuring financial exclusion for four years now and in that time the number of financially excluded adults has grown to three million. The total number of people financially excluded in 2013 was 3,038,451 (16.9 percent of the adult population), comprised of:
• 179,790 (1.1 percent) adults who were fully excluded; meaning they had no financial services products.
• 2,858,661 (15.8 percent) adults who were severely excluded; meaning they only had one financial services product.
NAB and Good Shepherd Microfinance have partnered together since 2003 to address financial exclusion, providing more than 90,000 microfinance loans to vulnerable Australians.
NAB has provided Good Shepherd Microfinance with $130 million in capital to support lending to people on low incomes. Together, they have set a goal with Good Shepherd Microfinance of improving financial inclusion for one million people on low incomes by 2018. To view a copy of the report, please visit nab.com.au/microfinance