26th April 2006
Return of the People’s Bank
An excellent report on financial exclusion by the Welsh Consumer Council from November last year showed that an incredible one in seven people in Wales don’t even have a bank account and more than half don’t save regularly. The problem is much deeper in Wales than the rest of the UK with our historically higher levels of deprivation.
In its policy recommendation the report concentrates on improving financial literacy – and we all could certainly benefit from a little more of that. But it’s often not so much a question of people excluding themselves through ignorance but more a case of the financial instituions failing to target the needs of low-income individuals in their marketing strategies and product design.
The needs of the financially excluded are fairly clear according to earlier research by the “Joseph Rowntree Foundation”:http://tinyurl.com/gq233
“For day-to-day money management they required a simple account which would allow them to retain tight control over their money. It should offer basic money transfer facilities, including a facility for spreading the cost of bills. It would offer no credit facilities but have a ‘buffer zone’ to allow flexibility. Ideally, it should also be designed so that access is not dependent on credit scoring.”
There may just be a solution on hand from the early decades of the last century: the municipal bank. First created in Birmingham in 1916 and popularised by the Independent Labour Party and the Co-operative Movement as a means of promoting financial independence among the working class, there are six municipal banks currently in existence, though none currently in Wales. But we do have the power to create them under the Banking Act 1987. A municipal bank is essentially a savings bank linked to a local authority which allows you to make deposits, pay bills etc – but without credit facilities, though these can be provided by an associated credit union.
Perhaps it’s time to dust down those early socialist banners and build the people’s bank in council estates up and down Wales.
