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Monday, March 22, 1999 Published at 14:55 GMT

Business: Your Money

'1.5 million' lack access to financial services

Millions of low income households lack access to financial services

A substantial part of the UK population lack any access to financial services.

Research published by the Joseph Rowntree Foundation found that one in 14 households made no use of any financial services such as bank accounts or insurance.

BBC Economics Correspondent Ed Crooks reports on the reality behind the report
In addition, another 4.4 million households only use one or two financial services.

The report warns the problems of the "financially excluded" households will intensify as the rest of the public increases its use of savings, investment, banking and insurance products.

Barriers to use

The groups most at risk of financial exclusion include people on low incomes, benefit claimants, and older pensioners who left school before the age of 16. Households of Pakistani and Bangladeshi origin were also likely to make very little use of financial products.

The poor may have been put off the use of financial services by poor information, religious objections, or mistrust of financial institutions.

But the report's author, Elaine Kempson, says that government and the private sector must take action.

"Knowledge about financial products is remarkably low among households that are without them. This is compounded by marketing policies which reinforce the belief that financial services are not for the poor .. low income households continue to be constrained in their access to financial products, reinforcing their risks of long-term social exclusion," she said.

Key steps needed

The report urges the government to act against the three types of financial exclusion it finds: price exclusion (where the product is too expensive); marketing exclusion (where more affluent customers are targeted); and condition exclusion (where the terms and conditions are inappropriate for poor people).

It suggests:

  • A simple banking account that would allow tight control of money with a small buffer zone;

  • A simple, regular saving product that could be flexible enough for times of hardship;

  • Affordable home contents insurance;

  • Affordable short-term credit with small, fixed-interest loans.

The research was carried out by the University of Bristol's Personal Finance Research Centre, using small group interviews and national survey data.

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