Improving access to financial services for UK low-income households
Submitting InstitutionUniversity of Bristol
Unit of AssessmentGeography, Environmental Studies and Archaeology
Summary Impact TypeEconomic
Research Subject Area(s)
Economics: Applied Economics
Studies In Human Society: Policy and Administration
Summary of the impact
The Personal Finance Research Centre (PFRC) at the University of Bristol
conducted a major research programme that shaped UK financial inclusion
policy and informed research and policy internationally. PFRC carried out
seminal research to measure the level and nature of financial exclusion in
the UK. Subsequent studies looked at ways of improving access to banking,
credit, insurance and savings that could reduce the `poverty premium' paid
by low-income households. PFRC's research directly informed UK central
government policy which resulted in the successful achievement of a shared
government-banking industry target to halve the number of adults in
households without a bank account (from two million to 890,000) and
funding to extend affordable credit union loans and savings products to an
additional one million low-income people.
Nature of research insights/findings
Research in the early 1990s considered financial exclusion primarily as a
geographical phenomenon related to bank and building society branches. In
a report published in 1999, PFRC established financial exclusion as a more
complex phenomenon, grounded in consumer experience, with geographical
issues playing only one part in explaining patterns of exclusion. For the
first time, the PFRC research described the number and type of households
that were excluded from mainstream financial services (not just banking).
It showed that households particularly at risk of exclusion were those on
low incomes, social tenants, single parents, and certain black and
minority ethnic groups. It also identified the costs and other
consequences of exclusion for those who made little or no use of
mainstream financial services .
In 2001, PFRC developed a new qualitative research method (called
community select committees) to gauge the views of financially excluded
people living in a Bristol regeneration area about initiatives to promote
financial inclusion. This novel approach saw residents hearing from and
then cross-examining representatives from the financial services industry
and civil society organisations. The research showed that residents would
welcome a `one-stop shop' facility in their local community where they
could access appropriate financial services alongside advice and
PFRC argued that access to affordable credit should be part of the
financial inclusion policy agenda, because of the very high cost that
people on low incomes have to pay to borrow. In 2005, the PFRC conducted
an in-depth empirical examination of the challenges to delivering
affordable credit to low-income households, from the perspective of
lenders and borrowers . This demonstrated the potential role for
larger, professionally run credit unions and regional community-based loan
schemes. Later research, published in 2009, brought together consultants
and financial inclusion practitioners to examine the feasibility of a
not-for-profit home credit service . Notably, this research found that,
even with substantial government subsidy, the charge for a non-profit home
credit service would be in excess of 100% APR. Because of this, there was
very little appetite among not-for-profit lenders to offer such a service.
In 2010, PFRC undertook an impact evaluation of the Department for Work
& Pensions (DWP) Growth Fund, a scheme that aimed to expand the
capacity of credit unions and other not-for-profit lenders to offer
low-income borrowers an alternative to high-cost credit. It found that the
Growth Fund reduced the interest paid by borrowers, estimating total
interest savings to financially excluded individuals in deprived
communities of between £119.1m and £135.1m .
PFRC research also highlighted saving as an important (but overlooked)
aspect of financial inclusion, that could provide low-income households
with a financial cushion and potentially avert the use of high-cost
credit. In 2002, HM Treasury launched a pilot matched savings scheme
(Saving Gateway) targeted at low-income people of working age. In 2004/05,
PFRC conducted a mixed-methods, quasi-experimental impact evaluation of
the pilot, which demonstrated that well-targeted, clear and simple
incentives were effective at encouraging people on lower incomes to save
What the underpinning research produced
PFRC's financial exclusion research programme has produced more than twenty
research reports, funded by government, regulatory bodies, charities and
private organisations. Many of these reports have focussed on specific
aspects of financial exclusion (e.g. access to banking, affordable credit
Kempson, E (1998-1999) Understanding and combating financial exclusion,
Joseph Rowntree Foundation, £42,890.
Kempson, E (1999-2000) Tackling financial exclusion: an area-based
approach, Joseph Rowntree Foundation, £43,127.
Kempson, E (2002-2005) The evaluation of the Community Finance and
Learning Initiative and the Saving Gateway, HM Treasury,
Kempson, E (2003-2005) Affordable credit for low-income households,
Joseph Rowntree Foundation, £45,717.
Kempson, E (2007-2008) Not-for-profit doorstep lending, Joseph
Rowntree Foundation, £51,000. Collard S (2010-2011) Evaluation of the
DWP Growth Fund, HM Treasury, £57,930
The research projects were carried out between 1998 and 2011.
The research was carried out between 1998 and 2011 by the Personal Finance
Research Centre, University of Bristol, led by Elaine Kempson (appointed
1998) Sharon Collard (appointed 1998) and Andrea Finney (appointed 2007).
References to the research
*all citation values from Google Scholar as of September 18th,
Details of the impact
Nature of impact
In the late 1990s, the UK government recognised financial exclusion as an
important aspect of social exclusion. PFRC research showed that a
significant minority of people in the UK — often the most vulnerable
people in our society — were outside mainstream financial services and
exclusion imposed real costs on them. Households that operate solely on a
cash budget are: i) unable to make savings via direct debits on utility
bills, ii) more vulnerable to loss or theft if they don't have home
contents insurance, and iii) far more likely to use the sub-prime credit
market — paying interest many times that of a standard personal loan.
PFRC's research described the number and types of UK households that were
excluded or self-excluded from mainstream financial services and showed that
financial exclusion extended beyond access to bank and building society
branches to other aspects of people's financial lives such as credit and
saving. This was an important step forward for developing comprehensive
financial inclusion policy and interventions to improve financial access.
Low-income households benefit from introduction of basic bank accounts
PFRC's research set out an empirically-based blueprint for a bank account
better suited to the needs of people on low incomes than a traditional
current account . Evidence of this blueprint (notably no credit
facility but ideally a small `buffer zone') can be seen in the basic bank
accounts that were introduced by banks and building societies from 2002-03
and are still available today [a].
Basic bank accounts were instrumental in bringing more people into
banking. The proportion of low-income households without a bank account
dropped from 20-25% in the late 1990s, to 8% in 2002/03 and 3% in 2010/11
In a piece of work commissioned by the Financial Inclusion Taskforce in
2009, Finney undertook a quantitative analysis of the unbanked using the
Family Resources Survey [c]. This informed changes in how the numbers of
unbanked were calculated and demonstrated that a shared government-banking
industry target for reducing the number of unbanked had been met. In human
terms, this meant that between 2002 and 2009 the number of adults living
in households without access to a bank account fell from two million to
890,000 [d, pg 4].
Low-income households benefit from access to affordable credit
The Department for Works & Pensions (DWP) Growth Fund increased access
to affordable credit through credit unions and other non-profit lenders
between 2006 and 2011. In 2010, PFRC conducted an impact evaluation of
this programme , which led to a feasibility study by the DWP in 2012 to
examine the modernisation and expansion of credit unions [e, pg 7].
In June 2012, DWP announced they would make a further investment of £38
million over the next three years in credit unions, in addition to the £13
million invested in 2011/12. Managed by the main credit union trade
association, the expansion project aims to attract up to one million more
credit union members. Based on estimates produced in the PFRC evaluation,
this credit union expansion could save consumers around £1 billion in loan
In addition, research led by Kempson on the feasibility of a non-profit
home credit service was repeatedly referred to in parliamentary debates on
the Financial Services Bill [f, column 561].
HM Treasury benefits from research in developing national savings
Drawing directly on PFRC's evaluation that showed matched saving to be
effective among the target group of low-income working age households ,
new legislation was drafted to roll out the Saving Gateway scheme. Kempson
was an adviser to HM Treasury on that roll out.
Collard gave oral evidence to the Saving Gateway Accounts Bill Committee
in evidence sessions 27 January-5 February 2009 [g, pg 9], and PFRC
research is cited in the Committee research paper [h, pg 12] and
explanatory notes to the Bill for the House of Commons and the House of
Lords [i, pg 2]. The Bill established a government subsidised savings
scheme for people of working age on low incomes and was passed on 2nd July
2009. From July 2010, the nationwide 'Saving Gateway' scheme was to be
launched, with an estimated 8 million people on low incomes set to benefit
[h, pg 15]. The Coalition Government subsequently cancelled the scheme on
the basis of cost.
The approach developed by PFRC to understand and measure financial
exclusion led directly to similar research in India [j] and Australia [k]
to establish the extent and nature of financial exclusion among their
In 2008, PFRC was the scientific lead and expert partner on a European
Commission study to identify the most effective policy measures to prevent
financial exclusion [l]. In the course of the study, PFRC advised Eurostat
(the statistical office of the European Union) on the design of surveys to
capture financial exclusion in member states. As a direct result of the
study, in February 2009 the European Commission launched a public
consultation on ensuring access to basic bank accounts in Member States
[m]. Following the consultation, in July 2011 the Commission adopted a
Recommendation on access to a basic payment account and more recently in
May 2013 a proposal for a Directive on access to a basic payment account
Sources to corroborate the impact
[a] Money Advice Service (2013) Basic Bank Accounts, Available from
[b] Department for Work and Pensions (2012) Family Resources Survey —
United Kingdom 2010/11. London: Department for Work and Pensions
[c] Finney, A.and Kempson, E. (2009) Regression Analysis of the
Unbanked using the 2006-07 Family Resources Survey. London: HM
[d] Financial Inclusion Taskforce (March 2010) Mainstreaming
financial inclusion: Managing money and access to banking. London:
HM Treasury/Financial Inclusion Taskforce
[e] Purtill, C., Cray, J., and Mitchell, C. (May 2012) DWP Credit
Union Expansion Project: Project Steering Committee Feasibility
Study Report. DWP Credit Union Expansion Project
[f] HC Deb 25 January 2010, vol 504, cols 555-649, Available from
(Accessed 18 September 2013).
[g] House of Commons Library (23 February 2009) Saving Gateway
Accounts Bill: Committee Stage Report. Research paper 09/16
[h] House of Commons Library (9 January 2009) Saving Gateway Accounts
Bill. Research Paper 09/02 www.parliament.uk/documents/commons/lib/research/rp2009/rp09-002.pdf.
[i] Saving Gateway Accounts Bill — Explanatory Notes (26 February 2009)
[HL Bill 25] www.publications.parliament.uk/pa/ld200809/ldbills/025/en/2009025en.pdf.
[j] M Mahadeva (2011) `Poverty of access to financial services and its
alleviation: some lessons to India from the United Kingdom'. In: Journal
of Asian Public Policy, 4 (2) pages 187-200. DOI: 10.1080/17516234.2011.595911.
[k] Connolly, C., Georgouras, M., Hems, L. (2012) Measuring Financial
Exclusion in Australia, Centre for Social Impact, University of New
South Wales. National Australia Bank
[l] European Commission (2008) Financial Services Provision and the
Prevention of Financial Exclusion. Directorate-General for
Employment, Social Affairs and Equal Opportunities Unit E2.
[m] European Commission (August 2013) Financial Inclusion: Commission
launches public consultation on ensuring access to a basic bank account,
(Accessed 18 September 2013).
[n] European Commission (August 2013) Bank accounts: Commission acts to
make bank accounts cheaper, more transparent and accessible to all,
(Accessed 18 September 2013).