National Australia Bank (NAB) and The Centre for Social Impact (CSI) today released the second annual “Financial Exclusion in Australia” report, which found that just under three million, or 17.2% of Australians, are now either fully or severely financially excluded from affordable and appropriate financial services.
Funded by NAB and conducted by CSI, the study measures exclusion based on lack of access to appropriate and affordable financial services and products — the key services and products being a transaction account, general insurance and a moderate amount of credit.
The NAB/CSI Financial Exclusion Indicator is the largest review of its kind worldwide. Activity focused on a lengthy face-to-face interview with 50,000 Australians, and a ‘re-contact’ telephone survey with 661 identified in 2010 as financially excluded.
Full financial exclusion refers to an inability to access credit, basic insurance and a transaction account. Severe exclusion is an inability to access any one of the three.
The report includes heat maps which present the geographical spread of financial exclusion across 58 regions.
Factors leading to financial exclusion
Cost – The cost of motor vehicle and home insurance has increased at a rate higher than inflation, bringing the average premium up to $898 (compared to $855 last year). When combined with the annual cost of a credit card ($808 average) and basic bank account ($88), this represents 15% of the income for 12.7% of the country’s population.
Demographics – Indigenous Australians, young adult Australians, and those living in low-income outer suburban and regional areas are cited as some of the most vulnerable to financial exclusion. 43.1% of Aboriginal or Torres Straight Islanders (ATSI) are considered financially excluded. 49.2% of 18-24 year olds are now considered financially excluded.
Language & Documents – Communication difficulties and a lack of appropriate identification documentation were also cited as key barriers to credit. Most study respondents seeking credit did so to cover basic household necessities, such as food, rent and utility bills.
NAB Group CEO Cameron Clyne, says the increasing number of Australians excluded from affordable and appropriate financial services is alarming and unacceptable.
“In a country with a banking system and economy as strong as ours, it is simply unacceptable that nearly three million Australians are financially excluded from affordable financial services.
“NAB has led the industry in making banking more accessible and affordable for all Australians. We believe that as a major contributor to the Australian economy we have a significant role to play in ensuring that all sections of the community and economy are financially supported; however the research demonstrates that more needs to be done.
“Financial inclusion has an obvious and invaluable social impact, but there is also a very strong economic case, like greater workforce participation, reduced welfare and health costs, that validate and confirm its importance,” he said. “We are calling on all governments, community groups and other corporates to unite and help reduce the extent of financial exclusion in Australia.”
NAB has one of the largest microfinance programs in the developed world and has committed more than $130-million into microfinance initiatives. NAB supports a range of microfinance initiatives for financially excluded Australians, including the No Interest Loan Scheme (NILS), StepUP Loans, AddsUP Matched Savings Program, NAB Microenterprise Loans and a range of concessional bank accounts. NAB anticipates its Microfinance program will support over 20,000 low or no-interest loans (NILS) this year alone.
CSI Lead Researcher and Author, Chris Connolly, says this year’s study gives an even greater insight into the extent of financial exclusion in Australia.
“This year we have delved deeper into key topics, such as the use of credit and the experiences of Indigenous consumers. We also provide a geographic analysis of financial exclusion data.
“The report also shows that the list of current credit needs of consumers facing financial exclusion is dominated by regular expenses, such as food, rent and utility payments. ” he said.