Financial exclusion is in their crosshairs
◆ Emma Newlands on an initiative which aims to use untapped resource that could help one million Scots stuck in poverty
It is seeking the eradication of financial exclusion, looking to replace it by the normalised provision of “easy access to fair loans, savings, insurance products and financial wellbeing tools for everyone – and the ability to acquire help when needed”. And now, the Financial Inclusion for Scotland (FIFS) initiative – which is fusing the powers of a band of policymakers and professionals from the private, charity and not-for-profit sectors north of the Border, led by Social Investment Scotland – has laid out measures it would like to see implemented with no delay to expedite the achieving of such goals.
The venture is calling on the Scottish Government to urgently prioritise the allocation of dormant assets towards combating financial exclusion, and help the one million-plus Scots that have been calculated to be living in poverty.
It is also calling for the introduction of a Fair Banking Act for the UK, driven by collaboration between relevant organisations.
The recommendations form part of what is billed as Scotland’s first collaborative Financial Inclusion Strategy, aimed at enhancing the financial wellbeing of Scotland’s most vulnerable populations, and enabling access to mainstream financial services in the absence of traditional credit scores.
The pressing need to tackle financial exclusion is, says FIFS, “starkly” illustrated by findings from the Financial Conduct Authority’s (FCA) Financial Lives Survey, which not only revealed that in excess of one million people in Scotland live in poverty, but also that more than a third of the population reported struggling financially.
FIFS details how its newly unveiled two-year strategy “underlines the transformative potential” of dormant assets – financial products that have not been touched for at least 15 years. The Dormant Assets Scheme (DAS), which has unlocked £982 million over the last decade for social and environmental initiatives across the UK, was expanded last year to include pensions and insurance, for example.
Such an expanded remit presents an opportunity to direct a proportion of these assets, which in Scotland are currently used to fund youth projects, towards financial inclusion initiatives, according to FIFS, which proposes creating a £20m First Loss Fund that would be “instrumental” in bolstering community lenders and expanding the availability of affordable credit.
“With evidence suggesting a significant proportion of Scots are either unaware of cheaper credit options or are unable to access them, FIFS is also pressing for accelerated digital transformation in the
We have a unique opportunity to support financial inclusion in Scotland FIFS chair Stephen Pearson
credit sector,” it states. Citizens Advice Scotland said in March that a worryingly high number of Scots had turned to commercial credit, like credit cards or loans, to cover essential bills this year, with 16 per cent – equivalent to about 737,000 people – having done so to pay for food.
FIFS chair Stephen Pearson has now said: “Directing dormant assets towards financial inclusion is not merely a funding issue; it's about laying the foundation for a fairer financial future for all Scots. With the expansion of the [DAS] potentially releasing a further £880m for good causes, we have a unique opportunity to support financial inclusion in Scotland – and drive significant change.”
Looking ahead two years, FIFS says the strategy emphasises the importance of collaboration to develop and implement effective and sustainable financial inclusion solutions, and against this backdrop it is calling for the introduction of a Fair Banking Act for the UK, saying this would mirror legislation such as the US Community Reinvestment Act, to ensure financial institutions serve everyone. “Such legislation would require banks and building societies to disclose the extent to which they are meeting the needs of everyone in the diverse communities they service, focusing particularly on those who are financially excluded.”
Pearson comments: “This strategy is not just about alleviating immediate financial stress – but about building a resilient financial ecosystem that supports all Scots, particularly the most
vulnerable. Our vision is for easy access to fair loans, savings, insurance products, and financial wellbeing tools for everyone – and the ability to acquire help when needed.”
But no organisation is an island. “At our launch event, then Deputy First Minister John Swinney said he ‘would leave no stone unturned to help financial inclusion in Scotland’. To achieve success, we need everyone from policymakers and banks to [Community Development Finance Institutions] and community groups to be aligned with this ambition.”
FIFS was formed in 2022, with one of its members trade body Scottish Financial Enterprise, which itself has clearly outlined financial inclusion as a major priority. SFE chief executive Sandy Begbie tells The Scotsman: “Our sector growth strategy, launched late last year, outlines how financial services can deliver sustainable, inclusive economic growth for Scotland, and we are determined to make sure that every person in Scotland feels the benefits.”
FCA boss Nikhil Rathi said last year at an event in Glasgow that the “ultimate example of financial exclusion is not having a bank account, the most unassuming but most essential financial service”, and noted that 3 per cent of Scots fell into this category, higher than the UK’S. 2.1 per cent
Begbie also states: “Greater financial inclusion is essential if we want to have a stronger, fairer and more inclusive economy and we are proud to have worked closely with [FIFS] to create this collaborative strategy.”