Mainstream banks are closing branches across the country – with Lloyds the most recent example. Access to banking services is a problem for many communities across the UK, but some sections of society face financial exclusion more systematically than others.
Recently our friends at Fair 4 All Finance released a new report highlighting the greater financial exclusion faced by people from minority ethnic groups. Ahead of Racial Justice Sunday (11 February), we call for greater support for measures to tackle this ethnicity wealth gap.
Justice, equity, equality: what is the goal of racial justice? Over and over again, anti-racist and anti-colonial leaders have insisted that liberation without economic justice is incomplete. King, Mandela et al were not content with equality before the law, knowing that unless economic inequality was overcome, racial division and domination would remain.
Like slavery and apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings.Nelson Mandela
When analysing the data around ethnicity and poverty, it is important to recognise variance and nuance. Factors such as geography, gender, education, class and more can combine with ethnicity as explanatory factors, and different ethnicities within the ‘minority’ category will have different experiences.
Generally speaking however, it is fair to say that people from minority ethnic groups are more likely to experience poverty in the UK. According to the Runnymede Trust, those in minority ethnic groups are 2.5 times more likely to be in relative poverty (individuals who have income below 60% of median) and 2.2 times more likely to live in deep poverty (an income more than 50% below the relative poverty line).
If we believe that all humans are made in the image of God, and that all are equal and welcome to take part in God’s kingdom, then trends like this should concern us. We must seek both racial and economic justice and understand the causes behind them if we are to shape a fairer, greener world.
One key factor that could explain differences across ethnicity is access to credit. Debt Justice has shown that those from minority ethnic backgrounds are nearly twice as likely to be in serious debt as white people, with experiences of discrimination from traditional banks driving people towards predatory high-interest lenders.
The main impact of this is to trap people in paralysing debt, keeping people in poverty for longer, but also reducing people’s access to ‘good’ debt necessary for obtaining a mortgage, starting a business or improving your credit score. Replicated across a population, these trends help explain some of the systemic economic disadvantage.
In response, Fair 4 All Finance has produced the report ‘Levelling the Playing Field: Building inclusive access to financial services for people from minority ethnic groups’. They assess the experiences of exclusion from mainstream financial services, highlighting experiences of discrimination, disparities in need versus use,1 lack of trust, a uniform approach, language needs, and poor communication over decisions as reasons for financial exclusion.
Noting the new Consumer Duty regulation from the Financial Conduct Authority in July 2023, they make a range of calls to action for financial firms to improve outcomes for minority ethnic groups, including transparent decision making, improved cultural representation and community engagement, and regulation.
We don’t just need the big lenders to become more inclusive: we should also encourage smaller, community-based lenders that are already serving the needs of excluded groups. One such institution we are proud to support is the Pentecostal Credit Union. Elaine Bowes, who shared more about their work at our Money Talks event, said:
“98% of our members are Black African or Caribbean. Our objective has always been to economically empower our communities as we believe that the route to true equality is an economic one. So in this regard we welcome this report from Fair 4 All Finance, however the headline findings of this report
isare old news. But we are heartened by the key takeaway:
‘’It doesn’t have to be like this – there are clear solutions and practical ways to address discrimination and improve financial wellbeing. This is an opportunity for the UK financial service providers to accelerate work on improving financial inclusion.’’Elaine Bowes
The JustMoney Movement is part of the Fair Banking for All campaign, which, among other reforms, would support these alternative lending institutions to grow, opening more avenues to good credit for those who may be excluded by mainstream services.
Financial services should be equally available to all, regardless of background. The more we break down the barriers to financial inclusion, the further we can go to addressing systemic economic disadvantage for minority ethnic groups. It may not solve inequality in one stroke, but there are a realistic set of reforms at hand that can move us another step towards racial justice.
Read the Fair 4 All Finance report here, and support the Fair Banking for All campaign here – you could contact your MP in the run up to Racial Justice Sunday, to let them know you’re marking this occasion by raising awareness of this issue and ask them what measures they are supporting to tackle financial exclusion.
PS if you’re interested in how ethnicity plays out in the economy, you might want to keep an eye on a new Racial Equity Scorecard which our allies at EIRIS Foundation have helped to research. It aims to help investors consider racial justice in their investment decisions.