Campaigning for a Fair Banking Act to tackle financial exclusion.
Funding snapshot
- Programme area:
- Ending the poverty premium
- Amount:
- £120,000
- Length of grant:
- 2024-2026
The challenge
14 million people across the UK have less than £100 in savings. This means that sudden unexpected costs or financial shocks can be devastating, and push them into destitution.
But many people on low-incomes are excluded from the financial services we all rely on day to day, and are likely to be turned down for loans by high street banks. Even before the cost-of-living crisis, more than three million people were forced to turn to very high cost providers like pay-day lenders, where interest rates can be over 1,000%. This often traps people in a cycle of poverty.
The project
Finance Innovation Lab works to help create a fairer finance system, that works for both people and planet. We’re funding the team to coordinate the Fair Banking for All Campaign, which will help reduce the poverty premium associated with unaffordable credit.
The campaign brings together a number of organisations, such as Rooted Finance, Purple Shoots and Fair by Design. People with lived experience of financial exclusion also play a key role in shaping the coalition’s strategy and work.
Our funding will help the team continue its work, which includes:
- Campaigning for the government to deliver a Fair Banking Act which would benefit millions of low-income households by improving access to affordable credit.
- Building and supporting a cohort of people with lived experience of financial exclusion so that they have the skills, confidence and opportunities to share their expertise and perspectives with policy makers.
The campaign for a Fair Banking Act is inspired by the Community Reinvestment Act in the United States, which has helped significantly increase bank funding of financial institutions such as credit unions. As a result, in 2020, US banks provided $150bn to low and moderate income communities.
The act would require banking institutions to disclose their performance on financial exclusion, and would create a clear rating system that shows which banks are doing well and which need to improve.
Research has found it could lead to a thirteen-fold increase in the level of annual lending by purpose-driven finance institutions, from an estimated £250m per year now up to a £3.3bn per year with a Fair Banking Act in place. In turn this would reduce the number of people using high cost lenders and being pushed into a spiral of deeper and deeper poverty.
