Financial Exclusion in Ireland An Explor

Financial Exclusion in Ireland: an exploratory study and policy review
The concept of financial exclusion has emerged as a major international issue as
Research
people increasingly depend on financial products, such as bank accounts, credit
cards and mortgages, to manage their money and plan for the future. Yet, low-
income households are often unable to access or use financial services. For some,
it is a case of not having a bank account (the ‘unbanked’), for others it means using
alternative services that are less suitable and more expensive.
This study examines the nature of financial exclusion in an Irish context from the
perceptions and experiences of low-income consumers. It identifies the reasons
why low-income households do not use financial services and highlights their
unmet needs.
The study also draws on the views of various stakeholders, as well as international
research, to suggest ways to improve the design and delivery of financial services
for low-income consumers, including:
» a national strategy to promote financial inclusion
» easier access to bank accounts
» better design and delivery of basic banking services
» more financial information
» affordable credit and savings products
» further data and research on financial exclusion.
This pioneering study provides a new insight into the usually separate domains Financial Exclusion in Ireland:
of social policy and financial services. As such, it will appeal to those involved in
developing financial and welfare policy, providers of financial services, consumer
advocacy groups and organisations representing low-income households.
an exploratory study
and policy review
ISBN 1-905485-24-7
ISBN-10: 1-905485-24-7
9 781905 485246 ISBN-13: 978-1-905485-24-6 Caroline Corr

Financial Exclusion in Ireland:
An exploratory study and policy review
Caroline Corr
Combat Poverty Agency

First published 2006
By the
Combat Poverty Agency
Bridgewater Centre
Conyngham Road
Islandbridge
Dublin 8
© 2006 Combat Poverty Agency
This study forms part of the Combat Poverty Agency Research series, in which it is number 39.
British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.
ISBN-10: 1-905485-24-7
ISBN-13: 978-1-905485-24-6
Publications and printed matter will be made available, on request, in a range of formats,
including audio tape, large print, Braille and computer disc.
Cover design by Red Dog Design Consultants, Dublin

Typeset by Red Dog Design Consultants, Dublin
Printed in Ireland by Inkspot, Dublin

Contents
List of figures vi
List of tables vi
Foreword vii
Preface viii
Acknowledgements x
List of abbreviations xi
Executive summary xiii
Chapter 1 Introduction 1
1.1 The emergence of financial exclusion 2
1.2 Aims and objectives 4
1.3 Research methodology 5
1.4 Report outline 6
» Part One
Nature and extent of financial exclusion in Ireland
Chapter 2 Understanding financial exclusion 8

2.1 Defining financial exclusion 9
2.2 Dimensions of financial exclusion 10
2.3 People at risk of financial exclusion 13
2.4 Banking 15
2.5 Credit 17
2.6 Savings and other financial services 21
2.7 Manifestations of financial exclusion 22
2.8 Conclusions 25
Chapter 3 Financial exclusion and financial

services in Ireland 26
3.1 Indicators and data sources for financial exclusion 27
3.1.1 Estimates on access to bank accounts 29
3.1.2 Estimates on access to other financial services 33
3.2 Supply-side barriers to financial services in Ireland 37
3.2.1 Banking 37
3.2.2 Credit 38
Financial Exclusion in Ireland: an exploratory study and policy review iii

3.2.3 Savings 42
3.2.4 Other financial services 43
3.3 Conclusions 45
» Part Two
Low-income consumers’ experiences

of financial services in Ireland
Chapter 4 Banking 50
4.1 Take-up of bank accounts 51
4.2 Benefits of having a bank account 52
4.3 Access 53
4.4 Geographical isolation 60
4.5 Technology 62
4.6 Price 65
4.7 Terms and conditions 70
4.8 Self-exclusion 71
4.9 Marketing 72
4.10 Further barriers 73
4.11 Consequences of banking exclusion 73
4.12 Conclusions 75
Chapter 5 Credit 78
5.1 Attitudes towards credit 79
5.2 Banks 79
5.3 Credit unions 82
5.4 Informal networks 86
5.5 Sub-prime credit 87
5.6 Department of Social and Family Affairs 91
5.7 Consequences 92
5.8 Conclusions 92
Chapter 6 Savings and other Financial Services 95

6.1 Savings 96
6.2 Insurance 98
6.3 Bill payment 100
6.4 Conclusions 103
iv Financial Exclusion in Ireland: an exploratory study and policy review

» Part Three
Exploring policy options for low-

income consumers in Ireland
Chapter 7 Policy Responses to Financial Exclusion 106

7.1 Financial exclusion as a public policy issue 107
7.2 Improving access to banking services 109
7.2.1 Anti-money laundering legislation 109
7.2.2 Codes of practice 111
7.2.3 Legislation 112
7.3 Development of basic banking services 114
7.3.1 Basic banking services 114
7.3.2 Universal banking services 116
7.4 Financial advice and education 119
7.5 Affordable credit 122
7.6 Savings 124
7.7 Other financial services 126
7.7.1 Electronic payment of benefits 126
7.7.2 Insurance 127
7.7.3 Addressing over-indebtedness 127
7.7.4 Social finance 128
7.8 Conclusions 129
Chapter 8 Respondents’ Views on Policy Responses 130

8.1 Financial exclusion as a public policy issue 131
8.2 The role of different stakeholders 132
8.3 Improving access to banking services 134
8.3.1 Anti-money laundering legislation 134
8.3.2 Banking codes versus legislation 136
8.4 Developing basic banking services 138
8.4.1 Universal banking services 142
8.5 Financial advice and education 148
8.5.1 The role of MABS 150
8.6 Affordable credit 151
8.7 Savings 156
8.8 Other financial services 158
8.8.1 Electronic payment of benefits 158
8.8.2 Insurance 160
8.9 Conclusions 161

Chapter 9 Policy implications 165
Appendix: Methodology 184

Glossary 192
Bibliography 199
» List of figures
Figure 3.1 Percentage of households without a current account

by income deciles (1999/2000) 29
Figure 3.2 Percentage of respondents without a current account

(which comes with a payment card and/or a chequebook)
in EU member states (2003) 31
» List of tables
Table 3.1 Percentage of respondents with a current account

(which comes with a payment card and/or a chequebook)
in EU member states (2005) 32
Table 3.2 Percentage of the Irish population that cannot afford

to save income regularly (2004) 34
Table 3.3 Percentage of the Irish population without home contents

insurance (2004) 35
Table 3.4 Percentage of respondents with life assurance in EU member

states (2005) 36
Table 3.5 Supply-side barriers to financial services 47
vi Financial Exclusion in Ireland: an exploratory study and policy review

Foreword
The Financial Regulator was established in May 2003. Our role is to

regulate firms that provide financial services and to help consumers make
informed decisions about their personal finances. A key part of our role is to
provide information about financial services in plain English and to provide
information on the costs, risks and benefits of various financial products. We
also work towards raising consumer awareness about their personal finances
in an effort to build consumer confidence.
When the Financial Regulator was established we undertook to foster access

to financial services. There is no doubt that some people experience difficulty
in accessing financial services, although there appears to be no single
reason why this is so. For consumers, issues such as low income, low literacy
levels, cultural and ethnic barriers, disability and geographical isolation may
create difficulties. For industry, issues such as advances in technology, staff
training and anti-money laundering/terrorist financing requirements may be
contributory factors to the problem.
As part of our work on this topic, we approached Combat Poverty to

undertake new research. I warmly welcome this study as a very important
contribution to the understanding of issues surrounding access to financial
services in Ireland. The recommendations made by Combat Poverty are
directed at a wide audience, and many are outside the remit of the Financial
Regulator. However, I can give an assurance that the recommendations within
the remit of the Financial Regulator will be very carefully considered by us.
I have no doubt that this report will help to influence industry and policy-
makers alike, and for that reason I would like to extend a sincere thanks to
Combat Poverty for its contribution to the emerging debate on financial access.
Mary O’Dea
Consumer Director
Financial Regulator
Financial Exclusion in Ireland: an exploratory study and policy review vii

Preface
Combat Poverty is a state agency developing and promoting evidence-based

proposals and measures to combat poverty in Ireland. In support of this role,
it undertakes research on the nature and causes of poverty and on solutions
to poverty.
This study on financial exclusion builds on Combat Poverty’s earlier research

on the related issues of access to financial services and indebtedness for low-
income households. Its landmark study on moneylending and low-income
households (Daly and Walsh, 1988) subsequently informed the development
of the Money Advice and Budgeting Service and the Consumer Credit Act.
More recently, Combat Poverty has reviewed public policy on savings and
pensions and proposed a number of new policy initiatives.
The starting point for this study is the growing interest of policymakers in the
consumer aspects of financial services, including greater access to financial
services. There is also an awareness among providers of financial services of
their corporate social responsibility. Financial services are also important to
public policy goals. Thus, the state provides significant incentives for personal
savings and pensions and also promotes electronic payments (through the
National Payment Strategy). It is important that public and corporate policy is
informed by an awareness of the situation of low-income consumers.
The understanding of financial services from a poverty perspective has

developed considerably in recent years, as crystalised by the concept of
financial exclusion. Financial exclusion reflects two developments: the
increasing importance of financial services in the management of household
resources; and the structural barriers faced by low-income households in
accessing and using such services. From a policy perspective, promoting
financial inclusion is seen as enhancing the capacity of low-income households
to better manage their (limited) resources and to make greater use of key
financial products, such as savings, affordable credit and home insurance.
This exploratory study is the first attempt to apply the emerging concept
of financial exclusion in the Irish context. Given a lack of existing data on
financial exclusion, the focus of the study is on the experience of financial
In this context, the study was undertaken with the support of the Financial Regulator,
which has a statutory role to promote consumer information and protection.
viii Financial Exclusion in Ireland: an exploratory study and policy review

services by low-income groups and on the views of diverse organisations on
financial service provision for such groups. The study also draws lessons for
Ireland from emerging policy responses in other developed countries.
The study finds that financial exclusion is an important issue for low-income
groups in Ireland. It identifies a range of obstacles which inhibit access to
and use of financial services, ranging from ID requirements for opening a
bank account to restrictive price and other conditions for financial products.
The effects of financial exclusion are more time and expense in managing
household resources; less protection against theft, unexpected expenditure or
loss of income; and greater difficulties in getting employment.
The key recommendation of the study is for the development of a strategy

to tackle financial exclusion, to form part of the forthcoming national action
plan on social inclusion. The report also proposes specific actions in regard
to access to bank accounts, basic banking services, financial education, new
financial products and further research. Combat Poverty is committed to
working with all relevant actors in progressing these recommendations.
This study places the Irish experience of financial exclusion in an international

context, drawing on extensive research and policy analysis of the issue. In
particular, the European Union has identified financial exclusion as a key
issue, as have a number of EU member states. Combat Poverty will continue
to promote a comparative perspective on measures to tackle financial
exclusion.
Combat Poverty recognises the need for further research on financial

exclusion, especially to quantify the full extent of the problem. The EU-SILC
module on financial services in 2008 will provide a new data source for
this purpose. We will work with relevant interests to analyse this and other
relevant information.
Helen Johnston
Director
Combat Poverty
The national action plan will be prepared as a follow-on to the National Report
for Ireland on Strategies for Social Protection and Social Inclusion 2006–2008,
available at www.socialinclusion.ie. Financial exclusion is relevant to all 4 priorities
under this strategy, in particular those relating to access to quality services and
integration of immigrants.
Financial Exclusion in Ireland: an exploratory study and policy review ix

Acknowledgements
Combat Poverty would like to thank all those who contributed to this
study. The main work was undertaken by the research section of the
agency. Caroline Corr was the lead researcher on the project and author
of the final report. She was assisted by colleagues Vanessa Coffey (data on
financial products and indicators of financial exclusion); Joanne Mulholland
(transcription of the focus groups and interviews and administrative support);
and Jim Walsh (design and management of the study). Other agency
colleagues also contributed to the report. Ubiqus Ireland transcribed the
focus groups and in-depth interviews.
The Financial Regulator supported Combat Poverty in undertaking this study.

A Stakeholder Forum representing financial institutions and government
departments facilitated dialogue on the issues arising from the research.
However, the policy implications do not necessarily reflect the views of
individual organisations represented at the Stakeholder Forum.
The Combat Poverty research committee advised on the study, in particular

Dr Anthony McCashin (School of Social Work and Social Policy, Trinity
College, Dublin).
The study was externally reviewed by Professor Elaine Kempson (Personal

Finance Research Centre, University of Bristol) and Dr Olive McCarthy (Centre
for Co-operative Studies, University College Cork).
The main data source for the study was the views and experiences of 59
low-income consumers who participated in 8 focus groups, which were
supported by community development projects. Thirty-eight representatives
of financial services, government departments, academic institutes and
organisations working with low-income groups participated in in-depth
interviews. Finally, data on financial services was provided by a number of
financial institutions.
Combat Poverty
The Stakeholder Forum was established by the Financial Regulator.

List of abbreviations
ABCUL Association of British Credit Unions

AIB Allied Irish Bank
APR Annual percentage rate
ATM Automated teller machine
BBA British Bankers’ Association
BCSB Banking Code Standards Board
BIC British–Irish Council
CE Community Employment
CGAP Consultative Group to Assist the Poor
CLÁR Ceantair Laga Árd-Riachtanais
CSO Central Statistics Office
DIRT Deposit interest retention tax
DoF Department of Finance
DSFA Department of Social and Family Affairs
EBS Educational Building Society
EC European Community
EFT Electronic funds transfer
ESB Electricity Supply Board
EU European Union
EU-SILC European Union Survey on Income and Living Conditions
FÁS Foras Áiseanna Saothair (Ireland’s National Training and
Employment Authority)
FITF Financial Inclusion Taskforce
FSA Financial Services Authority
HBS Household Budget Survey
HM Her Majesty’s
IBF Irish Bankers Federation
ICB Irish Credit Bureau
ILCU Irish League of Credit Unions
INOU Irish National Organisation of the Unemployed
IPSO Irish Payment Services Organisation
IPU Irish Postmasters Union
MABS Money Advice and Budgeting Service
MLSC Money Laundering Steering Committee
NALA The National Adult Literacy Agency
NAPS National Anti-Poverty Strategy
NAPs/incl National Action Plans against Poverty and Social Exclusion
Financial Exclusion in Ireland: an exploratory study and policy review xi

NTMABS National Travellers Money Advice and Budgeting Service
OECD Organisation for Economic Co-operation and Development
OFT Office for Fair Trading
OLR Opinion Leader Research
OPEN One Parent Exchange and Network
OSI Office for Social Inclusion
PAT Policy action team
PIN Personal identification number
POCA Post office card account
PPSN Personal public service number
PRSI Pay-related social insurance
QNHS Quarterly National Household Survey
RAPID Revitalising Areas by Planning Investment and Development
RTÉ Radio Telefís Éireann
SCSF Steering Committee on Social Finance
SSIA Special savings incentive account
SVP Society of St Vincent de Paul
SWA Supplementary welfare allowance
UK United Kingdom of Great Britain and Northern Ireland
US United States of America
VEC Vocational education committee
VTOS Vocational training opportunities scheme
xii Financial Exclusion in Ireland: an exploratory study and policy review

Executive summary
Introduction
This research is an exploratory study and policy review with the overall aims
of examining exclusion from financial services among low-income consumers
and identifying appropriate policy responses. Financial exclusion refers to
exclusion from affordable and appropriate financial products, including bank
accounts, current accounts, credit, savings and insurance. It is complex and
multi-dimensional and can come about as a result of a range of problems with
access, conditions, price, marketing or self-exclusion (Kempson et al., 2000).
Since the 1980s there has been a substantial increase in the number of
people, both nationally and internationally, using a wide range of financial
services and products. Financial services have become progressively more
important due to the payment of wages by automatic credit transfer and the
spread of home ownership. Social relations are also increasingly expressed
in monetary terms (Gloukoviezoff, 2006). Consequently, the majority of
consumers now have a bank account. A proportion of the population,
however, remains excluded from banking services and other financial
products, i.e. they are financially excluded. Low-income consumers are at
greatest risk of financial exclusion, and being financially excluded not only
prevents people from escaping from poverty, but can also result in people
falling into poverty.
The objectives of the study are threefold:
» To explore the nature and extent of financial exclusion in Ireland
» To examine the experiences of low-income consumers in relation to

financial service provision in Ireland
Financial services refer to those used for personal financing, including bank
accounts, current accounts, savings, credit, insurance and bill payment services. In
Ireland these are mainly provided by banks, building societies, credit unions, An
Post and insurance companies.
Bank accounts refer to current accounts and savings/deposit accounts provided by

banks and building societies. Savings accounts provided by credit unions and post
offices are not included as the vast majority do not offer EFT facilities (only 0.04%
of credit unions offer EFT and it is only provided by An Post on its child save and
pension save accounts).
Current accounts are provided solely by banks in Ireland and offer a range of
transactional services.
xiv Financial Exclusion in Ireland: an exploratory study and policy review

» To identify appropriate policy responses to improve access and use of
financial services for low-income consumers.
The research involved a detailed literature and policy review; an analysis of

secondary data and financial products; 8 focus groups with 59 low-income
consumers; and 26 in-depth interviews with a range of interviewees from
the financial services sector, government departments, organisations working
with low-income groups and academic institutes.
Policy
Despite financial exclusion becoming a key policy issue in many EU member
states, this research has shown that the issue was largely ignored in Ireland
until recently.
» Financial inclusion should be included in the forthcoming National

Action Plan for Social Inclusion in conjunction with a national strategy
on financial inclusion.
Partnership approach
Interviewees felt that the most appropriate means of addressing financial

exclusion was working in partnership, preferably through the establishment
of a steering committee.
» Consideration should be given to the establishment of a Steering

Committee on Financial Inclusion, whose key role should be the
development, coordination and monitoring of a national strategy to
promote financial inclusion as well as liaising with relevant groups.
Financial Exclusion in Ireland: an exploratory study and policy review xv

Bank accounts
Barriers to bank accounts
A current account is generally viewed as the key financial product as it offers

a range of services including access to cash, bill payment facilities and money
transmission (through direct debits and standing orders). There is limited Irish
data on non-ownership of bank/current accounts. Surveys have found that
over one-quarter of households/individuals in Ireland are without a current
account and 10% of individuals are without any type of bank account. Low-
income households are less likely to have a bank/current account.
The main reason for respondents in the current study not having a bank
account was because they felt it was unnecessary to have one to manage a
low income. Other respondents only succeeded in opening a bank account
with the help of an organisation (e.g. their employer). This would indicate
that low-income consumers who are not linked in with an organisation are
less likely to have a bank account. According to several respondents, it is
more difficult to get rented accommodation or a job without a bank account.
The main difficulty respondents encountered in opening bank accounts was

producing relevant identification (i.e. passport/driving licence and utility bill).
Vulnerable groups who faced particular difficulties meeting this requirement
included the unemployed, young people, members of the Travelling
community and asylum seekers and refugees.
There was a general consensus that the guidelines produced by the Money
Laundering Steering Committee in 2001 (and revised in 2003) have
not succeeded in addressing the problems that some consumers were
experiencing in opening bank accounts. This is because customers are not
being made aware of alternative options in relation to identification and
there are inconsistencies in their interpretation. Therefore it was stressed that
these issues need to be addressed in the new guidelines developed under the
Third Anti-Money Laundering Directive.
xvi Financial Exclusion in Ireland: an exploratory study and policy review

» The legislation and administrative measures implementing the Third
Anti-Money Laundering Directive should not deter low-income
consumers from opening a bank account. Efforts to identify a range of
appropriate identification documents should continue in consultation
with organisations working with low-income consumers.
Two focus groups were carried out in urban locations that were not served by
a bank and other respondents had noticed bank closures in their localities in
recent years. While the increase in the number of ATMs and developments in
telephone and Internet banking have increased access for many consumers,
respondents faced barriers accessing money at ATMs and most were
excluded from telephone/Internet banking due to their low income and high
levels of technophobia.
» Consideration should be given to carrying out independent social

audits4 on the effects of bank closures and to addressing any remedial
actions which the audits recommend.
A further barrier for respondents was bank charges. Since the research was
carried out, ‘normal’ transaction charges (e.g. for ATM withdrawals) have
been removed for many current accounts as a result of a move towards
‘free’ banking. However, ‘out-of-course’ transaction charges still apply and
respondents were particularly concerned about charges for unauthorised
overdrafts, failed standing orders/direct debits and bounced cheques. Other
barriers were government stamp duty and higher charges for over-the-
counter transactions.
Discussions in the focus groups revealed that bank accounts are not always
suited to the needs of low-income consumers. For instance, those with a
savings account or building society account were unable to set up direct
A social audit is a systematic assessment of the social impact of a business and

involves key stakeholders. Social audits have been completed by a number of
European banks and have proved to be a practical way for banks to understand
and report on the social impact of their actions.
5 ‘Out-of-course’ transaction charges are penalty charges applied by banks if

customers break a term of their contract with the bank (e.g. unauthorised
overdraft).
Financial Exclusion in Ireland: an exploratory study and policy review xvii

debits. Also terms and conditions attached to many of the ‘free’ banking
offers, such as minimum account balances or the requirement to carry out a
number of transactions via the Internet, do not suit their needs.
Basic banking services
Basic banking services involve the provision, by banks and building societies,
of basic bank accounts, which are simple, low-cost, ‘no frills’ current accounts
designed for those who are financially excluded. There was overwhelming
support for the introduction of basic banking services in Ireland as it was
felt that this would address the problems faced by low-income consumers
in relation to charges, in particular ‘out-of-course’ transaction charges, and
barriers related to terms and conditions.
» Consideration should be given to the provision of basic bank accounts

in Ireland.
Codes of practice
Internationally, banks have made provision for basic bank accounts through
the creation of codes of practice. Other countries have legislated around the
‘right to a bank account’, which enables people without a bank account to
open one at a financial institution of their choice. There was a preference in
the current study for a code of practice rather than legislation.
» Consideration should be given to developing a code of practice in

relation to the provision of basic banking services in Ireland.
Universal banking services
Universal banking services are the delivery of current account facilities,

especially bank accounts, through intermediaries (e.g. post offices, credit
unions). Many respondents supported the role of post offices in the provision
xviii Financial Exclusion in Ireland: an exploratory study and policy review

of basic banking services, citing advantages such as their convenience, service
to remote communities, better customer orientation and previous banking
experience with AIB (Allied Irish Bank).
» In its new banking venture, An Post should give consideration to

developing an appropriate basic bank account.
There was also support for credit unions to develop a basic transactional
account as many respondents preferred to carry out their financial transactions
at credit unions. Respondents stated that they would welcome a move
towards universal banking services as this would mean that credit unions
would join the clearing system and their money would be more accessible.
» Consideration should be given to how the credit union movement can

be given access to the clearing system.
» The credit union movement should consider the introduction of an

appropriate basic bank account (i.e. transactional account).
Even though many respondents had a bank account, most of them

reluctantly opened those accounts in order to receive wages and continued
operating a cash budget for fear of losing control of their finances. Lack of
demand (i.e. respondents felt they did not need a bank account) was also
an issue for those who chose to remain outside the banking system. Other
respondents lacked the confidence or self-esteem to engage with banks
and antipathy and mistrust of financial services contributed to levels of
disengagement. There was also a socio-cultural barrier as many low-income
consumers felt that banks were not interested in poor people. Low levels of
financial capability were also an issue. It was suggested that lack of demand
could be stimulated through advice and education.
Financial Exclusion in Ireland: an exploratory study and policy review xix

» The Financial Regulator should continue to develop its financial
education programme.
» Training and support should be provided to organisations working with

vulnerable consumers to promote their role in providing non-brand-
specific advice in relation to financial products.
» Staff training in financial institutions should address literacy and

intercultural issues.
Credit
Access to affordable credit is vital for low-income consumers in order to buy
essentials such as household appliances, to pay bills or to cover unexpected
costs. This research shows that credit unions are a popular form of credit for
low-income consumers. Overall perceived advantages were accessible loans,
low interest rates and automatic insurance at no extra cost. Furthermore,
loan repayments are perceived to be flexible and negotiable and repayment
terms are chosen to suit members’ particular circumstances. One condition
that respondents particularly favoured was that the debt dies with the debtor
as a result of loan protection insurance. Other appealing features include no
conditions in terms of loan size or a minimum savings amount and in most
cases no waiting period.
There are conditions which may act as an obstacle to some low-income

consumers. The main barrier cited was not being able to build up a savings
history to qualify for a credit union loan (a prerequisite for most credit
union loans) due to low income. There was also concern expressed that
non-repayment of a credit union loan could result in a court summons and
that credit unions might move towards issuing larger loans (due to the new
Consumer Credit Agreement) which would not suit low-income consumers.
Respondents were not likely to apply to a bank for a loan. Some of them
perceived the interest rate in banks to be too high, while others excluded
themselves because they felt that people on low incomes were unlikely to
get a bank loan due to credit scoring. Other barriers include minimum loan
amounts, higher interest rates for smaller loans, monthly repayments and
little flexibility for occasional missed payments.
xx Financial Exclusion in Ireland: an exploratory study and policy review

Some respondents had current and past experiences of moneylenders. Those
respondents with past experiences usually stopped using this form of credit
when their circumstances improved (e.g. through gaining employment). This
would indicate that it could prove challenging for more vulnerable consumers
(e.g. the unemployed) to end their relationship with a moneylender. The
main push factor towards moneylenders was the denial of credit from
mainstream financial institutions; pull factors included accessibility, reduced
bureaucracy, convenience, transparency, simplicity, no credit history is needed
and repayments are collected in cash on a weekly basis. The main barrier for
low-income consumers was the high interest charges (which can range from
23% to 200% APR), and other negative practices noted included targeting
the most vulnerable consumers in disadvantaged areas, not receiving a full
explanation of the terms and conditions and rollover loans.
The role of credit unions
Credit unions were posited as playing a key role in providing affordable

credit to low-income groups. However, it was felt that credit unions should
design services specifically for low-income groups and should also target
disadvantaged groups through educational programmes and campaigns,
addressing the benefits of membership and the advantages of credit union
loans compared to moneylending.
» The credit union movement should continue to develop a social

finance policy and consider the development of a national educational
campaign specifically designed for low-income consumers.
Savings
Savings are important for low-income consumers to help them cope in times
of change and plan for the future. Savings can also prevent people falling
into poverty or help people living in poverty to manage extra costs. The main
reason respondents were unable to save was lack of resources. Other barriers
included lack of tradition of saving, concern in relation to how savings would
affect social welfare entitlements and the identification required to open
some savings accounts. Uptake is likely to be lower among low-income
Financial Exclusion in Ireland: an exploratory study and policy review xxi

consumers if large deposits are required or there are restrictions around
withdrawals. Also fixed-term and online savings schemes are less appealing
to low-income groups.
Respondents who had savings were more likely to keep them in post offices
and credit unions. The perceived advantages are that there are no minimum
instalment requirements, it is possible to lodge small amounts of money
and there are no charges for withdrawing money. Furthermore, credit union
members are entitled to dividends and free savings protection.
Targeted savings scheme
The above factors, which may encourage low-income consumers to save,

have been incorporated into a proposed savings scheme designed by the
Money Advice and Budgeting Service (MABS) and supported by Combat
Poverty. The scheme is based on the UK’s Saving Gateway Scheme. According
to respondents, the perceived advantages of such a scheme were that
minimum payments would be manageable, it would be flexible and it would
help low-income consumers plan for a ‘rainy day’.
» The government should consider allocating additional resources to

MABS to develop its existing role in terms of encouraging savings
among its clients.
Other initiatives
Insurance
Lack of insurance, in particular home contents insurance, means that some

sectors of society are unable to insure themselves against unforeseen events,
such as fire or burglary. Respondents were unlikely to have home contents
insurance and affordability was the most pertinent barrier. This was a
particular issue for those who live in ‘high-risk’ areas. There was widespread
support for examining the feasibility of providing a low-cost, flexible
insurance scheme, similar to the UK’s Insurance with Rent Schemes.
xxii Financial Exclusion in Ireland: an exploratory study and policy review

» Providers and funders of social housing should consider commissioning
a feasibility study on providing low-cost group insurance to local
authority and social housing tenants as well as those in receipt of rent
allowance in the private rented sector.
EFT
The Irish government is moving towards making EFT (electronic funds

transfer) the normal method of payment for all social welfare payments.
Although many participants were unaware of the option of receiving social
welfare through EFT, there was support for the move as it would be more
convenient and eliminate the need to queue for payments. While this
research supports the government’s move towards EFT, it emphasises the
complementary need to ensure that the appropriate products (e.g. basic bank
accounts) are provided in the preferred financial institutions (e.g. banks, post
offices, credit unions). There should also be an opt-out clause for people who
might face difficulties with it.
The role of MABS
Several respondents reported positive experiences of MABS, which is widely

regarded as a model of best practice in other European countries (Korczak,
2004). However, it was suggested that MABS increase the advertising of
its services to target the most disadvantaged and develop its links with the
community and voluntary sector.
» MABS should expand its community education role and promote access
to financial services for its clients.
Financial Exclusion in Ireland: an exploratory study and policy review xxiii

Chapter 1
Introduction
1.1 The emergence of financial exclusion
Since the 1980s there has been a substantial increase in the number of
people, both nationally and internationally, using a wide range of financial
services and products. This increase is mainly due to structural changes in the
financial services sector, the payment of wages by automatic credit transfer
and the spread of home ownership (Kempson and Whyley, 1999; Sinclair,
2001). Banking services have become progressively more important due to
the ‘financialisation of social relationships’, i.e. social relations are increasingly
expressed in monetary terms (Gloukoviezoff, 2006). Consequently, the
majority of consumers now have a bank account. A proportion of the
population, however, remains excluded from banking and other financial
services, i.e. they are financially excluded.
For the purpose of this study, financial exclusion refers to exclusion from
affordable and appropriate financial products, including bank accounts,
current accounts, credit, savings and insurance. As highlighted by
international commentators, financial exclusion is complex and multi-
dimensional and can come about as a result of a range of problems with
access, conditions, price, marketing or self-exclusion (Kempson et al., 2000).
Low-income consumers are at greatest risk of financial exclusion and being

financially excluded not only prevents people from escaping from poverty, but
can also result in people falling into poverty. Hence, in Ireland the 800,000
people (19% of the population) living in income poverty and the 300,000
(7%) living in consistent poverty are at risk of financial exclusion. Financial
exclusion impacts on low-income consumers in the following ways:
» Managing limited household resources outside the banking system is more

costly and time-consuming
Financial services refer to those used for personal financing, including bank
accounts, current accounts, savings, credit, insurance and bill payment services. In
Ireland these are mainly provided by banks, building societies, credit unions, post
offices and insurance companies.
Bank accounts refer to current accounts and savings/deposit accounts provided by

banks and building societies. Savings accounts provided by credit unions and An
Post are not included as the vast majority do not offer EFT facilities (only 0.04% of
credit unions in Ireland offer EFT and it is only provided by An Post on child save
and pension save accounts).
Current accounts are provided solely by banks in Ireland and offer a range of
transactional services.

» People without bank accounts lack security in holding and storing their money
» Bill payment can be more difficult and costly without a bank account,
given that an increasing number of companies require bills to be paid by
direct debit or standing order
» Managing low incomes outside of the mainstream financial services

can result in higher charges for basic financial transactions (e.g. money
transfers, cheque cashing)
» Limited access to affordable credit means that those on low incomes often
turn to home credit providers who charge high interest rates
» It is more difficult to accumulate savings for the future, which can result
in people falling into poverty when circumstances change (e.g. loss of job,
divorce, separation, illness)
» Lack of home contents insurance means that unexpected events (e.g. fire,
burglary) will further compound social exclusion
» People without a bank account have limited access to employment (as a

bank account for receipt of wages is a basic requirement of most employers)
» Lack of access to financial advice can mean that people miss out on
information that could improve their financial situation
» Financial exclusion can also inhibit the eradication of child poverty as

households ‘may incur extra costs for using inappropriate or no financial
products or may not claim welfare payments to which they are entitled’
(Regan and Paxton, 2003: 14).
The impact of financial exclusion can be more far-reaching than the

immediate effects on individuals and households. When ‘whole communities
have limited access to financial products the process becomes self-reinforcing
and an important contributor to social exclusion more generally’ (Kempson
and Whyley, 1999: 22).
Financial exclusion is a public policy issue as well as a market issue and

forms part of the wider concept of social exclusion. Financial exclusion has
become a key element of the National Action Plans against Poverty and
Social Exclusion (NAPs/incl) of many EU member states. Furthermore, other

EU member states have developed action plans (e.g. Scotland) and codes
of practice (e.g. Germany, Belgium, Finland, the Netherlands) in relation
to promoting financial inclusion, and have legislated around access to
bank accounts (e.g. France, Portugal, Sweden). Despite financial exclusion
becoming an important issue at European and international levels, the
issue was largely ignored in debates around social exclusion in Ireland until
recently. However, in recent consultations for the development of the NAPs/
incl 2006–2008, several organisations (including Combat Poverty and MABS
– the Money Advice and Budgeting Service) recommended that a greater
focus should be placed on the relationship between financial exclusion and
social exclusion in Ireland, with a particular ‘commitment to identifying and
addressing barriers to financial services’ (OSI, 2006: 71). The Irish government
has recognised the need to address financial inclusion in its work in the
British–Irish Council (BIC, 2004).
Similarly, financial exclusion received limited recognition from the Irish

financial services sector. In May 2003, the Financial Regulator was
established, as a result of the Central Bank and Financial Services Authority
Act, 2003, with a responsibility for the regulation of all financial services firms
in Ireland. In its Strategic Plan 2004–2006, the Financial Regulator committed
to developing an action plan on access to financial services. Furthermore, the
Irish banking sector (through IPSO – the Irish Payment Services Organisation)
has proposed the development of ‘universal access’ to banking services as
an integral part of the government’s wider National Payment Strategy. The
Irish Bankers Federation (IBF, 2005a) has also developed the IBF Fact File on
Financial Inclusion, which sets out proposals for addressing identification
requirements for opening bank accounts and universal banking options.
In comparison to other EU countries, there is a dearth of Irish research on

financial exclusion. Most of the research to date has explored issues for
specific vulnerable groups such as the Travelling community and older people,
or focused on issues related to credit and debt.
1.2 Aims and objectives

This research is an exploratory study and policy review with the overall aim of
examining exclusion from financial services among low-income consumers in
order to identify appropriate policy responses.
The objectives of the study are threefold:

» To explore the nature and extent of financial exclusion in Ireland
» To examine the experiences of low-income consumers in relation to

financial service provision in Ireland (including barriers to access and use)
» To identify appropriate policy responses to improve access and use of financial

services for low-income consumers in consultation with relevant stakeholders.
1.3 Research methodology

The fieldwork component of the study included 8 focus groups and 26 in-
depth interviews. Fifty-nine low-income consumers participated in 8 focus
groups and discussed their experiences of, and aspirations for, financial
services provision in Ireland. Focus groups were used as they are particularly
suited to exploratory studies and they have been widely used in research on
financial exclusion internationally (see Kempson and Whyley, 1999; Collard
et al., 2001; Collard et al., 2003). Kempson and Whyley’s (1999) pioneering
focus group study in the UK was instrumental in the development of financial
exclusion policy there, in particular the 2 policy documents on financial
exclusion developed by HM Treasury (1999; 2004). Focus group participants
were accessed through a number of community development organisations
based in different disadvantaged localities (including urban, provincial and
rural areas). One of the focus groups was carried out solely with members
of the Travelling community and another solely with asylum seekers and
refugees, as these social groups are likely to encounter specific problems.
Twenty-six in-depth interviews were also carried out with a range of

interviewees from financial services, government departments and organisations
working with low-income groups, as well as academic experts. In-depth
interviews are particularly suited to research that requires responses to complex
issues (e.g. policies on financial exclusion), and are also considered the most
appropriate way of interviewing public figures, leading professionals or ‘experts’,
given their highly specialised role and knowledge of issues. Interviewees were
chosen based on their detailed knowledge of financial service provision, the
policy context and/or the needs of low-income consumers.
See Appendix (Section A.1.3) for further details on the focus groups.
See Appendix (Section A.1.4) for further details on the interviews.

1.4 Report outline
The report is divided into 3 main parts.
Part One: Nature and extent of financial exclusion in Ireland
Chapter 2 draws on national and international literature in order to provide

an overview of the concept of financial exclusion. Chapter 3 identifies
relevant indicators of financial exclusion and quantifies the extent of financial
exclusion in Ireland based on secondary data sources. It also presents an
overview of the main financial products available to low-income consumers in
Ireland and specifically examines supply-side barriers.
Part Two: Low-income consumers’ experiences

of financial services in Ireland
Chapter 4 explores low-income consumers’ experiences of banking services.

Chapter 5 examines credit use among the 59 focus group respondents and
considers the factors which attracted or deterred them from accessing and
using loans from different financial service providers. Chapter 6 investigates
low-income consumers’ experiences of savings and other financial services.
Part Three: Exploring policy options for low-

income consumers in Ireland
Chapter 7 reviews policy initiatives which could have a significant impact

on reducing financial exclusion. Respondents’ views on these initiatives are
presented in Chapter 8. Chapter 9 sets out the policy priorities for Ireland in
relation to financial exclusion.
The Appendix presents some background information on the research and

fieldwork processes. A glossary and bibliography also accompany the text.

Nature and
extent of financial
exclusion in
Ireland
t O n e
Par
Chapter 2
Understanding
financial exclusion
This chapter draws on national and international literature in order to
provide an overview of financial exclusion. The first section outlines how
the concept has evolved and explains the different dimensions of financial
exclusion. Thereafter, the chapter identifies groups which are at particular
risk of financial exclusion. Finally, the main barriers to accessing and using
banking, credit and other financial services are summarised and different
manifestations of financial exclusion are described.
2.1 Defining financial exclusion

There is no official European or global definition of financial exclusion.
However, there is a general consensus among commentators that financial
exclusion is primarily concerned with the lack of a bank account, in
particular a current account (Kempson et al., 2000). Other indicators include
lack of access to affordable credit, savings and home contents insurance
(Devlin, 2005).
Early literature on financial exclusion concentrated on issues of geographical

access to services, particularly banking outlets. Therefore, financial exclusion
was narrowly viewed in terms of ‘access’, and was first described by Leyshon
and Thrift (1995: 312) as ‘the processes that prevent poor and disadvantaged
social groups from gaining access to the financial system’.
More recent debates on financial exclusion have acknowledged that the

issue is much broader than the changing geography of financial services and
that there is a range of potential barriers to accessing and using mainstream
financial services. Kempson et al.’s review (2000) was the first attempt
to offer a wider definition of financial exclusion. They recognised that
financial exclusion is complex and multi-dimensional and can come about
as a result of a range of problems with access, conditions, price, marketing
or self-exclusion. Gloukoviezoff (2004) also finds that ‘access’ is only part
of the problem and in his view the greatest challenge is the difficulties
the financially excluded face in ‘using’ financial services. Consequently,
Gloukoviezoff (2004: 2) defines financial exclusion as ‘the process by which
a person encounters such difficulties in accessing and/or using its banking
practices that he/she is no longer able to have a normal social life in society’.
Therefore, financial exclusion is increasingly defined in terms of ‘access’ and
‘use’ as well as the associated social consequences.

Commentators have also noted that there are gradations of financial
exclusion. These range from those who are ‘hyper-included’ (Kempson
and Whyley, 1999) to those who are ‘unbanked’ and have no access to
mainstream financial services. Those members of the population operating
their financial affairs completely outside the regulated financial system are
at what Kempson et al. (2000: 21) refer to as the ‘sharp end of financial
exclusion’. In between these extremes are those who are ‘underbanked’ or
on the ‘margins of financial exclusion’ as they have limited access and/or use
of mainstream financial services. Research in Australia highlighted a further
group who are ‘included, but using inappropriate products’, these individuals
are ‘victims’ of inappropriate products and may be ‘starting on a downward
spiral if no intervention occurs’ (ANZ, 2004: 63).
2.2 Dimensions of financial exclusion
Geographical exclusion
Geographical exclusion from financial services is related to 3 main factors:

the reduction in financial retail outlets in disadvantaged communities, a
substantial number of bank closures and low levels of car ownership among
people living in disadvantaged communities (Kempson et al., 2000).
Financial ‘desertification’ from disadvantaged areas makes it more difficult

for local people to access financial services. The decrease of contact
with financial services and the decline in relationship banking can create
psychological barriers among the local population. As a result, people living in
these areas not only have no personal experience of mainstream institutions,
but they also do not know anyone who has. Overall, it deprives people living
in disadvantaged areas of ‘the sense of participation in mainstream life which
a vibrant community and inclusive society require’ (Sinclair, 2001: 12).
Bank closures in the UK have had a negative impact on the built environment,
economic growth and social problems of the local area. The loss among the
local community of economic opportunities often leads to a decline in trade
and deters small businesses from starting up (Leyshon and Thrift, 1995).
Bank closures can also precipitate other retail outlets closing as people begin
to travel to branches and shops outside the local area. They can also open
up the market for alternative financial services such as moneylenders. These
10 Financial Exclusion in Ireland: an exploratory study and policy review

factors compound other aspects of social exclusion as disadvantaged areas
are also more likely to lack other essential services (Sinclair, 2001).
Access exclusion
Access exclusion is ‘the restriction of access through the processes of risk

assessment’ (Kempson et al., 2000: 9). The ability of financial institutions
to assess risk has improved greatly with developments in information
technology. Kempson et al. (2000) point out that while this process has
meant that many more people have gained access to financial products,
in particular credit, it also means that those who cannot gain access face
greater isolation.
Condition exclusion
Condition exclusion occurs when the ‘conditions attached to financial

products make them inappropriate for the needs of some people’ (Kempson
et al., 2000: 9). The lack of appropriate financial products for low-income
consumers is partly due to the financial industry’s ‘flight to quality’ strategy.
This has led to the development of a range of more tailored and sophisticated
products targeted at profitable customers. Consequently, there has been
‘a move away from basic credit and debit related products towards growth
orientated investment-related products which are both more risk averse and
which can also be targeted at higher income market segments at premium
prices’ (Sinclair, 2001: 36). The same effort has not been spent on designing
and delivering appropriate products to low-income consumers (Carbo et al.,
2005). Therefore, Fischer et al. (1999: 133) would argue, financial exclusion is
more an issue of ‘appropriateness and affordability’ rather than access.
Price exclusion
Price exclusion occurs ‘when some people can only gain access to financial
products at prices they cannot afford’ (Kempson et al., 2000: 9). As every
cent counts for low-income consumers, they may not access or may give
up using financial services if they are too costly. Charges, for even minor
financial transactions, can lead to what has been referred to as a ‘bank fee
poverty trap’ (Kempson et al., 2004: 19).
Financial Exclusion in Ireland: an exploratory study and policy review 11

Marketing exclusion
Marketing exclusion occurs when ‘some people are effectively excluded

by targeted marketing and sales’ (Kempson et al., 2000: 9). Since the
early 1990s, financial institutions have increasingly pursued more affluent
customers (Carbo et al., 2005). People on low incomes are unattractive to
financial service providers as their needs are modest and thus the profit
margins are small or non-existent (Kempson and Whyley, 1999). Leyshon
and Thrift (1995) refer to this as ‘information exclusion’ because information
systems and databases are used to divide customers into the more
sophisticated and sought after and those who fall under the ‘information
shadow’. The outcome is a clear polarisation between the ‘super-included’
and those who are excluded from mainstream financial services altogether
(Kempson et al., 2000).
Self-exclusion
Self-exclusion occurs when ‘people may decide that there is little point
applying for a financial product because they believe they would be refused.
Sometimes this is a result of having been refused personally in the past,
sometimes because they know someone else who has been refused, or
because of a belief that “they don’t accept people who live round here”’
(Kempson et al., 2000: 9). Recent research carried out in the UK found that
such demand-side barriers are a serious deterrent for financially excluded
people engaging with financial services (OLR, 2006). While some financial
institutions would maintain that if people are voluntarily excluding themselves
they are not ‘financially excluded’, commentators such as Sinclair (2001:
12) argue that ‘many financial service providers have not taken the steps
necessary to encourage access and use by excluded groups’.
Resource exclusion
A further dimension of financial exclusion is described as resource exclusion.

According to Devlin (2005: 77), this arises when ‘people may have an
inherent need to save for the future to provide for themselves and their
family but may not have the discretionary income to do so’.

Electronic exclusion
Technological advances have increased access to financial services for many

people. However, research in the UK (Pahl, 1999) found that there has been
an increasing polarisation in terms of access to the ‘electronic’ economy (i.e.
credit and debit cards; Internet and telephone banking). This research showed
that those who accessed financial services electronically had high incomes,
were ‘work rich’ in that they belonged to households with more than one
earner, ‘credit rich’ in that their credit rating was secure, and ‘information
rich’ as they had a good understanding of financial services. Conversely,
those who were more or less completely excluded were ‘work poor’ as they
were living in households without a regular earner, ‘credit poor’ in that it was
hard for them to get any sort of loan, and ‘information poor’ in that they did
not understand the rules of the new world of personal finance. Early school
leavers, the low paid, unemployed people, women and retired people were
more likely to fall into the latter category.
2.3 People at risk of financial exclusion

International research has consistently found that financial exclusion is
‘concentrated among the most disadvantaged groups and communities and,
as a result, contributes to a much wider problem of social exclusion’ (Sinclair,
2001: 12). Many households move in and out of financial exclusion. Some
people experience short periods of exclusion, maybe more than once in their
lives. For a small number, however, it can be a long-term, perhaps life-long,
situation (Kempson and Whyley, 1999). Low income has been found to
have the most significant impact on financial exclusion (Carbo et al., 2005;
Kempson et al., 2000; Sinclair, 2001). While not mutually exclusive, the main
low-income groups most likely to experience financial exclusion are the long-
term unemployed, old age pensioners, people with disabilities, female single
parents, certain minority ethnic groups, homeless people, young households
who have not yet used financial services, those reliant on state welfare
benefits and those living in social housing or private rented accommodation
(Collard et al., 2003; Kempson and Whyley, 1999; Kempson et al., 2004;
Kempson et al., 2000; OFT, 1999; Rahman and Palmer, 2001; Sinclair, 2001).
Kempson et al. (2004: 1) note that ‘although levels of banking exclusion

vary across the developed world, it is the same groups of people who are
affected’. Research carried out internationally has found that those on low
incomes are twice as likely to be without a bank account (Kempson et al.,

2004). Almost one-fifth (19%) of the Irish population (800,000) is living
in relative income poverty and hence at risk of financial exclusion. Within
this group, there is a smaller group (7% of the population) experiencing
deprivation of basic necessities (i.e. consistent poverty). The living standards
of this category of almost 300,000 people are below those considered the
norm in society. They experience considerable difficulty in making ends meet
and, as such, are at very high risk of financial exclusion.
Categories of the population that are more likely to be on a low income

include older women, lone parents (and their children), people living alone
and larger households with children. 7% of people in work are income poor,
in contrast to 37% of unemployed people, 32% of those on home duties
and 26% of those who are retired. There is also a spatial dimension to low-
income households: 35% of people in rented housing are on a low income,
as compared to only 16% of people in privately owned homes. People living
in the Border, Midlands and Western region of Ireland have a high poverty
rate (26%), as do rural dwellers (24%).
Research in the UK has found that being in receipt of social welfare is closely
linked to financial exclusion (Kempson and Whyley, 1999). In Ireland, almost
one million people are in receipt of a weekly welfare payment, 55% of whom
are on a social insurance benefit, with 45% on a social assistance or means-
tested payment. The main categories are pensioners (85,000), lone parents
(80,000), the unemployed (74,000), people with a disability (73,000) and
low-income families (25,000). A related high-risk group are participants
on training, education and employment programmes. The largest category
here is Community Employment (CE) workers. Other significant groups are
in vocational training (VTOS) and Youthreach schemes. Another vulnerable
category is households in receipt of housing income support, whether in
social housing or the private rented sector.
Poverty statistics are based on results from the EU Survey on Income and Living
Conditions (EU-SILC) 2004 (CSO, 2005).
Relative income poverty refers to an income that is less than what is regarded as
acceptable by general society, giving a lower than normal standard of living. It is
measured as the share of persons with an equivalised income below 60% of the
national median income.
Consistent poverty is relative income poverty combined with the lack of one or
more basic deprivation items (e.g. warm coat, sufficient food, adequate heating).
Includes recipients of family income supplement, farm assistance and the back-to-
work allowance.

The link between ethnicity and financial exclusion is complex as low income
may be the main explanation for some groups being excluded, whereas
language, culture and religion have an impact on other groups (Kempson et
al., 2000). The main Irish minority ethnic group are members of the Travelling
community (approximately 30,000) and research has found that they face
numerous barriers in accessing banking services and affordable credit
(Quinn and McCann, 1997; Quinn and NiGhabhann, 2004). Reports from
new communities suggest that immigrants are facing similar problems to
members of the Travelling community (Quinn and NiGhabhann, 2004).
People living in institutional settings can also have a higher incidence of

financial exclusion. In the Irish context, these include prisoners, asylum
seekers in direct provision, homeless people living in hostels, people in
residential care (e.g. children, people with a disability) and older people living
in nursing homes.
A final at risk category is workers in vulnerable settings. This group includes

migrant workers, who now represent one-tenth of the Irish labour force.
Other vulnerable groups are people in atypical employment (contract and part-
time work) and workers on the minimum wage in low-skilled employment.
As well as vulnerable individuals, communities with high levels of low income

and social disadvantage can be affected by financial exclusion. For instance,
communities in RAPID and CLÁR areas would be at particular risk.
2.4 Banking
International research has found both supply and demand barriers that
contribute to banking exclusion among low-income groups. Supply factors
are related to price (e.g. costs of overdrawing, bouncing cheques and failed
direct debits) as well as conditions such as requiring a minimum account
balance (Kempson et al., 2004). Recent research carried out among financially
New communities refer to a number of communities that have recently arrived in

Ireland, many of whom are refugees and asylum seekers.
RAPID (Revitalising Areas by Planning Investment and Development) is a

government initiative, which targets 25 of the most disadvantaged urban areas
and 20 provincial towns.
CLÁR (Ceantair Laga Árd-Riachtanais) is an investment programme targeted at

disadvantaged rural areas in up to 23 counties.

excluded people in the UK has also highlighted the importance of demand
barriers, including lack of awareness of appropriate financial products and
their perceived advantages, socio-cultural barriers, attraction of alternatives
such as post offices, fear of losing control of money management, confusion
around the complexities of opening a bank account and fear and mistrust of
banks (OLR, 2006).
Banking exclusion has not been the main focus of any previous Irish studies,
although the issue has been addressed to a limited extent by studies among
vulnerable groups such as families living on a low income (Daly and Leonard,
2002), lone parents (Conroy and O’Leary, 2005a), members of the Travelling
community (Quinn and McCann, 1997; Quinn and NiGhabhann, 2004),
adult literacy and numeracy learners (Conroy and O’Leary, 2005b) and
elderly people (Kelly and Parker, 2005). In their qualitative study among 30
low-income families in Ireland, Daly and Leonard (2002) found that the vast
majority had no contact with, or experience of, banks. Similarly, Conroy
and O’Leary’s (2005a) focus groups with lone parents revealed that many
families on welfare do not have access to, or have been refused access to,
mainstream banking.
Producing appropriate identification has been reported as the main barrier

among some vulnerable groups including members of the Travelling
community, immigrants (including refugees and asylum seekers), lone
parents, non-home owners such as those in private rented accommodation,
‘non-utility bill holders’, people who are unemployed, those in receipt of
social welfare payments, homeless people and younger/older people (Conroy
and O’Leary, 2005a; Conroy and O’Leary, 2005b; NTMABS, 2006; Quinn
and NiGhabhann, 2004; Reidy, 2004). Quinn and NiGhabhann (2004) found
that just over one-fifth (22%) of the clients of Exchange House MABS
had bank accounts and 90% of those had been assisted in opening the
accounts by Exchange House. Among those who did not have a bank
account, the majority were refused access as they did not have appropriate
identification, while others were refused as they were unemployed and did
not live in the vicinity. Moreover, low literacy levels hindered some members
of the Travelling community with the form filling and ‘red tape’ associated
with joining financial institutions. Those living on the side of the road or in
unofficial sites faced particular difficulties in relation to opening accounts
(Quinn and McCann, 1997; Quinn and NiGhabhann, 2004). Likewise, in a
Exchange House MABS offers money advice and education programmes to the
Travelling community in Dublin.

survey carried out among 200 poor elderly people in Dublin, a number of
barriers to banking were cited including charges, unfriendly staff, difficulties
using ATM cards, long queues and no seating (Kelly and Parker, 2005).
2.5 Credit
Low-income households need access to credit, either on a regular or an
occasional basis, usually for small amounts of money (Sinclair, 2001).
However, being without a bank account can prevent people accessing
credit facilities. While the move away from personal assessments of credit-
worthiness to centralised, computer-based credit scoring has widened
access to credit, it has subsequently made it more difficult for low-income
consumers (Sinclair, 2001). Particular difficulties may be faced by those with
a history of bad debt. Also, people with no credit history could be viewed by
commercial lenders as a bad risk because they have no record of successful
debt repayment (Sinclair, 2001). Moreover, mainstream financial services may
be unable to meet their needs, as those on low incomes often seek small
loans for a short period of time (Carbo et al., 2005).
Research carried out in Ireland has found that the most common reasons
for accessing credit are for child-related expenses (e.g. school and clothing),
consumer goods (e.g. fridges and washing machines), emergency situations
(e.g. funerals and unexpected bills) or changes in personal circumstances
(e.g. separation, divorce, relationship breakdown, disability or illness) (Conroy
and O’Leary, 2005a; Daly and Leonard, 2002). For many members of the
Travelling community, the main credit needs are for the replacement of
caravans and for funerals, as well as general household expenditure (Quinn
and McCann, 1997; Quinn and NiGhabhann, 2004).
In order to meet these needs, low-income households in Ireland tend to

engage in 2 major types of borrowing: informal borrowing from relatives or
neighbours and formal borrowing from credit institutions. Located between
informal and formal credit are moneylenders. Daly and Leonard (2002)
found that the average borrowing among 30 low-income households was
the equivalent to over 250% or 8 times the average household income and
it was common for them to have more than one source of credit. However,
not all those living on low incomes can access credit. In a study exploring
deprivation in a disadvantaged urban community in Dublin, Collins (2006)

found that 29.4% of ‘mildly deprived’ households, and 64.7% of ‘severely
deprived’ households, reported they could not raise €1,000 if an emergency
arose.
Banks
Irish studies have found that low-income households and vulnerable groups
such as lone parents are less likely to source banks for loans than other
credit institutions (Byrne et al., 2005; Conroy and O’Leary, 2005a; Daly and
Leonard, 2002). Daly and Leonard (2002) found that 27% of the 30 low-
income households they interviewed were currently borrowing from a bank,
while Conroy and O’Leary’s (2005a) study revealed that 21% of lone parents
were borrowing from a bank. Similarly, 21% of low-income consumers
interviewed by Byrne et al. (2005) were currently borrowing from a bank.
As a general rule, those that do borrow from banks usually secure loans for
small amounts, averaging between €3,000 and €5,544 (Conroy and O’Leary,
2005a; Daly and Leonard, 2002).
Credit unions
Credit unions are one of the most important sources of low-cost credit in
Ireland (Byrne et al., 2005). Daly and Leonard (2002) found that the average
size of a credit union loan among 30 low-income households was €1,875.
In a survey of 253 low-income consumers in the Munster region, Byrne et
al. (2005) found that 74% were credit union members, 67% of whom were
currently borrowing from credit unions. Furthermore, among those surveyed,
50% of lone parents and of those who were retired, 40% of those who
were unemployed and 69% of those who were in part-time employment
were currently borrowing from credit unions. In another study with elderly
people living in poverty in Dublin, respondents stated they preferred credit
unions to banks or building societies, as they were seen as less expensive
and more flexible, opening times were more convenient, staff were more
accommodating and the debt died with the debtor (Kelly and Parker, 2005).
Nevertheless, research in Ireland has found that low-income consumers

can face barriers in accessing and using credit unions, particularly more
vulnerable groups such as unemployed people and members of the Travelling
community (Byrne et al., 2005; Quinn and NiGhabhann, 2004). The main
obstacles for low-income consumers are a poor credit history or the need to

have built up a savings history to apply for a loan (Byrne et al., 2005; Quinn
and NiGhabhann, 2004). Quinn and NiGhabhann (2004) also found that low-
income consumers may self-exclude themselves as there was a general lack
of interest among members of the Travelling community towards becoming
credit union members. Furthermore, low-income consumers may have
incorrect perceptions of credit unions (e.g. credit unions are unlikely to give
out small loans). Byrne et al. (2005) concluded that the major shortcoming of
Irish credit unions would appear to be their limited marketing, in particular to
low-income groups. They also noted a perception among low-income groups
that credit unions are more interested in middle-class clientele as is reflected
in their move to issuing larger loans.
Moneylending
There are an estimated 150,000 people in Ireland using moneylenders for

small loans, averaging around €423 (Conroy and O’Leary, 2005a; Daly and
Leonard, 2002). Research in Ireland has concluded that the difficulties low-
income consumers face in opening bank accounts and accessing affordable
credit, coupled with decreased financial autonomy, are related to the
persistent use of moneylenders (Byrne et al., 2005; Daly and Walsh, 1988;
Quinn and McCann, 1997; Quinn and NiGhabhann, 2004). Conroy and
O’Leary (2005a) found that vulnerable groups such as lone parents are more
likely to be in debt to moneylenders and hire purchase agreements than
other sources of credit.
Byrne et al. (2005) found that 36% of 253 low-income consumers in

Munster were currently borrowing from moneylenders. Furthermore, 72%
of those who were retired, 33% of those who were unemployed and 36%
of lone parents were currently borrowing from moneylenders. The majority
(65%) of them were also borrowing from mainstream sources of credit
(mainly credit unions). However, over one-third (35%) of those who were
currently borrowing from moneylenders were using this form of credit only
and the authors attributed this to a ‘lack of access to mainstream sources
of credit’ (Byrne et al., 2005: 21). The main reasons cited by low-income
consumers for accessing moneylenders were tradition, fast response,
convenience, close relationship with the moneylender and consistency.
Furthermore, moneylending is not usually perceived as a problem among
low-income groups and the cost of credit does not appear to influence the
decision to borrow.

The main advantages of moneylending reported by low-income consumers
are that it is not necessary to have a previous credit history and there is no
savings requirement (Byrne et al., 2005). Lone parents in one study reported
that moneylenders do not require bank statements, personal documentation
or proof of earnings (Conroy and O’Leary, 2005a). Moneylenders appeal to
low-income groups as they are informal, convenient, easy to access, loans
are granted immediately, repayments are weekly and no collateral is needed
(Conroy and O’Leary, 2005a; Quinn and NiGhabhann, 2004). Furthermore, if
customers have difficulty repaying, they can renegotiate the loan at no extra
charge to the customer (Byrne et al., 2005).
The main barrier associated with moneylending in Ireland is the exorbitant

interest rates charged (Quinn and NiGhabhann, 2004). Generally, those who
borrow from moneylenders pay out a higher percentage of their weekly
income on loans. Byrne et al. (2005) found that 60% of those who were
borrowing from only moneylenders were paying out over 20% of their
income every week on loans. They concluded that moneylending was not
only a ‘serious drain on the household economy’ but also ‘on the local
economy of poor communities across Ireland’ as a ‘significant percentage
of state transfers into communities is quickly drained out in high interest
payments to moneylending companies’ (Byrne et al., 2005: 23).
There have been no studies carried out in Ireland that specifically examine
illegal moneylending. However, Daly and Walsh (1988) found that many
of the moneylenders operating in low-income communities in Dublin were
illegal. In a more recent study, Byrne et al. (2005) found that 1% of low-
income consumers in Munster were using illegal moneylenders. Often
low-income consumers are unable to distinguish between legal and illegal
moneylenders, although lone parents in Conroy and O’Leary’s (2005a) study
did report that illegal moneylending was not as common in their locality
as hitherto but they asserted that in other areas it was still widespread and
usually collected by local women.
Informal borrowing
Low-income consumers engage on a regular basis in informal borrowing

from friends and relatives (Conroy and O’Leary, 2005a; Daly and Leonard,
2002). Daly and Leonard’s (2002) study among 30 low-income households
revealed that a relative outside the household was the most popular source
of informal credit (average loan size €34). They found that just over half of

all households used relatives as a form of credit, although less than one-tenth
had a loan from relatives at the time of interview. Borrowing from friends
and neighbours was almost as popular although this was usually for smaller
amounts of money (average €19). Conversely, Byrne et al.’s (2005) study
found that only 9% of low-income consumers were currently borrowing from
relatives, friends or neighbours and that respondents were more likely to
access loans through credit unions. Daly and Leonard (2002) highlighted that
those borrowing from relatives and friends would have preferred not to use
this form of credit but considered it a necessity.
2.6 Savings and other financial services
Savings
Those who are financially excluded are less likely to have savings, which
means they have no security or flexibility for unexpected events and
no assets for the future (Kempson et al., 2000). Those who save small
amounts of money informally do not benefit from the interest rates and tax
advantages that people using formal methods enjoy (Kempson et al., 2000).
Furthermore, those who save money at home are vulnerable to losing it in
the event of a fire or burglary. In a study on deprivation in a disadvantaged
urban community in Dublin, Collins (2006) found that almost half (49.6%)
of households had savings (of at least €15 per month) for ‘rainy days’ or
retirement. However, 45.2% of households reported that they did not have
savings as they could not afford it.
Insurance
Due to their lack of disposable income, it is rare for low-income consumers

to have insurance policies (Kempson et al., 2000). According to Carbo et
al. (2005), insurance products have become expensive as the market grows
increasingly niche-oriented. As a result, insurance premiums are now based
on smaller risk pools, which has led to higher charges for higher risk groups,
who are more likely to be lower income groups. For instance, if people living
in disadvantaged areas have access to home contents insurance, structural
geodemographic factors mean that they tend to pay more to insure their
homes (Sinclair, 2001). Other barriers include lack of knowledge about what
is available on the market, conditions attached to policies, negative views of

the principles of insurance and inability to pay annual or monthly insurance
premiums (Carbo et al., 2005; Kempson et al., 2000). Lack of home contents
insurance means that unexpected events, such as fire, burglary, ill health or
redundancy/unemployment, will further compound social exclusion (Kempson
et al., 2000).
Life assurance is one type of cover people on the margins of financial

services are likely to have (Kempson et al., 2000). However, these policies
have been criticised for their lack of flexibility and transparency and many
lapse after their first few years (Kempson et al., 2000). Hitherto, people on
low incomes accessed life cover and other basic insurance services through
door-to-door salespeople but many insurance companies no longer offer this
service. Therefore, direct debit has become the most common way to pay for
insurance, which excludes those without the appropriate banking facilities
(Kempson et al., 2000).
2.7 Manifestations of financial exclusion
Money management
The defining characteristic of low-income households in Ireland is their

reliance on a set weekly cash income, primarily from the state, in the form
of either welfare transfers or training or employment allowances. A smaller
number may have another income source from employment or farming.
As well as weekly payments (e.g. unemployment benefit, family income
supplement), low-income households may receive monthly payments (e.g.
child benefit), quarterly payments (e.g. early childcare supplement) and
annual payments (e.g. clothing and footwear allowance). This makes money
management challenging, particularly without a bank account. The majority
of welfare payments are paid in cash through the post office.
The lack of a bank account also means that low-income households do not
have a safe and secure mechanism to receive and store their income, which
leaves them vulnerable to theft and burglary. Managing a cash budget can
also be more complex, costly and time-consuming and cashing cheques can
be more problematic (Kempson et al., 2000; Kempson and Whyley, 1999).

Bill payment
Despite low-income households facing strict constraints on their weekly

budget, priority is usually given to bill payment (after food shopping) in order
to avoid having a service cut off or falling into arrears (Daly and Leonard,
2002). The payment of bills is typically managed by putting money aside on
a weekly basis, often formally through the credit union, post office, bank or
MABS. The usual pattern is to pay the bills in person in cash. However, those
who pay in cash are prone to theft or losing money. It is also more time-
consuming as people may have to travel to a number of different outlets
(Daly and Leonard, 2002; Kempson et al., 2000).
Over-indebtedness
There is no official European definition of over-indebtedness. Stamp (2006:

12) suggested the following definition for use in the Irish context, based on
the key components of previously proposed European definitions:
Households are over-indebted if their net, habitual, maximised income,

including realisable cash assets, is so inadequate on a persistent basis,
without recourse to extra borrowing, charity or gifts, as to render them
objectively unable to meet both living expenses regarded as essential by
Irish society generally and deferred payments as they fall due.
An important distinction needs to be made between this and indebtedness

referring to secured and unsecured borrowing, which may not cause a
problem for the consumers concerned. While more affluent households in
Ireland can experience over-indebtedness, ‘poorer households are much more
likely to be in persistent and multiple debt and to be going without basic
essentials in addition to experiencing over-indebtedness’ (Stamp, 2006: 13).
Korczak (2004: 7) highlights 5 different ways in which over-indebtedness can
be both a result and a driver of financial exclusion:
» Access exclusion to information and financial services (e.g. refusal of a

bank account)
» Price exclusion when people only gain access to financial products at prices
they cannot afford

» Condition exclusion when the conditions attached to the financial
products make them inappropriate to the needs of people with debts
» Self-exclusion when people withdraw from social and financial life because
of fear, shame, disappointment or resignation as a result of debt
» Social exclusion when people are excluded from social life by creditors’
sanctions (e.g. compulsory evictions).
Similarly, Comhairle (2003) highlighted inaccessibility of mainstream financial

services as one of the 4 core issues underlying over-indebtedness in Ireland
(as well as detrimental changes in circumstances, inadequate income and
unethical credit practice).
The occurrence of debt is reflected in analysis of the latest European Union

Survey on Income and Living Conditions (EU-SILC) data, which shows that
experiencing debt problems arising from ordinary living expenses is the most
common type of deprivation reported (8.7%) and is particularly prevalent
among lone-parent households (36.6%) and other households with children
(13%) (CSO, 2005). Daly and Leonard (2002: 32) also found that over-
indebtedness was a particular feature of life on a low income as almost half
of the 30 low-income households they interviewed were either ‘sinking under
consistent or increasing debt’ or were ‘drowning under multiple debts’.
As highlighted in Section 2.5 above, low-income consumers may accrue

debts through formal and informal borrowing. In addition, low-income
households may be in debt with rent and utilities, usually on several bills or
services simultaneously. Daly and Leonard (2002) found that the 30 low-
income households they interviewed were most likely to be in arrears with
the rent or mortgage and that debts to local authorities averaged twice the
household’s weekly income. Similarly, Conroy and O’Leary (2005a) found that
among MABS clients who were local authority tenants, 43% were in arrears
with rent. The second most common type of arrears was to utility companies
(including telephone, gas and electricity). Conroy and O’Leary (2005a) found
that 40% of MABS clients were in arrears with their electricity bill (ranging
from €35 to €1,485); 25% were in arrears on telephone bills (ranging from
€75 to €2,600); and 18% were in arrears with their gas supply (ranging
from less than €200 to €700). Concurrent with other Irish research, lone
parents were found to be at particular risk of falling into arrears with rent
and utilities, ‘suggesting that the presence of children in a household may be
a factor in forcing bill-payers into arrears’ (Conroy and O’Leary, 2005a).

Non-repayment of debts and loans can be extremely serious. As Conroy
and O’Leary (2005a: 78) point out, ‘the ultimate penalty for the build-up
and non-repayment of arrears may be the disconnection of an essential
energy supply or the eviction of tenants from rented accommodation’. Joyce
(2003) highlights that non-repayment of debts can lead to imprisonment
and he estimates that at least 200 people are imprisoned in Ireland each
year in relation to the non-payment of civil debt. In addition, thousands of
applications are made to the Irish courts annually for instalment orders and
committal orders to enforce judgments against consumers in straitened
financial circumstances.
2.8 Conclusions
There is a general consensus among commentators that financial exclusion
is primarily concerned with the lack of a bank account, in particular a
current account, as well as lack of access to affordable credit, savings
products and home contents insurance. Financial exclusion is complex and
multi-dimensional and low-income consumers face a range of barriers in
relation to ‘access’ and ‘use’. Specific dimensions of exclusion are related
to geographical isolation, access, conditions, marketing, self-exclusion and
electronic exclusion. Low income is the most significant influence on financial
exclusion. National and international research has found that low-income
groups are at risk of financial exclusion, including the long-term unemployed,
old age pensioners, people with disabilities, female single parents, certain
minority ethnic groups, homeless people, young households who have
not yet used financial services, those reliant on state welfare benefits and
those living in social housing or private rented accommodation. Those who
experience financial exclusion can find money management and bill payment
more time-consuming and costly and they can face difficulties accessing
affordable credit and accumulating assets (e.g. savings, insurance). Financially
excluded individuals are also at risk of over-indebtedness.

Chapter 3
Financial exclusion
and financial
services in Ireland
The first part of this chapter identifies relevant indicators of financial
exclusion and summarises the available data from secondary data sources.
The second part presents an overview of the main financial products available
to low-income consumers in Ireland. It concentrates on the supply-side
barriers, which may offer some explanations for the levels of non-usage
highlighted in the first section.
3.1 Indicators and data sources for

financial exclusion
To measure financial exclusion it is necessary to develop an appropriate set of
indicators that meet the following criteria:
» Reflects a financial service which is common to the majority of population
» Connected with low income and not an issue of choice/preference
» Measurable in practice, with reliable and timely data
» Allows comparisons over time and ideally with other countries
» Outcome-focused and independent of manipulation by administrative

factors or policy changes (e.g. SSIAs).
A variety of indicators have been developed internationally to measure

financial exclusion. At EU level, the most detailed work has been carried out
in the UK by HM Treasury (2004), the Financial Services Authority (Kempson
et al., 2000) and the Financial Inclusion Taskforce (FITF, 2005). According to
these groups, the key indicators to measure financial exclusion are:
» Number of households/individuals with no bank account
» Number of households/individuals with no current account.
The FITF (2005: 3) maintains that measuring non-usage of a bank account

offers a ‘suitable measure for the most extreme form of financial exclusion’.
However, it also stresses that it is necessary to measure non-usage of a
current account as ‘operating without a current account imposes real costs
on those who can least afford them’ (FITF, 2005: 3).

Further indicators include:
» Number of households/individuals with no access to affordable credit
» Number of households/individuals with no savings
» Number of households with no (home contents/life) insurance
» Number of households/individuals with no access to money advice.
As these indicators show, financial exclusion is primarily measured by non-

ownership of different types of products. Second, it is important to measure
an individual’s capacity to use these products. For instance, measurement
could include whether individuals can afford to save regularly, are able to
repay small-scale loans or have the resources to purchase insurance. Third,
it is also useful to examine individual factors that may influence ownership
of certain products. These include demographic factors (e.g. gender, age,
household status, marital status), socio-economic factors (e.g. employment
status, income, education levels, socio-economic group) and other indicators
such as location, housing tenure and ethnicity.
Financial exclusion is usually measured at household level. However, it is also

useful to measure it at an individual level as household statistics ignore intra-
family inequalities (Kempson and Whyley, 1999). As Gloukoviezoff (2004: 3)
points out, when a single member of a household has access to an account,
other members become highly dependent and in the event of conflict
and/or separation ‘these inequalities may have highly significant financial
consequences’.
There is no dedicated data source to measure financial exclusion in Ireland.

The main sources of available information are official statistical data (e.g. Irish
and European household surveys) and market research data (e.g. financial
industry and Eurobarometer surveys).
In 2008, the EU-SILC will include a module on financial exclusion and debt which
will generate data on more than 5,000 households (14,000 individuals). See
Appendix (Section A.1.2) for further information.

3.1.1 Estimates on access to bank accounts
Official Irish statistical sources
The most recent Household Budget Survey (HBS) shows that almost 33%
of households in 1999/2000 were without a current account. Figure 3.1
highlights a clear linear relationship between current account ownership and
income. In other words, current account ownership decreases systematically
as income decreases. Households on a low income were significantly less
likely to have a current account than those on higher incomes. As shown
in Figure 3.1, over 68% of households in the lowest income decile were
without a current account in 1999/2000 compared to less than 6% of those
in the highest income decile.
Figure 3.1 Percentage of households without a current account by

income deciles (1999/2000)
-%
+-#&
,% +'#*
+%
),#,
*% )(#%
)%
('#,
'-#)
(%
'&#, '%#&
&,#.
'%
&'#'
&% *#+
%
&hi 'cY (gY )i] *i] +i] ,i] -i] .i] &%i] HiViZ
<gdhh=djhZ]daY>cXdbZ9ZX^aZh
Source: CSO, 2001. Household Budget Survey, 1999/2000.
The HBS is a survey of households’ income and expenditure and is a representative

sample of 8,000 households. It is only carried out every 5 years and the latest data
available are for 1999/2000. See Appendix (Section A.1.2) for further information.
Income deciles are constructed as follows. Households are ranked in ascending

order of gross income (direct income plus state transfers). They are then evenly
divided into 10 groups of households. The first group of households having the
lowest incomes is called decile 1 (i.e. the poorest). The tenth group of households
(decile 10) has the highest incomes (i.e. the richest).

Irish market research surveys
Market research surveys also provide information on ownership of bank/

current accounts, e.g. surveys undertaken by the Financial Regulator and the
Irish Bankers Federation. The Financial Regulator Customer Survey showed
that 10% of individuals (based on a sample of 1,000 respondents aged 15
plus) were without a bank account in 2003. The IBF market research survey
in 2003 focused primarily on current accounts and showed that 28% of
individuals (based on a sample of 1,200 adults) were without a current
account. Among the 28% of the population who did not have a current
account, nearly two-thirds (62%) stated specifically that it was because they
did not need or want a current account, while a further 12% stated that it
was because they preferred to use cash.
The most recent market research survey was commissioned by the Irish
Payment Services Organisation in 2006 (Marketing Partners Ireland Ltd, 2006).
This survey found that among a quota sample of 1,074 individuals (aged 18
years and over) 11% were ‘unbanked’ (i.e. did not hold a bank account at
all). Those who were over 65 years, retired or unemployed were the most
likely to be ‘unbanked’. This 11% can be further divided into 3% who were
‘unaccounted’ (i.e. did not hold a bank, credit union or post office account)
and 8% who held a post office or credit union account but had not opened a
bank account. Among those who held a post office or credit union account,
50% had a credit union account and 62% had a post office account.
European market research surveys
The Eurobarometer survey (European Commission, 2004b) in 2003 found

that Ireland had a high percentage of respondents, 46%, without a current
account (which comes with a payment card and/or a chequebook) compared
to the EU average of 19%. As illustrated in Figure 3.2, Greece, where 80%
of respondents were without a current account, was the only country that
reported a higher rate than Ireland. Analysis across the EU member states
showed that women were less likely to have a current account, as were
younger people and those who had lower levels of education.

Figure 3.2 Percentage of respondents without a current account
(which comes with a payment card and/or a chequebook) in EU
member states (2003)
-%
,%
+%
*% )+
)%
(%
&.
'%
&%
%
b
<Z g`
<g n
XZ
;g c
?h XZ
Z
C Z Wd n
i] jg\
6j Yh
Ed g^V
;^ Va
Hl cY
Zc
J@
+
b a
Vc
'
Wd
V^
mZ >iV
j\
^j
ZZ
Vc
ZY
V
hi
;K
He
cb
gb
aV
ca
[b
a\
gi
Zg
7Z
9Z
Aj
Note: This Eurobarometer survey was based on a sample of 1,007 people in

Ireland aged 15 and over (total of 16,059 in 15 EU member states).
Source: European Commission, 2004b. Public Opinion in Europe: Financial
Services Report B.
As shown in Table 3.1, the most recent Eurobarometer survey, carried out
in 2005, found that 57% of the Irish population reported having a current
account (with a payment card and/or chequebook), which was lower than
the EU average of 71%. Although these results are not comparable to the
previous survey undertaken in 2003, both surveys indicate that Ireland
has a much lower rate of current account ownership (which comes with a
payment card and/or chequebook) than other EU member states. Across the
EU member states, younger respondents, the unemployed and students were
less likely to have a current account (which comes with a payment card and/
or a chequebook).
The 2005 report noted that ‘the results for this question cannot be compared
to those observed in the previous wave, where, in this case, each item was put
separately to respondents who were asked to respond “yes” or “no” according to
whether or not they have the financial product in question. However, in the latest
survey, respondents were asked to select from a list of financial services all those
which they personally have’ (European Commission, 2005: 87).

Table 3.1 Percentage of respondents with a current account (which
comes with a payment card and/or a chequebook) in EU member states
(2005)
The Netherlands 95%
Belgium 93%
Germany 92%
France 87%
Slovenia 87%
Finland 82%
UK 76%
Sweden 75%
Luxembourg 74%
Portugal 74%
Estonia 74%
Austria 73%
Czech Republic 73%
EU 25 71%
Italy 62%
Slovakia 62%
Ireland 57%
Malta 53%
Spain 50%
Hungary 49%
Denmark 47%
Republic of Cyprus 46%
Poland 46%
Lithuania 42%
Latvia 29%
Greece 10%
Note: This Eurobarometer survey was based on a sample of 997 people in Ireland
aged 15 and over (total of 24,708 respondents in 25 EU member states).
Source: European Commission, 2005. Public Opinion in Europe on Financial Services.

3.1.2 Estimates on access to other financial services
Savings
A recent release from the Quarterly National Household Survey (QNHS),

carried out by the Central Statistics Office, (CSO, 2006) provides information
on the ownership of special savings incentive accounts (SSIAs). Almost
38% of the population aged 21 and over had an SSIA. The youngest and
oldest age groups were less likely to have an SSIA: over one-fifth (22%) of
those aged 21 to 24 had an SSIA and almost one-quarter (24.5%) of those
aged over 65. The unemployed (16%) were much less likely to have an SSIA
than those in employment (47%). A high percentage of those employed in
professional and associate professional/technical employment had an SSIA
(73% and 63% respectively).
Further data on savings is provided by the EU-SILC survey. In 2004, the EU-
SILC found that over half of the Irish population (55%) reported that they
had difficultly saving income regularly (CSO, 2005). As Table 3.2 shows,
this difficulty is intensified for people on low income, with almost 83% of
individuals in income poverty and a further 90% of individuals in consistent
poverty not able to afford to save income regularly. Also, individuals living in
local authority or private rented accommodation had greater difficulty saving
income regularly (73%) than those in owner-occupied accommodation (51%).
The QNHS interviews 39,000 households every quarter. See Appendix (Section
A.1.2) for further information.
See Chapter 7 (Section 7.6) for further details on SSIAs.

Table 3.2 Percentage of the Irish population that cannot afford to save
income regularly (2004)
% in income % in consistent
% that cannot
poverty that poverty that
save income
cannot save cannot save
regularly
income regularly income regularly
Total 54.7 82.6 90.1
Tenure status
Owner-occupied 50.7 78.8 83.6
Private/local
73.0 90.3 95.3
authority rented
Note: Data are for head of household.

Source: CSO, 2005. EU Survey on Income and Living Conditions (EU-SILC) 2004
(with revised 2003 estimates).
Home contents insurance
The EU-SILC in 2004 also revealed that 28% of the Irish population were
without home contents insurance (CSO, 2005). Individuals in private rented
accommodation or local authority housing were much less likely to have
home contents insurance. As shown in Table 3.3, over 88% of those living
in private rented or local authority accommodation were without home
contents insurance. Furthermore, 51% of those in income poverty and 69%
of those in consistent poverty were without home contents insurance. Almost
all of those living in private rented or local authority accommodation and in
consistent poverty were without home contents insurance (96%).

Table 3.3 Percentage of the Irish population without home contents
insurance (2004)
% in income % in consistent
% without
poverty without poverty without
home contents
home contents home contents
insurance
insurance insurance
Total 28.2 51.2 69.2
Tenure status
Owner-occupied 14.8 31.4 36.5
Private/local
88.5 92.2 95.6
authority rented
Source: CSO, 2005. EU Survey on Income and Living Conditions (EU-SILC) 2004
(with revised 2003 estimates).
Life assurance
Table 3.4 presents data on individuals with life assurance in EU member states
(European Commission, 2005). It shows that in 2005, over one-third of Irish
respondents (36%) had life assurance, which compared favourably to the
EU average of 30%. The groups least likely to own life assurance across the
EU member states were the young, those who finished education earlier, the
unemployed and the retired.

Table 3.4 Percentage of respondents with life assurance in EU member
states (2005)
Sweden 54%
The Netherlands 45%
UK 40%
Germany 40%
Denmark 39%
Austria 39%
Belgium 38%
Luxembourg 38%
Slovakia 37%
Slovenia 37%
Czech Republic 36%
Ireland 36%
France 35%
Republic of Cyprus 33%
EU 25 30%
Poland 26%
Malta 26%
Hungary 24%
Finland 22%
Portugal 21%
Spain 18%
Estonia 16%
Greece 15%
Italy 10%
Latvia 10%
Lithuania 9%
Note: This Eurobarometer survey was based on a sample of 997 people in Ireland
aged 15 and over (total of 24,708 respondents in 25 EU member states).
Source: European Commission, 2005. Public Opinion in Europe on Financial Services.

3.2 Supply-side barriers to financial
services in Ireland
The second part of this chapter presents an overview of the main financial
products available to low-income consumers in Ireland. It examines the
factors which may attract low-income consumers, as well as highlighting
the supply-side (or institutional) barriers which may exclude or deter them
from accessing and using these services. These factors may offer some
explanations for the non-usage of products in the previous section.
3.2.1 Banking
A current account is generally viewed as the key financial product as it offers

a range of services including access to cash, bill payment facilities and money
transmission (through direct debits and standing orders). It also acts as a
gateway to a range of other financial products such as credit and insurance.
Retail banks in Ireland are the only institutions that offer a current account
facility as they are part of the Irish clearing system. The main building society,
EBS, does not offer current account facilities as it is not part of the clearing
system. Instead it offers a demand savings account where wages/social
welfare payments can be paid electronically. Credit unions do not offer
current accounts, although some offer basic transactional services. A small
number can accept wages by electronic funds transfer (EFT) via Paypath,
while approximately 50% offer direct debit/standing order facilities. Ten credit
unions offer full EFT facilities, while 6 are offering it on a pilot basis (0.04%
of credit unions in total). Some credit unions offer an ATM service and 4
credit unions offer ‘IQ’ cash cards, which can be used at any credit union,
Bank of Ireland or AIB ATM. An Post is currently planning to launch a retail
banking service.
In 2005/2006, increased competition in the Irish banking sector resulted in

a huge move by retail banks towards ‘free’ transactional banking. This has
removed ‘normal’ transaction charges for many current accounts such as
quarterly fees, ATM withdrawals and standing order/direct debit facilities.
However, ‘out-of-course’ transaction charges still apply (e.g. bounced
cheques, failed standing orders/direct debits, unauthorised overdrafts). A
particular barrier for those on low incomes is higher charges for over-the-
counter transactions as those on low incomes often prefer to use this facility.

Government stamp duty of approximately €10 per annum is normally
charged to a bank account for the use of an ATM card. When bank charges
apply, banks are obliged to provide notification of any fees/charges 14 days
in advance of the charge being debited, although this does not apply to
government stamp duty. Both the IBF and IPSO have contended that the
government should abolish stamp duty on cards. IPSO (2005: 11) claims that
it acts as a disincentive ‘to the movement of the Irish payments system away
from the inefficiencies of cash and cheques towards payment cards’.
One of the most useful products attached to current accounts is the Laser
card (Irish debit card). It is described as an electronic version of a cheque.
More than one million people in Ireland now have one. The main advantages
are that it is convenient, it offers a high degree of financial control as well as
increased security (as cardholders do not need to carry cash) and it is widely
accepted by retailers. However, the government stamp duty of €10 also
applies to Laser cards. Transaction fees may also apply.
In addition to encountering barriers in relation to charges, low-income

consumers could also be deterred by terms and conditions attached to
current accounts. For instance, some of the ‘free’ banking offers are only free
while an account is in credit or when a number of transactions have been
carried out via the Internet.
3.2.2 Credit
Access to affordable credit is vital for low-income groups in order to buy

costs. Hence, their need is generally for small amounts of money, repaid in
weekly instalments over a short term. In Ireland, personal loans are offered
by retail banks, building societies, credit unions, home credit associations and
other financial organisations that deal with personal loans.
Banks and building societies
The main barrier for low-income consumers accessing loans through a bank
is credit scoring carried out by financial institutions with data provided by
the Irish Credit Bureau (ICB). There are currently 56 financial institutions
registered as members of the ICB and the database contains almost 3

million names and addresses. The ICB produces credit files on an individual’s
record over the preceding 24 months, which are then used by lenders
for credit scoring. In addition, information is kept on the full term of any
loans (whether a 3-year loan or a 30-year mortgage) and the customer’s
performance on a loan stays on the ICB database for 5 years after the loan is
completed. This process is likely to lead to the exclusion of those with a poor
credit history or a history of bad debt, as well as other high-risk groups.
Bank loans are also less likely to appeal to low-income consumers as the
minimum amount loaned by banks is usually higher than the amount they
want to borrow. Furthermore, smaller loans tend to have higher interest
rates, monthly repayments do not suit the weekly budget cycles of low-
income consumers and banks usually offer little flexibility for occasional
missed payments.
Apart from loans, banks also provide credit through overdrafts and credit
cards. The advantages of these are that credit can be provided in small
amounts. However, overdrafts and credit cards are usually provided alongside
a current account (therefore excluding those who do not have one) and it is
usually necessary to have a good credit history. Also, as there is little discipline
imposed on repayment, low-income consumers often fear debt spiralling out
of control and hence prefer not to use these types of credit. There is also a
€40 government stamp duty on credit cards.
Credit unions
Overall, low-income consumers are more likely to go to credit unions for a

loan. Appealing features include that there are no conditions in terms of loan
size, insurance or even a minimum savings amount, and in most cases there
is no waiting period. Loan protection is provided free of charge and there
are no hidden charges or penalties for default. Interest rebates are paid to
members who paid loan interest on their loans during the preceding financial
The ICB database relates to credit agreements between ICB members and their
customers. When an individual enters a credit agreement with an ICB member,
details of the individual’s performance in complying with the terms of the
agreement are put into the ICB credit file database, which may be accessed by all
member institutions of the ICB. Each time a person applies for credit from an ICB
member, that institution accesses the ICB’s credit file to ascertain the applicant’s
performance under any previous credit agreements with ICB members.

year. Loans can be paid weekly and renegotiated with reduced payments. The
interest rate is capped at 12.68% APR. In their study on credit unions, Byrne
et al. (2005: 49–50) conclude that:
The credit union loan product would appear to be accessible to low-

income groups in terms of how loans are assessed, the availability of
small loan sizes, the reasonable costs of loans […] and the geographical
proximity of the credit union office […] In terms of the simplicity and
transparency of the credit union loan product, the possibility of weekly
repayments, lack of charges and a flexible and sympathetic approach to
repayments, the credit unions perform very well.
However, there are conditions that may act as an obstacle to some low-
income consumers. Loans are granted in credit unions based on a member’s
track record and his/her ability to repay. This is usually determined by a
savings history and, as Byrne et al. (2005) highlight, low-income consumers
may find it difficult to build up a savings record. Loan assessment may also
be based on character (i.e. local knowledge of the individual). There is also a
move towards assessing a credit union loan on capacity (i.e. credit scoring),
which is likely to exclude some low-income groups. Byrne et al. (2005) also
find that credit unions are moving towards providing larger loans, which
would also not suit the needs of low-income consumers. However, in 2004, a
large percentage (45%) of credit union loans were for less than €1,000 and
a further 39% were for between €1,001 and €5,000, indicating their appeal
to those on low incomes (ILCU, 2005a).
Moneylenders
Low-income consumers often turn to moneylenders when credit is

unavailable from other mainstream institutions or when credit is needed for
small amounts of money (Byrne et al., 2005). Although some organisations
may offer loans up to €3,000 over longer time periods, most loans range
in size between €100 and €1,300, with the average loan ranging between
€300 and €450. Generally loan terms vary from 20 weeks to 50 weeks.
Moneylenders attract low-income consumers as they collect loan payments
in cash on a weekly basis, usually at the customer’s home. The borrower also
has the option of paying double the following week or adding extra weeks
onto the term of the loan if they cannot make the payment. If the borrower
misses between 6 and 8 payments, it is generally assumed that the borrower

is struggling to make repayments, and it is common for the lender to reduce
the amount to a level that the borrower can afford and to increase the length
of the term.
One of the main disadvantages of loans from moneylenders is their high

interest rates, ranging from 23% to 200% APR. In addition, rollover loans,
whereby customers can take out further loans before they have fully repaid
their current loans, are common practice among moneylenders, which means
that customers end up paying interest on interest and can become ‘locked
into’ home credit (Whyley and Brooker, 2004).
Sub-prime credit sector
There are a number of other providers operating in the sub-prime credit sector
in Ireland, including mail-order catalogue companies and pawnbrokers.
Agency mail-order catalogues are similar to moneylenders in that transactions

are conducted face-to-face in the customer’s home. Customers can purchase
items from a catalogue agent and pay for them on a weekly basis at a
fixed rate of interest. The advantages for low-income consumers are that
they are relatively simple and quick to access, customers do not need a
current account and borrowing is usually on a small scale. Many catalogue
companies also offer 52 weeks’ credit as a way of easing pressure at
Christmas (Conroy and O’Leary, 2005a). However, mail-order catalogues
usually offer less flexibility over missed payments than moneylenders, and, as
purchases can be made before existing commitments are repaid, debts can
spiral (Conroy and O’Leary, 2005a; Whyley and Brooker, 2004).
Very few pawnshops exist in Ireland and those that do have a long-term local
presence which means they are trusted and are perceived as understanding,
sympathetic and non-judgmental. The process is also relatively quick and
simple with no formal application process or credit check. However, the
service has become increasingly limited to jewellery and as loans are often
repaid in one instalment there is no discipline of repayment. Furthermore, if
loans are not repaid in full, goods are forfeited (Whyley and Brooker, 2004).
Other sub-prime credit providers include cheque cashers, payday loans and buy-
back stores, although there is no information or research to indicate the extent to
which they exist in Ireland.

Other providers
Retail stores have also begun to offer loans to their customers. These loans
are generally organised by a finance company (e.g. Tesco loans are offered by
Ulster Bank). Experience in the UK has shown that the role of supermarkets
(or so-called ‘thin’ banking) has not materialised and in reality they have
targeted more affluent customers (Carbo et al., 2005).
3.2.3 Savings
It is important that people on low incomes have access to savings as this can
prevent them from falling into poverty or over-indebtedness and can help
them cope at times of change (Gloukoviezoff, 2004). Savings can also help
people living in poverty to manage extra costs and plan for the future (Regan
and Paxton, 2003).
Banks and building societies
Retail banks and building societies offer a number of different types of

savings account.10 Features most likely to appeal to low-income consumers
are no restrictions attached for withdrawal and no minimum deposit
requirements. However, some savings accounts require large sums of money
as an initial instalment and money needs to be left on deposit for a fixed
time before it can be withdrawn. It may also be necessary to give a number
of days’ notice before savings can be accessed. Higher interest rates are
generally offered to customers who leave large sums of money in accounts
for long periods of time (e.g. 2 to 5 years) without making withdrawals.
Higher rates are also offered to customers who use online savings schemes,
which are less likely to appeal to low-income consumers.
Some retail shops are also involved in the sub-prime market. These shops allow
customers to buy items on weekly credit with no credit checks. The amount
charged for any item is based on its cost price, plus the interest charged, plus
service cover and liability insurances. Missed repayments are subject to penalty
charges and goods are repossessed if repayments are not maintained.
10 These include instant access or demand accounts, fixed-term accounts, notice

accounts and regular savings scheme accounts. DIRT (deposit interest retention
tax) is applied to all deposit accounts and those over 65 years are eligible to
reclaim DIRT if they are taxed at the standard rate.

Credit unions
Credit union savings are normally held by way of share and deposit
accounts.11 Share accounts are more likely to appeal to low-income
consumers as the minimum requirement to open the account is only €3
and withdrawals can be made on demand. However, members who have a
loan with a credit union may be restricted on withdrawals because of their
commitment to pay off their loan.
Post offices
An Post offers savings schemes on behalf of the state. There are guaranteed
interest rates in return for a minimum investment term and gains are tax-
free.12 An Post savings schemes may also attract low-income consumers as
the minimum deposit required is only €1. In 2005, An Post agreed to look
at the 7-day withdrawal period for post office savings accounts to see if it
could be altered to make savings accounts more attractive to social welfare
recipients. The outcome of the review was to remove the withdrawal period
condition on deposit accounts, which are therefore more likely to appeal to
those on low incomes.
3.2.4 Other financial services
Insurance
Insurance is being given increasing attention in financial exclusion debates

internationally (Kempson et al., 2000). Home contents insurance and life
assurance are of most use to low-income consumers. However, low-income
consumers tend to live in disadvantaged or high-risk areas and are therefore
likely to face higher costs for insuring their home. Furthermore, insurance
companies are increasingly requesting that monthly premiums are made
by direct debit, which excludes those who do not have a current account.
Low-income consumers often prefer door-to-door insurance salespeople, but
11 The accounts available include a regular and special share account, deposit account,
3-year and 5-year fixed-term accounts, savings stamps and a budget account.
12 The products offered include savings bonds, savings certificates, national

instalment savings, childcare savings accounts and deposit accounts.

this service is now limited in Ireland. There are also conditions attached to
insurance premiums, which may deter low-income consumers. For example,
almost all insurance premiums are paid annually or monthly and insurance
is often cheaper if there is a burglar alarm and security locks fitted on doors
and windows, an extra cost that many people on low incomes cannot afford.
Bill payment facilities
Bill payment facilities are offered by a range of financial institutions.

Currently, the most preferred method of paying bills in Ireland is by direct
debit (IPSO, 2005), however low-income consumers without a current
account are unable to use this facility and they are less attracted to this
method of payment because default charges are high.13 Hence, they are more
likely to pay for bills in cash at the post office or use pre-pay methods (such
as meter cards).
An Post’s bill payment service (PostPoint) appeals to low-income consumers

as payments can be made in cash in local shops. The Household Budget
Scheme, operated by An Post on behalf of the Department of Social and
Family Affairs (DSFA), is a service available to recipients of one-parent
family payment and to people who cash their unemployment payment at
a post office. Attractive features include the fact that it is a free service
and customers can pay a weekly amount towards various household bills
which is deducted directly from their social welfare payments. Low-income
households have reported positive experiences of the scheme as it allows
them to avoid falling into arrears (Daly and Leonard, 2002). However, they
have also criticised the scheme as sometimes the deduction made for certain
bills (usually rent) might be lower than the amount owed due to limits on the
size of deductions which can be made. It is felt that this dilutes the benefit
of the service since people have to make the remainder payment themselves
(Daly and Leonard, 2002).
Approximately 50% of credit unions provide a budget account for MABS

clients where payments are made weekly, and hence the cost of bills is spread
over the year. The account also acts as a debt repayment account.
13 The inability to pay by direct debit could become a problem for low-income
consumers in the future as cheque usage is declining and some companies (e.g.
NTL) have already tried unsuccessfully to oblige subscribers to pay by direct debit
and not by cheque or cash.

Bord Gáis Energy Supply offers pay-as-you-go cards, which allow customers
to build up a credit balance so that when their gas bill arrives they will
either have paid for it already or will only have a small balance to settle.
This is particularly attractive to low-income consumers as it helps them
manage their money more effectively and have greater control over their
budgeting. According to Conroy and O’Leary’s (2005a: 37) research on lone
parents, ‘pay-as-you-go users who had previously fallen into arrears, are now
managing their finances more effectively, as it offers them stricter control
over their budget’.
Both ESB and Bord Gáis offer meter cards, however rates for these can vary
and could be more expensive than other bill payment methods. In the early
2000s, MABS found that utility companies were recalibrating household
meters in order to recover debts due in respect of financial agreements.
MABS was successful in securing an agreement to stop this practice so that
now meters are only used to pay for energy supply (Korczak, 2004).
3.3 Conclusions
In order to measure financial exclusion it is necessary to develop appropriate
indicators. The key indicator that has been developed internationally is the
number of households/individuals with no bank account or current account.
The most recent HBS survey in 1999/2000 shows that almost 33% of
households in Ireland were without a current account. Similar to international
studies (Devlin, 2005; Kempson et al., 2000), the HBS found that low-income
households were significantly less likely to have a current account. Other data
provided by Eurostat reveal that Ireland has a much lower rate of current
account ownership (which comes with a payment card and/or a chequebook)
than other EU member states. Ireland’s relatively high level of banking
exclusion has been attributed to the popularity of cheque payments and
cash usage, the lack of banking products designed specifically for vulnerable
groups, as well as the market not being equipped to solve the problem of
financial exclusion (Carbo et al., 2005). Furthermore, Kempson et al. (2004)
found that countries with low levels of income inequality tend to have lower
levels of financial exclusion. Ireland has one of the most unequal income
distributions of all OECD countries (Nolan and Smeeding, 2004) and this is
likely to contribute directly to higher levels of financial exclusion.

Non-ownership of other financial products, such as savings, home contents
insurance and life assurance, are additional indicators used internationally
to measure financial exclusion. Figures show that the majority of the Irish
population do not have a government savings account (SSIA) and people
living in income and consistent poverty are more likely to have difficulties
saving income. Furthermore, over one-quarter of the Irish population (28%)
does not have home contents insurance and only 36% have a life assurance
policy. This means that a substantial proportion of the Irish population has
no resources to cope with unexpected events (e.g. house fire, burglary, loss
of job, divorce, ill health). This situation can result in people remaining in
poverty or others falling into poverty.
This review of financial products in Ireland has highlighted how a lack of

financial products designed for low-income consumers can result in a number
of supply-side barriers. These are summarised in Table 3.5. Despite a move
towards ‘free’ banking due to increased competition, low-income consumers
can still face charges. Of most significance to low-income consumers are
penalty charges for unauthorised overdrafts or failed direct debits/standing
orders. Government stamp duty can pose a serious barrier as well as the
terms and conditions attached to some current accounts (e.g. minimum
balance requirements). Similar to other research studies (Byrne et al., 2005),
this review of credit options indicates that the credit union loan is the most
appealing to low-income consumers. However, lack of savings history
could pose a substantial barrier for some. Access exclusion emerged as a
particular issue in relation to bank loans, due to credit scoring carried out by
financial institutions and through the ICB. Savings products which require
no minimum deposit or have no withdrawal requirements are most likely to
appeal to those on low incomes, while those with fixed terms or withdrawal
requirements tend to be less appealing.

Table 3.5 Supply-side barriers to financial services
Barriers
Banking
Price Fees for over-the-counter transactions;

bounced cheques; failed standing orders/
direct debits; government stamp duty
Conditions Minimum balance requirements; a number

of transactions to be carried out via the
Internet
Credit
Access Banks: credit scoring

Credit unions: loan assessment based on
capacity (i.e. credit scoring)
Price Banks: higher interest rates for smaller loans
Moneylenders: high interest rates
Conditions Banks: minimum amounts; monthly

repayments; little flexibility for occasional
missed payments
Credit unions: savings history
Moneylenders: rollover loans
Savings
Conditions Banks: Large deposits; withdrawal

requirements; fixed terms; online savings
Credit unions: restrictions on withdrawals if
prior commitment to pay off a loan
Other services
Home Price Higher costs for living in disadvantaged areas

contents
insurance Conditions Annual and monthly premiums; direct debit
payments; costly conditions such as having to
fit burglar alarms
Bill Price Default charges

payment
Conditions Direct debit requirements

Low-income
consumers’
experiences of
financial services
in Ireland
t Two
Par
Chapter 4
Banking
Part Two of this report looks at low-income consumers’ experiences of
different financial services. The analysis is primarily based on the findings
from 8 focus groups, with a total of 59 participants, and also draws on 26
in-depth interviews with 38 interviewees. Chapter 4 examines low-income
consumers’ experiences of banking services. It commences with an overview
of take-up and access to banking services. It then addresses different barriers
that low-income consumers may encounter in accessing and using bank
accounts, in relation to price, terms and conditions, geographical isolation,
technology, self-exclusion and marketing. Finally, the consequences of
banking exclusion are outlined.
4.1 Take-up of bank accounts

Among the 59 focus group participants, 7 did not have any type of bank
account as they felt that it was unnecessary to use one to manage a low
income. As the following participants explained:
R3: So why would I need an account as I won’t use it? I have no money to
put in it. So I don’t see the importance of having an account for me […]
R5: My status doesn’t allow me to work so I can’t afford to have a bank

account.
(Female asylum seekers, focus group 4)
The majority of focus group respondents had bank accounts: 27 had a

current account, 11 had a savings/deposit account, 8 had student accounts
and a further 6 had a bank account but were unsure of the type of account.
Only one focus group respondent had a building society account. There was
some level of confusion among focus group participants in relation to the
difference between transaction and deposit accounts.
The most common reason given for opening an account was to receive
wages. However, many of the focus group respondents were annoyed that
they were obliged to open a bank account when they gained employment
and would have preferred to be paid in cash, given that they were used to
operating a cash budget. Others stated they would have preferred to receive
their wages into a building society or credit union as they felt that these
mutual organisations were more suited to their needs.

R6: And I didn’t want those services in the first place. It’s because I’m at
work, I’ve got to have them […]
R2: I really resent the fact that my wages are paid into a bank account and I
don’t have the choice of placing them in a building society or a credit union.
(Female CE employees, focus group 3)
4.2 Benefits of having a bank account

During the focus groups, participants were asked if they were aware of any
benefits of owning a bank account. A few felt that a bank account was a
necessity in an era when the vast majority of people have bank accounts and
one participant saw it as ‘part of becoming an active citizen’, while another
stated:
So it’s the ‘in’ thing today to have a bank account.
(Female respondent, focus group 6)
The main advantage reported of having a bank account was being able to
receive wages electronically, which, according to focus group participants,
was a prerequisite for most workplaces. One interviewee also pointed out
that having a bank account could help someone gain employment:
The only advantage of having [a bank account] is that if they’re in the

system and they do get a job, which requires wages to be paid directly into
the bank, they’re already there.
(Interviewee 10: public official)
Several focus group respondents did believe that bank accounts offered a
safe way of storing money and lodging cheques, they facilitated saving small
amounts of money and they could possibly assist money management (even
though few focus group participants used bank accounts for day-to-day
money management as they preferred to operate in cash). One focus group
respondent felt her feeder account helped her manage her finances more
effectively as this account enabled her to plan the payment of various bills
while spreading the costs over a 12-month period.

Other comments made by focus group participants included that cash
machines (ATMs) were a convenient way of withdrawing money and this was
particularly useful for immigrants if they were travelling. Only a few participants
were aware that a bank account could act as a gateway to other financial
products, such as credit, mortgages and loans. A small number also found staff
helpful in banks and older customers enjoyed the social aspect of banking.
4.3 Access
Opening a bank account
The most pertinent issue that arose during the focus groups was the
difficulties respondents faced opening bank accounts. A minority of
focus group participants did not encounter any problems as they had the
appropriate identification required or had opened their bank account pre-
1994 (i.e. before anti-money laundering legislation was enacted).
Yeah, I had no problems; mine was opened for the last few years. But I’m
kind of up-to-date now, that they’re having problems. Before you could
just walk in and open a bank account without an address.
[Interviewer: What are the problems at the moment then?]
The ID and the address.
(Female member of the Travelling community, focus group 2)
Community development organisations and employers play a major role in

facilitating those on FÁS and CE schemes to open bank accounts and many
reported that they would not have succeeded in opening an account without
the help of those organisations.
See Chapter 7 (Section 7.2.1) for a discussion of anti-money laundering legislation.
A high proportion of focus group respondents had bank accounts as a result

of assistance from FÁS and CE schemes. This would indicate that low-income
consumers who are not in contact with these and similar organisations are less
likely to have a bank account.

Our J1 scheme has an account there and had an agreement with the bank.
So that’s really why we had no trouble opening our accounts. We were
given a letter from here and we were sent over there.
(Male J1 employee, focus group 3)
They came in here. They brought like a clerk from the bank down and they
gave us all forms to fill out. It’s a student card like; it’s not a normal card
like. But basically they just got us to sign it, fill it out and give it back to
them and that was it like.
(Youthreach participant, focus group 7)
Identification requirements
For most of the focus group respondents, producing relevant identification

(i.e. passport/driving licence and utility bill) was particularly challenging. The
following focus group respondents’ comments are typical as participants
explained how people living on low incomes are often unlikely to possess a
passport or driving licence as they do not drive or travel and will probably not
acquire these pieces of identification due to the costs involved.
R3: Well I don’t drive, so I’ve no driving licence. I’ve no need of a passport,
so I don’t have one. [The bank] wanted identification and they’d only
accept a passport or a driving licence or you have to go to the Guards, and
fill in this long questionnaire […]
R6: I think it’d cost me the equivalent of about €60 to get a passport. To
get a provisional driver’s licence I have to apply for the driver’s theory test,
which is €20 odd. I then have to pay for the provisional licence.
A further obstacle for the focus group participants was the requirement to
produce identification for address verification. Most of them were asked
for a utility bill, which proved particularly difficult for young people living at
home with their parents, those in private rented accommodation, women if
the bills were in their husband’s name, for people living in accommodation
that uses prepayment meters and for people not residing in permanent

accommodation (e.g. members of the Travelling community, asylum seekers).
The following comments sum up the experiences of many focus group
participants:
R5: When I went to open an account I was living with my mother at the
time. And they still told me I needed a bill in my name. My mother said,
‘How can she get one? Sure she’s living with me. It’s in my name’. They
said they still needed proof of where I was living […]
R4: And they don’t accept anything but an ESB bill. And it was hard for me
to give them the PRSI thing, the form. They wouldn’t accept it first, and
then I told them it was the only thing I had. And they made a little bit of
bother about I had 2 last names, my mom’s and my dad’s. And they had
to ask me why. And I just told them that’s the way it is in my country. And
they wouldn’t accept it at first either and I had to tell them that’s the way I
have it on my passport. I can’t change it.
(Youthreach participants, focus group 7)
Many focus group respondents generally found it a very time-consuming

exercise to open a bank account especially if they had to get an ML10 form
signed by a member of the Garda Síochána or letters from the council,
workplace or PRSI. One lone parent commented that the hassle involved in
opening a bank account could deter low-income consumers from accessing
accounts:
You could make the effort and then they put all these obstacles in your
way and then you give up then. You know if it’s too much hassle. Oh to
hell with that!
(Female lone parent, focus group 1)
The ML10 is an identification form with a photograph signed by a member of the

Garda Síochána which can be accepted by a credit institution as an alternative
form of identification if a prospective customer does not possess evidence of
identity and/or address verification.

Vulnerable groups
Members of the Travelling community without a permanent address (e.g.

those living in caravans) find it difficult to prove where they live and many do
not have utility bills (as electricity is usually paid for by prepayment meter).
Even though one Traveller had both a passport and driving licence, she still
had to get an identification form signed by the Garda Síochána, as she was
not living in permanent accommodation:
I had a passport and everything, and my licence. Still I had to get 2 more
photos taken and get them stamped by the Guards.
[Interviewer: So what was the problem?]
Not having a permanent address.
Even getting passport photos signed by the Garda Síochána was not a
straightforward exercise for 2 of the Travellers, as they had difficulties proving
they lived in the vicinity:
R2: Even if I went down to the Guards at this moment and asked them for
identification to get signed, they wouldn’t sign it […]
R5: That’s true. I was living in a caravan and the Guard did not believe that
I was living in town. He said, ‘I know everyone in town’. And he said, ‘I
don’t know you; you’re not from town’.
(Female members of the Travelling community, focus group 2)
One focus group comprised 10 young people (aged between 17 and 19

years) from a Youthreach programme, all of whom had a bank account
(6 had a student account and 4 had a current account). None of them
had succeeded in opening a bank account by themselves and all needed
assistance: 6 from Youthreach staff, 3 from their parents (who either provided
birth certificates or accompanied them to the Garda Síochána) and one had
opened a bank account while participating on a FÁS course. The main barrier
to opening an account was a lack of appropriate identification.

As well, if you don’t have a permanent residence, as some people here
like, and then you can’t get a bill and some people like they might be
living with a brother or you know, maybe their parents or whatever, but
they mightn’t be staying there full time like. And in situations like that, it
just gets impossible. It gets so messy.
Producing relevant identification posed the greatest difficulty for the asylum
seekers and refugees. This is because people seeking asylum in Ireland are
obliged to hand over their relevant identity papers (e.g. passport, driving
licence, national identity card) to the Department of Justice when applying
for asylum and are given a Temporary Residency Card. Those that are granted
asylum status are given a Garda National Immigration Bureau Card. One
interviewee explained that these cards are not accepted as identification by
the banks:
But the tragedy is that at the back of these 2 cards is written: ‘This is not
an ID card’.
[Interviewer: So are they not accepted by the banks?]
Try to imagine on this card your photo is there, your name, date of birth,
place of birth and so on and they say that this is not an ID card […]
Now with these 2 kinds of paper, kind of cards – the Garda National
Immigration Bureau Card and the Temporary Residency Card, they can’t
open a bank account because when they go to the bank they don’t accept
the identity.
(Interviewee 2: voluntary organisation)
The fact that these identification cards were not accepted by the bank
posed serious difficulties for asylum seekers as highlighted by the following
respondent:
Before they open an account for you they ask you to bring in your passport.
So if you tell them that you don’t have a passport, that it’s with the Minister
of Justice and that you only have your [Garda National Immigration Bureau]
Card. They’ll tell you this is not a proper identity card. So they’ll tell you they
can’t open an account for you without a passport. So I told them that my

passport is with the Minister of Justice so could they write to the Minister
of Justice and ask for a copy. Like I cannot go to the Minister of Justice and
ask for my passport for them to open the account.
(Female asylum seeker, focus group 4)
Five out of the 9 asylum seekers had bank accounts (one had a current
account, while 4 were unsure of the type of account they had). Experiences
of trying to open bank accounts were similar to those of other groups,
in that it was a time-consuming and arduous process trying to obtain the
appropriate forms from either social welfare or the Garda Síochána. As the
following quotes exemplify, producing alternative forms of identification does
not necessarily mean an account would be automatically opened:
R3: I had to go to the Garda station. I first went to my social welfare office
who gave me a form but the bank said they wanted my green card. I have
not got my green card yet, so it was really very difficult for us. I obviously
had to open an account.
[Interviewer: And would they not accept the letter from social welfare?]
R3: When I gave them it they said that they needed my green card […]
R6: Like when I went to the bank they said I should bring my passport, my
Nigerian passport, and I told them that I don’t have a Nigerian passport.
And then they said, if I don’t have any passport that I could not open
an account […] I got a letter from social welfare which only had my PPS
number on it. When I went back to the bank they refused me. So I went to
Justice and I knew they had an ID card for me. So I went back to the bank
with a photocopy and they said they would get back to me in 2 weeks’
time, but they got back to me in 2 months’ time. So when they got back to
me, they told me that they can’t accept what I gave them. They said they
would only give me an account if I brought my green card and my passport.

Credit scoring
A few of the focus group respondents also felt that they were refused a bank
account, or offered limited banking services, as they were deemed a risk due
to their low income.
R1: I have a savings account in [a bank] because if you are unemployed,

you are not allowed to open a current account.
R6: I couldn’t get a bank account because I was unemployed and so I went
to the credit union.
(Male respondents, unemployed, focus group 8)
Another respondent reported that she was asked for a minimum deposit to
open a current account:
They won’t give [direct debit] to me because my wages go into a savings

account. But then when I tried to get the current account they told me
that I needed so much money in the bank or whatever, which is wrong.
Similarly, one interviewee believed that banks could try and close bank
accounts if they deemed the customer unprofitable:
If you are working and the next thing you lose your job and you’re just
on social welfare and you happen to go overdrawn, maybe a little, they
will actually force closure of your account because really they know that
the account is not going to be profitable […] Now they won’t admit that
they have a policy on that obviously, but there are some structures there to
close accounts.
Similarly, lone parents interviewed in Conroy and O’Leary’s (2005a) study who
succeeded in opening a bank account found it impossible to switch from a savings
account to a current account, which would offer the customer extra facilities.

4.4 Geographical isolation
The focus groups took place in different disadvantaged localities (4 urban,
2 provincial and 2 rural areas). Two of the urban focus groups took place in
housing estates on the edge of large cities; both these locations were not
served by a bank, although one had an ATM facility in a local shop. While
most of the interviewees from financial institutions felt that the increase in
the number of ATMs nationally was improving financial access, one focus
group respondent pointed out that ‘an ATM is still not the same’. This view
was reiterated by an interviewee:
They put cash machines in supermarkets, in off-licences and holes in the

wall. So it actually restricts people’s access to financial services by only
allowing them access to get their money out, but to do little else with it.
For focus group respondents who owned cars (mostly men) travelling to a
bank was not an issue, while some female respondents who lived in localities
not served by a bank had to plan their day in advance to include a visit to the
bank.
Because you plan your time that you know what day you’re going down
[…] People know what they’re doing in their days, so it isn’t a problem.
However, in another city, lack of transport was a particular issue for some of
the female respondents as there was no direct bus route to the nearest bank
and they did not have access to a car.
R6: It’s an awkward bank to get to, if you have to walk.
R8: It is yeah, yeah. You can’t get a bus there or anything.
[Interviewer: There’s no bus there?]
R7: Not for us, from where we come from, no.

The expense and inefficiency of transport to get to a bank was a greater issue
for some focus group respondents living in rural areas.
I wouldn’t come to town just to check my bank balance or just to take

money out because then you have to wait until 6 till you can go back. And
what do you do meanwhile? Like if you come at 2 o’clock?
Other observations made by focus group respondents living in rural areas

included that there is a lack of choice of banks and that it is impossible to
get a statement from the local ATM if an account is with a different bank.
However, 2 focus group respondents commented that the main advantage
of banking in rural areas is that staff tend to know the customers and are
therefore more approachable and flexible.
Several of the focus group participants had noticed bank closures in their
localities in recent years. The in-depth interviews produced a diversity of
opinion in relation to bank closures. Some interviewees from financial
institutions defended closure policies, emphasising that they were based
on demographic trends rather than the ‘financial desertification’ of
disadvantaged areas. Conversely, other interviewees argued that the aim
of bank closures was to reduce costs and maximise profits and asserted
that closures were mainly concentrated in disadvantaged areas and rural
communities.
I mean in some of the branches we’ve closed, which to be fair, they don’t
follow an advantaged or disadvantaged area […] A greater driver would be
population decline, you know, in areas where populations have dropped
a lot, and there simply isn’t a population, advantaged or otherwise, tends
to be a greater driver, rather than we’re sitting in an area and we look at it
and go, ‘Well, the average income in that area has dropped therefore we
should get out of there’. I have never heard that, even as a debating point
in terms of branch closures, because it doesn’t tend to happen.
(Interviewee 25: bank official)

You do not find banks closing branches in more affluent areas of rural
towns or more urban areas or in larger towns. They just don’t do it. They
cut branches particularly in smaller rural communities and in socially
deprived economic areas […] By reducing and taking away the branches
it increases financial and social exclusion and not just among those who
are socio-economically deprived but it would be impacting largely on
elderly people who by and large don’t have a lot of income and would be
dependent on the local bank branches to do their bits of dealing.
One interviewee was concerned that bank closures increased social isolation
among people in rural communities, and another felt that closures could lead
to a decline in local business. Some of the interviewees suggested that banks
should provide data on the geographical distribution of bank closures and a
social audit of bank closures.
Notwithstanding these concerns, some of the interviewees were optimistic

that access to banks in rural Ireland could improve with new players in the
financial market, such as Danske Bank and Bank of Scotland, making plans to
open branches in rural areas.
4.5 Technology
During the in-depth interviews, many of the interviewees from financial
institutions claimed that bank closures were not having a negative impact,
given the accessibility of ATM facilities and telephone and Internet banking.
ATMs
The difficulties accessing money at ATMs surfaced in all the focus groups.
The most substantial barrier for focus group respondents was not being
able to withdraw small amounts of money from ATMs. The following quote
emphasises how this is a particular problem for people on low incomes:
There is currently no information available in Ireland on the number and

distribution of bank closures.

Like you might have €10 left and you need it to pay a bill or whatever. But
you can only take €20 out.
A frequent experience for focus group respondents was not being able
to access money because ATMs were out of order. While this affects all
consumers, the following quotes illustrate that it is particularly burdensome
for people on low incomes who may not have access to a car, or may not
have alternative means for paying for bills or groceries (such as a Laser card
or credit card).
Well last Friday, no, last Thursday night I went to Johnsie’s, out of order.
I went over by Statoil, out of order. I went to Caherdavin, out of order.
Three places, after finishing work at 5 o’clock, on foot; on foot!
(Female CE employee, focus group 3)
I mean it has happened down there several times. They’d be all out
of order at the same time and you wouldn’t have money to do your
shopping.
When ATMs were out-of-order, focus group respondents were also unable to
check balances or print statements, which caused some respondents problems
in relation to money management and budgeting. Consequently, one of the
older respondents preferred to manage her money with a savings book:
I have a [building society] account […] And I do say to people, ‘Mine is

one of the old-fashioned books and I can look and I can see what I have’.
And I can see what I can take out. To me, they’re the best sort of stuff […]
I know people say they have access 24 hours to the machines but there
could be some sort of hitch. I know what I have, I know what hours I can
get me money out and I plan for tomorrow.

Telephone and Internet banking
Interviewees from financial institutions felt that technological advances in

banking, including telephone and Internet banking, had increased access for
the majority of consumers.
Our experience is phenomenal, in terms of the number of, profile of and

age of people that are registering for telephone and Internet banking now.
So it’s becoming the norm.
And I also think [electronic banking is] really the way to get the widest
possible inclusion for those not included at the moment.
(Interviewee 7: financial institution)
However, as one bank official acknowledged, these technological advances

could still exclude some socio-economic groups:
So the problem there is technology exclusion, which if you want to deal

with that problem, you’ve to deal with technology exclusion, which of
course then is a more difficult issue.
The majority of focus group respondents did not use Internet banking as they
did not have a computer, due to lack of income. They also stated that even
if they did own computers, they would not be able to afford Internet costs.
One interviewee highlighted that this was creating a clear polarisation in
access to the ‘electronic economy’:
It goes back to the digital divide – the whole access to the Internet and
computers – it underlines a level of divide that was already there. It is a
mixed blessing […] it should not become the choice and it shouldn’t be
the mode of the services or existence of the services because it tends to be
the better educated or more affluent that has the whole broadband thing
and the works. So it suits certain cohorts of people and not others.

Similarly, the focus group respondents’ low incomes impacted on their use of
telephone banking as sometimes they could not afford to put credit on their
mobile phones.
While low income had the most substantial impact on focus group
respondents’ access to telephone and Internet banking, there was also
a high level of technophobia. Many of them did not know how to use
telephone and Internet banking. Some participants commented that they
were reluctant to use telephone banking as they were not keen on carrying
out their financial transactions by phone, and several complained that it
would be difficult to resolve a query or problem by phone. They were averse
to using the Internet for financial transactions as they were sceptical about
Internet scams and people accessing their bank details. Hence, many of the
respondents showed a general preference for relationship banking.
I don’t know much about them; [electronic banking is] only new on the
market, isn’t it? We wouldn’t be up to that standard yet now. I think it’s
grand and handy just the way things are going at the moment like.
(Male CE employee, focus group 3)
4.6 Price
A significant barrier for focus group respondents was bank charges.
Although this did not deter them from opening bank accounts, it did
prevent them from using their accounts to manage their money. Focus group
respondents noted that they were charged for a range of services.
They charge for everything; using Banklink, everything, every piece of

paper, they charge. They’re deadly.
Also, LoCall telephone numbers used by financial institutions charge higher rates
for calls from mobile phones and many low-income consumers are more likely to
have pay-as-you-go mobiles than a landline.
It is important to note that the focus groups were carried out in the last 6 months
of 2005. 2006 has witnessed a huge move by retail banks in Ireland towards ‘free’
banking. Hence, some of the charges raised by focus group respondents may no
longer exist.

Several interviewees felt that government stamp duty was a substantial
barrier for low-income consumers wanting to access bank accounts. One
interviewee noted it contradicted the government’s National Payment
Strategy and could prevent people on low incomes opening a bank account:
We were trying to encourage people onto lower cost channels and to try
and make transaction banking a bit more accessible and then in comes this
huge barrier for them […] Now €10 is hugely prohibitive for the group of
people you’re researching. And €40 for a credit card is just a non-runner.
Equally, the problem with stamp duty on cards was also raised by some focus
group respondents.
But this charge for cards, you know, will have to be abolished for people
on social welfare.
(Male respondent, unemployed, focus group 8)
A major concern for focus group respondents was charges for ATM
withdrawals and it consistently surfaced in all focus groups that these charges
‘added up’ to substantial amounts for people who were already struggling to
make ends meet.
So if you withdraw money, each time you withdraw it is 20 cent and 30

cent. So by the time you have used your bank account for 3 months you’re
talking like €10 each at least just for your account to be paid. I wish it was
a smaller amount of money. It’s very expensive.
At the end of the year all those 20 cents in and out add up.
Since 2006, charges for ATM withdrawals do not exist for most current accounts.

As well as ATM charges, focus group respondents also complained that
they had to pay charges for statements, even though they usually did not
request them, and there was also some confusion around how charges on
statements were incurred.
R3: Because when they send you out a statement they take €3.90 or
€4.90 out of your money to send it out.
R5: That’s right, yeah.
R2: And you don’t even know what it’s about like.
(Members of the Travelling community, focus group 2)
You could get a statement from them, we’ll say today, and I mean you
might have €10 or €12, maybe €20 and it’s gone. You’re looking to
know where your €20 is gone. You wouldn’t know.
As already stated, many focus group respondents had to open bank accounts
– not out of choice, but because they were obliged to – in order to receive
their wages. Therefore, they felt particularly aggrieved that they had to pay
charges for a service they did not choose to use themselves.
R6: I’m just a tiny little person with a very small amount of money. They
don’t need the €12, €20; and you have no choice about paying it. That’s
what kills me. If I choose not to pay another bill, that is my choice. But I
have no choice because my money goes automatically into the bank. When
their money is due, they take it. It doesn’t matter if you’ve forgotten or
whatever else, and you go to take your money out and you’re €20 down.
R7: That €20 is very important.
Since the research was carried out, an annual statement on most bank/current
accounts is now provided free of charge. However, charges do apply for providing
duplicate statements, to cover production costs.

R6: When you’re only on small money, that €20 is the price of a week’s
bread and milk. But they’ve taken it; you have no say. You cannot turn
around to them and say, ‘Look, don’t touch that this week’.
Charges impacted substantially on how focus group respondents used

their bank accounts. In order to avoid bank charges, most focus group
respondents did not use their bank account for day-to-day money
management. The following comments are typical of many of the focus
group respondents who withdrew their wages as soon as they were paid to
avoid charges for several withdrawals:
R1: Just say for argument’s sake you took out €200 today. You’d just
be charged the once. But if you take out €50 or €20 or €10 you’d be
charged every time you take it out.
R2: Yeah no matter what amount.
R1: So you might as well take it all out in one go.
(Male CE employees, focus group 3)
I go to the bank every week to get my wages out unless I can afford to
leave it there, which doesn’t usually happen.
However, as one respondent pointed out, this still did not enable them to
avoid bank charges:
The trouble is then, the next load of money goes in and they automatically
snatch the bank charges, so that’s what I’m saying, you have no choice
with them. I’d rather see us paid into the credit union.

Bank charges deterred some respondents, particularly those who were
unemployed and social welfare recipients, from using bank accounts
altogether.
[Interviewer: And why do you not have a bank account?]
Well I used to work. When you’re working and the money is paid into the
bank and charges are coming out of it then, it just wasn’t as bad because
you had money.
I’ll tell you the truth. I was living on a Lone Parent’s and how would you
have a bank account on Lone Parent’s? As it is, I’m barely getting by on
what I am getting here.
As the foregoing evidence reveals, bank charges were quite a burden for
the focus group respondents, particularly in addition to a whole range of
utility bills and day-to-day living expenses. However, some interviewees from
financial institutions were generally unaware of the drain bank charges could
have on a household’s resources.
So current account fees, to the extent that they exist, can hardly be a
barrier to banking.
Regular charges also affected focus group respondents’ money management

as sometimes they were unsure how much money they had in their account.
This occasionally resulted in their accounts being empty or overdrawn and
they were particularly concerned about charges for unauthorised overdrafts.

4.7 Terms and conditions
Discussions in the focus groups revealed that bank accounts are not always
appropriate or suited to the needs of low-income consumers. For instance,
focus group participants with a savings account or building society account
were unable to set up direct debits.10 As the previous section highlighted,
focus group respondents were also concerned about the implications of
going into unauthorised overdraft.
Four of the 9 asylum seekers interviewed did not have a bank account.
Although the issue of usury has been raised as a critical obstacle for Muslims
accessing financial services in the UK, members of the Muslim community
who participated in the focus groups did not perceive this as a barrier.
Even if I needed to borrow, my situation [i.e. asylum seeker] doesn’t allow

me to borrow. I would like to borrow. In relation to Islam and interest, my
personal belief doesn’t forbid me, as there is a big need to borrow.
(Male asylum seeker, focus group 4)
However, one interviewee had met a Muslim in Ireland who had arranged that
his bank would not pay him any interest. This issue was highlighted by another
interviewee who stressed that this could become a challenge in the future for
the Irish banking sector, given the increase in immigration, even though it would
prove costly to produce specialised products compliant with Islamic teaching.
And again, I’d wonder if it’s an issue that’s probably going to become more
important as time goes on and numbers grow, but for people who have ethical
and moral issues with interest because of their faith, where do they go?
Most people think of a Muslim not being able to pay interest, so therefore
not borrowing, but you also can’t even have a simple savings account, so if
you’re a strict Muslim and abide by Islamic teaching, you wouldn’t be able
to use any financial services at all.
(Interviewee 5: academic expert)
10 The main building society in Ireland, EBS, offered a current account pre-1999.
Since then, this product has not been available and direct debits cannot be set up
as EBS is not part of the clearing system.

4.8 Self-exclusion
As already stated, a small minority of focus group respondents chose to
remain outside the banking system, while others reluctantly opened bank
accounts in order to receive wages. The vast majority, however, continued to
operate a cash budget. Part of this disengagement was attributed to a long
tradition of operating a cash budget, while other respondents felt that banks
were not interested in people on low incomes, particularly lone parents, social
welfare recipients, homeless people, members of the Travelling community
and asylum seekers.
I think definitely there is a perception out there that the banks, and
probably most places, don’t want people on low incomes. Whether we
should be addressing it, it shouldn’t happen, but it probably is more of a
reality, it’s more of a reality maybe than a lot of us would like to admit.
Some focus group respondents who had bank accounts spoke of being
‘intimidated’ and ‘frightened’ by banks and lacking the confidence or self-
esteem to engage with them. Therefore, several of them limited the amount
of contact they had with the banks.
I’d prefer not to go near the bank and just use the cash machine.
Several of the focus group respondents were also deterred by what they
perceived as ‘poor customer service’. They explained that customer service
often depended on the individual staff member, adjectives used to describe
some staff included ‘rude’, ‘miserable’, ‘sour’, ‘not approachable’ and
‘ignorant’. On the other hand, one interviewee from a financial institution
emphasised that there was an increasing amount of pressure placed on staff
in banks to increase profits, and as a result morale was low and turnover
particularly high.
These psychological barriers can lead to suspicion of financial services

(Kempson et al., 2000) and antipathy and mistrust were prevalent themes
in all the focus groups. Many focus group respondents stated they did not
trust banks and one had heard stories from a friend whose money had gone

missing from his account. This disengagement was reinforced by stories in
the national media of banks overcharging customers.11 Hence, many of the
focus group respondents perceived banks as ‘socially irresponsible’.
4.9 Marketing
Marketing exclusion occurs when people on low incomes are excluded from
marketing and promotional material. This was not an issue for most of the
focus group respondents as many of them had been targeted by literature
promoting new and existing financial products. However, the information
provided was inappropriate to their needs, e.g. information on insurance,
mortgages, car loans, gold cards, credit cards and student accounts.
[Interviewer: And would you be sent information from banks about their
new products or services?]
R1: Yes I do, about insurance things and they go in the bin or in to recycle.
R2: Oh yeah, or student accounts and so on, like that. Yeah, they go into
the bin as well.
(Female lone parents, focus group 1)
As well as being inappropriate, focus group participants stated that the

financial literature they received was often difficult to understand as it was
not written in plain English.
R2: Well they use these kinds of posh words and we don’t understand big
posh words like that.
R4: I think banks have a lot to learn about ordinary people. I mean some
people don’t understand them; it’s like they’ve swallowed a dictionary for
their breakfast. They should take that into consideration; they’re coming
out with these big words and we don’t understand them.
11 See, for example, Slattery, J., ‘Banks forced to pay back €118m in charges’, The
Irish Times, 26 July 2006; or Prime Time Investigates (RTÉ 1), ‘Investigation into the
banking industry’, broadcast 12 December 2005.

4.10 Further barriers
The focus group with members of the Travelling community raised some
specific issues for them. They stated that literacy issues are common among
members of the Travelling community and they sometimes find it difficult
to fill out forms. Asylum seekers and refugees also reported that they face
language barriers.
Focus group respondents also noted that banks have less staff than
heretofore, hence longer queues, which was a particular problem for
older people. A further issue was the opening times of banks, which are
particularly inconvenient for those working at the same time.
4.11 Consequences of banking exclusion
Limited opportunities
According to several focus group respondents, it is more difficult to get

rented accommodation or a job without a bank account. This point was
reiterated by interviewees and one public official explained how she was
contacted by a member of the Travelling community who was experiencing
problems with his wages as he did not have a bank account:
He had come back from England because he knew Ireland was doing
well and he wanted to get on, and yet he couldn’t get an account here.
Now he did in the end, but I mean it took a long time. When I rang the
employer, like the secretary was saying, ‘Look, we’re not paying him by
cheque again. We’ll give him one more week and that’s it’.12
12 However, it is important to note that some employers do set their staff up with a
bank account in the bank with which they have a relationship.

Cheque-cashing
A number of focus group respondents without bank accounts were paid by

cheque. Most of them lodged their cheque into a credit union account and
this was seen as preferable to lodging it into a bank account, as some were
able to have instant access to cash.13 One focus group participant was unable
to cash a cheque in a bank without a bank account:
So when I went in to the bank they wouldn’t give me the money unless
I opened an account. That is why I decided to open the account so that I
could collect the money back. So when they refused to open the account,
I couldn’t collect the money […] Since then I’ve never collected the money
and the cheque is here.
Those who were unable to cash cheques in a financial institution, cashed

them in a shop and usually had to pay a fee (average €3). One focus group
respondent explained that a well-known supermarket was only willing to
cash cheques if one-third of the cheque’s value was spent in the store.
Lack of security
The minority of focus group respondents who did not have bank accounts
were aware that it was unsafe to keep their money at home in cash or have it
on their person during the day. This was one of the main reasons why other
focus group participants opened bank accounts.
The disadvantages, well anything can just happen, God forbid, but the
house could catch fire and the money would be lost.
13 In some credit unions, instant access is given on all secured cheques, such as social
welfare, state and semi-state cheques. Third-party personal cheques generally
have to wait for clearance through banks before credit is given.

I would never have put money in a bank at all, only that I knew if I kept
it at home or kept it in my pocket, it could be taken from me; so this is a
security thing.
4.12 Conclusions
Take-up of bank accounts: A minority of focus group respondents were
‘unbanked’ and had no access to a bank account. According to Kempson
et al. (2000), this is the ‘sharp end of financial exclusion’. A substantial
minority only had a savings/deposit account which offers ‘minimal’ access
as the facilities are limited (ANZ, 2004; Devlin, 2005; Carbo et al., 2005;
Gloukoviezoff, 2006; Herbert and Hopwood-Road, 2006). Most of those
who had bank current accounts were assisted by an organisation to open
the account. This would indicate that low-income consumers who are not
in contact with these and similar organisations are less likely to have a bank
account. This is consistent with findings from Conroy and O’Leary’s study
(2005a: 101), in which lone parents reported that ‘the only way to open a
bank account was through a letter from an employer, FÁS or Community
Employment Scheme’.
Access: The most pertinent issue that arose in relation to accessing bank
accounts was producing the relevant forms of identification in accordance
with anti-money laundering legislation. This was particularly difficult for
focus group respondents who were unemployed, members of the Travelling
community, young people and asylum seekers/refugees. Similarly, research
in Ireland (Conroy and O’Leary, 2005a; Quinn and NiGhabhann, 2004) and
in the UK, Australia and Canada (Collard et al., 2001; Kempson et al., 2004;
Regan and Paxton, 2003) has consistently found that proof of identity is a
significant problem for people on low incomes.
Geographical isolation: Two focus groups took place in disadvantaged urban

areas not served by banks. Others living in rural areas had difficulties getting
to banks. This is related to geographical exclusion from financial services.

Although there have been a number of bank closures in Ireland in recent
years, there is no data on the geographical distribution of these closures
other than media reports.14
Technology: Similar to findings from UK studies (Herbert and Hopwood-

Road, 2006; Regan and Paxton, 2003), a substantial barrier for low-income
consumers in Ireland is not being able to withdraw small amounts of money
from ATMs, which sometimes leaves them short of money to pay for shopping
or bills. This research also found that low-income consumers are quite
resistant to using telephone and Internet banking, which is again consistent
with UK research (Devlin, 2005; Pahl, 1999). However, as the then Director of
Consumer Affairs Carmel Foley stressed in 2001, not all customers can adapt
to technology rapidly, particularly more vulnerable customers (Foley, 2001).
According to Kempson et al. (2004: 12), technology advances have further
reinforced banking exclusion for low-income consumers as they are ‘left
reliant on traditional banking services, such as pass books and face-to-face
transactions in branches, which are costly to provide and therefore, in decline’.
Bank charges: A further barrier to accessing banks for the focus group
participants was bank charges. Their main concerns were with charges
for ATMs, which have been removed for most accounts since the research
was carried out. This is a positive move as ATM charges particularly impact
on low-income households (Herbert and Hopwood-Road, 2006; Regan
and Paxton, 2003). However, other charges raised by respondents (e.g.
government stamp duty, charges for unauthorised overdrafts) still exist.
Use of bank accounts: Most respondents did not use their bank account for
day-to-day money management and withdrew their money on the day that
they were paid. This is because many opened bank accounts reluctantly in
order to receive wages but continued to operate a cash budget. Hence, focus
group respondents generally used bank accounts as a vehicle for receiving
money, but seldom for managing money. They would be viewed as ‘under-
14 For instance, see reports in the Irish media on the planned closure of the Bank
of Ireland branch in Glenamaddy, County Galway. Glenamaddy is a CLÁR area
(disadvantaged rural area). According to a spokesperson for Bank of Ireland, this
decision was taken for economic reasons and a Bank of Ireland ATM was recently
installed in a local shop. The people of the Glenamaddy area have mounted a strong
campaign in an effort to get the Bank of Ireland to reverse its decision to close the
branch. ‘The fear locally is that any erosion of services in a rural area such as this will
result in a detrimental knock-on effect. The closure has received national attention
and one source has indicated that a number of communities throughout the country
threatened with similar closure may now join to mount a collective campaign
against the moves’ (Galvin, 2006).

banked’ or ‘on the margins of financial exclusion’ as they make little or no
use of their bank account. Kempson et al. (2004: 13) attribute this ‘under-
use’ of banking facilities to a lack of appropriate products and note that
when people on low incomes are encouraged to open bank accounts that
have not been designed to suit their particular needs ‘they often withdraw all
their income as soon as it is received and continue to operate a cash budget’.
Self-exclusion: Similar to recent research carried out among financially

excluded groups in the UK (OLR, 2006), a number of demand-side barriers
were raised in the focus groups. These attitudinal factors can be a major
hurdle in the take-up of bank accounts for low-income consumers (Kempson
et al., 2004). According to Gloukoviezoff (2004; 2006), this is one of
the main challenges for financial institutions. He advises that in order to
overcome these challenges, banks should meet the needs of low-income
consumers geographically (i.e. location of branches), culturally (i.e. explain
banking products and services to customers) and socially (i.e. take account of
customers’ economic and social constraints).
Consequences: A bank account not only offers a gateway to financial inclusion,

it also ‘confers additional benefits, such as making people “job ready” since
almost all employers now insist on paying people directly into bank accounts’
(Herbert and Hopwood-Road, 2006: 5). In the current study, focus group
respondents reported that having a bank account was often a prerequisite for
gaining employment and it proved difficult for some focus group participants
to get a job without a bank account. Similarly, organisations working with low-
income consumers in Ireland have met a number of individuals who have had
difficulties in maintaining employment or training due to their failure to open
an account for salary payments (NTMABS, 2006).

Chapter 5
Credit
Access to affordable credit is vital for low-income groups in order to buy
costs. This chapter examines credit use among the 59 focus group
respondents and considers the factors which attracted and deterred them
from accessing and using loans from banks, credit unions, informal networks
and sub-prime credit.
5.1 Attitudes towards credit

Overall, focus group respondents showed a responsible attitude towards
credit and most did not want to get into debt. Younger respondents, in
particular, tried not to accumulate loans and credit as many had witnessed
the consequences of getting into debt among others in their community.
Because I see people get into debt and they lose pretty much everything.
They can lose their house, they can lose their job, they can lose their sanity.
They can lose everything for money, because of money.
5.2 Banks
Access
Focus group respondents were not likely to apply to a bank for a loan as
they felt that people on low incomes were unlikely to pass credit scoring
assessments due to a low income or a history of bad debt. Interviewees
from banks pointed out that they had to be prudent and could not lend
to someone who was perceived as a high risk. Similarly, interviewees from
building societies reported that they have a credit risk policy to ensure that
lending is not carried out irresponsibly and that customers do not overstretch
themselves in terms of borrowing. Another interviewee stressed that
responsible lending practices are essential:

You could never force a bank, or indeed any other credit provider, to
provide to somebody they believe was a very high risk. It’s not prudential
lending and they fall foul of the regulatory authorities.
Price
A few respondents mentioned that they would not attempt to get a loan
from a bank as they perceived the interest rates as too high.
God I’d borrow from the credit union sooner than I’d borrow from the
bank. It’s too much interest.
However, another respondent stated that she had an interest-free student

bank loan from AIB.
Self-exclusion
Focus group participants were particularly reluctant to seek a loan from

banks as they felt they would not get one or they were concerned about the
consequences if they fell into arrears.
[Interviewer: If you needed a loan, where would you go?]
R3: Oh definitely the credit union. I would never borrow off the bank. I’d
be terrified to owe money to a bank.
R5: Now that’s just how I feel. I just feel that if I owed money to a bank I’d
have this thing, this dread.
(Female participants, focus group 6)
A number of issues are taken into consideration when determining the interest
rate of a bank loan (e.g. size of loan, duration).

Overall, focus group respondents felt that banks were much more likely
to give loans to owner-occupiers or those with a history of saving than to
people who are young, unemployed, living in local authority accommodation,
disabled or ill.
R3: You won’t get a loan from them unless you’re a householder.
R5: We’re corporation so we wouldn’t come into that anyway.
[Interviewer: Has anyone ever got a loan from the bank?]
R3: I tried a couple of times and I was refused. It was a home improvement
loan, but I was refused because I didn’t own my own home.
R4: Normally we go to the credit union.
Credit cards
Banks also provide credit in the form of credit cards. Only a small minority of
the focus group respondents had credit cards. Generally, credit cards were
not widely used as focus group respondents feared overspending and falling
into debt.
Another thing, credit cards are being pushed on a lot of people. And
the likes of myself, I wouldn’t have a credit card because I’d be afraid of
overdrawing on it. I’ve never had one and I don’t plan to have one. And I’m
getting a lot of letters through the door, you know, offering me credit cards.
Some of the Youthreach participants had 3V cards (prepaid disposable credit cards
in the form of a voucher). The main advantage cited by them was that debt was
avoided, as customers cannot exceed the available balance. However, while there
is no stamp duty or interest charged, customers do have to pay a nominal €5
surcharge for every voucher purchased.

5.3 Credit unions
Of the 59 focus group respondents, 36 were members of credit unions. As some
of the preceding quotes highlighted, credit unions were a popular form of credit.
Access
Overall, focus group respondents felt that loans were more accessible in
credit unions than in banks and many of them currently had loans for first
Communions, confirmations, Christmas, holidays, home improvements and
caravans (for members of the Travelling community). According to the focus
group respondents, loans were more accessible as they were granted based
on each member’s track record (both savings and borrowing history) and
ability to pay rather than on computer-based assessments.
R1: There’s no hassle getting a loan off them, not like the bank.
R2: You have to have a lot of money in the bank before you can go to the
bank and ask for a loan. For the credit union, with a couple of hundred
they’ll still give you a loan, or 3 times I think your balance and still they’ll
give you a wee bit over, as long as you’re a good payer like you know.
(Female respondents, focus group 6)
Self-exclusion
Some focus group respondents stated they would not apply to credit unions
for loans as they felt they would be refused. Self-exclusion was particularly
prevalent among social welfare recipients, lone parents, members of the
Travelling community and asylum seekers.
R3: But a lot them, a lot of Travelling people don’t actually believe, you
know, in going to credit unions like, they can’t get out loans.
R4: No because they know they couldn’t get one […]

R6: No you see they don’t, they can’t afford to pay it back into the credit
union in the first place. And they would have to pay back on the double
and they wouldn’t be able to pay it back, never mind at the double.
R2: Because I’ve never seen a single parent getting a loan, you know what
I mean?
R1: I’m trying to think, have I?
R2: I’ve never.
However, interviewees from credit unions explained they would not

necessarily exclude social welfare recipients as they viewed this as a steady
and reliable source of income.
Price
Other perceived advantages were low interest rates and automatic insurance
at no extra cost.
R3: [The credit union’s] rate of interest is very good; it’s very easy to pay
them back […]
R7: God I’d borrow from the credit union sooner than I’d borrow from the
bank. The bank is too much interest. I pay very little interest in the credit
union, only a few pennies per month.
However, one focus group respondent suggested that customers are often
misinformed in relation to credit union interest rates and that they are
actually higher than in other mainstream financial institutions:
In fact interest rates depend on the specific bank or credit union. At the time of
going to print, credit union loans ranged from 6.9% to 12.6%, while interest
rates offered by banks ranged from 6.9% to 12.4%. However, loan protection in
credit unions is free.

R5: For example, when the interest rate in this country was 12%, 13%,
17 years ago and the credit unions were charging 11%, 12%, this was
quite low. But the banks have an interest rate now of around 3%, 4%,
5% maybe. The most banks charge may be 7% APR or something. I don’t
think the credit union brought their interest rates down.
R2: But the credit unions say that it’s 1% per month.
R5: Yeah but you’re missing the point there. It’s 12% per year.
Conditions
The main condition required for borrowing from the credit union is to have a
savings history. Some of the focus group respondents supported this position,
for example:
I don’t have anything against that rule myself. But I think, say somebody
is saving, they’ve been saving maybe not much, but a fiver a week we’ll
say, and they can see it’s more or less kept continual, then yes, give them a
loan. But I can see where they’re coming from. Just walking in and asking
for a loan; it doesn’t make sense really.
However, not all of the focus group respondents were able to build up a
savings record, due to lack of income.
But when you’re unemployed, you’re not in a position to save and from
that point of view I see the credit union as being marginally useful.
R7: It’s hard like when you have a family to look after, do you know what I
mean. Like you can’t be saving when you have bills to pay.
R6: Especially coming up to the weekend, you’re short as it is.

R8: Do you know, like, all your money goes on your family.
Interviewees from credit unions explained that this condition was necessary as
members need to contribute to a successful financial co-operative. They also
viewed it as an integral part of their member education, which helps increase
their financial autonomy and security as well as maintain credit worthiness
and capacity to borrow. When interviewees from credit unions were asked
whether these terms and conditions could prevent low-income consumers
accessing credit in a credit union, they explained that they would refer clients
facing financial hardship and difficulties to MABS and they would be willing to
work with these members once they had agreed a budget with MABS.
Overall, focus group respondents felt that loan repayments were flexible and
repayment terms were chosen to suit members’ circumstances. Furthermore,
they stated that loan repayments could be negotiated if they encountered
difficulties repaying the loan. One condition that focus group participants
particularly favoured was that the debt died with the debtor as a result of the
loan protection insurance. However, 2 focus group respondents highlighted
that non-repayment of loans can become a serious issue: one was threatened
with a court summons and another’s parents were brought to court by
their credit union. As the following discussion highlights, some focus group
respondents were unaware that this could be a consequence for loan defaulters:
R7: If you went and got a loan from the banks and didn’t pay them back,
they’d bring you to court like straight away. With the credit union they’d
give you time like.
R6: They’ll send you out letters.
R3: Well, my mother and father got a loan out together and the credit
unions brought them to court because they never paid it.
(Youthreach participants, focus group 7)
Loan protection is offered by credit unions to cover outstanding loans in the case
of death or permanent disability, which means dependants are not obliged to
repay outstanding loan balances in these events.

Interviewees from credit unions explained that as they lend in an unsecured
credit market, and have to remain accountable to their members, court
summons for non-repayment of debts had to be applied in particular cases.
As part of the European Consumer Directive, credit unions must now issue
a Consumer Credit Agreement for all loans over €250. Some interviewees
were concerned that the credit unions might move towards issuing larger
loans, given the increasing costs involved with the new credit agreement. This
could act as a barrier for some low-income consumers.
Well, why fill out a 5-page form to get your hands on maybe €300 for a
confirmation or Communion when your man [i.e. moneylender] is calling
to the door, and he’s handing it out with no forms attached.
(Interviewee 21: credit union official)
And of course, credit unions, because of all the paperwork and everything
else now, won’t want to give small loans. It’s going to be too costly for
them basically.
Some of the focus group respondents also noticed that the application
process for a loan was becoming more lengthy and complicated.
Before you would only fill in one form and sign it, but now it’s 5 or 6.
5.4 Informal networks

Another popular form of borrowing for focus group participants was from
families, neighbours and friends. This source was particularly prevalent
among members of the Travelling community.

[Interviewer: Where would you go if you needed a loan?]
R2: You’d go to your parents or your family or some family member.
R4: Yeah, you’d go to your family or a friend.
R5: Or maybe a couple of them to get the few pounds like you wanted.
Because these wouldn’t have as much there but you’d get a couple of
pounds.
A minority of focus group respondents had also been helped by staff in

community development projects during times of hardship (e.g. death of a
family member).
Asylum seekers found it the most difficult to access credit as they reported it
was difficult to borrow from fellow asylum seekers as all were receiving €19
a week so none of them had extra money to lend.
5.5 Sub-prime credit

Almost all the focus group participants had heard of home credit providers
(or moneylenders as they are more commonly known). Focus group
participants were asked about any current or past experiences of authorised
or unauthorised moneylenders (however, no focus group respondent
knew the difference). A small minority of focus group respondents were
currently using moneylenders, while several others had past experiences
of moneylenders, which they used to borrow money to buy furniture and
household goods. Others had pawned jewellery to pawn shops. It was
reported that in one disadvantaged urban area it was possible to buy food
and other everyday items from a van on credit. Several of the focus group
Similarly, lone parents in Conroy and O’Leary’s study (2005a) could not distinguish
between legal and illegal moneylenders. It is important to note that the
subsequent discussion on moneylenders could therefore relate to authorised or
unauthorised moneylenders.
However, more respondents may have been involved in moneylending as people

are often reluctant to admit to using moneylenders (Collard and Kempson, 2005).

respondents also used mail-order catalogues and the use of Argos was cited
several times. Mail-order catalogues were the most trusted form of home
credit, as one focus group respondent stated:
You can get clothes off them and stuff and you pay off every week. I’ve done
it for years with the kids and stuff, for their schoolbags and he’s brilliant.
They’re a company based in Cork and they’re absolutely fantastic […] I mean
if you get €100 worth of stuff, you pay a fiver every week and that’s it.
Overall, there was quite a negative attitude among focus group participants
towards moneylenders. Those who had no past experiences of moneylenders
stated that they would not use them, and this view was particularly prevalent
among members of the Travelling community who preferred to borrow from
friends and family.
R1: [Moneylenders will] take what you have like.
R3: Do you know what they’re doing? They go around and get your
allowance book like The General.
R2: I think I’d rather do without than get money off them.
R1: I wouldn’t go near any of them.
R2: No.
R1: You’d be shot.
R2: They’re like sharks.
R1: They are sharks, aren’t they?
Other Irish studies (Byrne et al., 2005; Conroy and O’Leary, 2005a) also came
across regulated moneylenders calling door to door with the Argos catalogue
and agreeing to purchase goods from the catalogue on behalf of the clients at an
interest rate of 187% APR.

Most of the focus group respondents who had past experiences of
moneylenders had made a concerted effort to stop using them and many
of them eventually become credit union members. This change was usually
related to an improvement in circumstances (e.g. gaining employment).
I’ve been down that road and it’s a very, very hard road. And the day I
started here [CE employment], I said, ‘I’m getting no more’, because of the
interest that they were charging; for €100, you pay €125. I’ve been down
that road, I know I shouldn’t say it, but I was up to my depth. And I paid it
away until I paid that man off and I joined my credit union.
So I said to the husband, ‘That’s it. We just have to stop.’ I couldn’t keep this
up. So I paid them. They used to come back and ‘Do you want this?’ and I’d
say, ‘No, I’m getting rid of all this. I don’t want it. If I can’t afford it, that’s it.’
So I went to put my money in the credit union then and I built on from that.
For the focus group respondents, the main push factor was the denial of
credit from mainstream financial services.
I use them because the financial institutions in this country pushed me into
that expense you know? Because if I had been given any assistance from
[the banks], I wouldn’t have come to this. They are just sharks, you know?
But what can I do? I use them; they assist me in some of my problems
when I was in need so why must I not be grateful to them? I say ‘Thank
you sir’, and that’s it.
Interviewees cited several pull factors which would attract low-income

consumers to moneylenders. Foremost was the accessibility of home credit
as no credit history was needed and there was no bureaucracy (e.g. form-
filling). It was also convenient, as the moneylender calls door to door, and the
product is generally transparent and simple. Further benefits cited were that
payments are collected in cash on a weekly basis and the personal contact
helps to build up trust.

There were also barriers highlighted in relation to home credit. By far the
greatest deterrent was high interest charges. Overall, there was a high level
of awareness among focus group respondents in relation to interest charged
by moneylenders and the most common interest quoted was €25 or €30
interest on €100 loan. However, a moneylender stressed it would not be
cost-effective to offer smaller interest rates:
You cannot do small loans, go out and collect them weekly and have it at
a competitive price compared to other institutions. If someone could show
me how to do it, and I’m in the business a long time, I’d love to see it.
(Interviewee 16: financial service provider)
It was also noted by several focus group respondents that moneylenders

tend to target the most vulnerable, particularly those living in local authority
housing estates and direct provision centres.
They’re knocking at every door in my area […] They knock on every door,
saying, ‘We’ll give you vouchers and then you pay back this amount and
then if you want money, we’ll give you so much’.
R6: I’ve seen them walking about in the direct provision centre but I’ve
never gone to them.
R7: Yeah I see them every Friday.
However, a moneylender claimed that only a minority of his clientele are

poorer consumers.
I mean the popular perception is that the only people we deal with are people
in local authorities who have no income, no recourse to any other type of
credit. And certainly we would have a percentage of our customers who fall
into that, but it would be a far, far smaller percentage than people would think.
(Interviewee 16: financial service provider)
These reports on interest are the same as those described in other Irish studies;
see, for example, Conroy and O’Leary, 2005a.

While some interviewees felt that the financial products offered by home
credit providers were simple and transparent, several focus group participants
who had borrowed from moneylenders in the past explained that they were
not aware of the terms and conditions attached to the loans at the outset.
I thought it was great at the start like until I wrote it down, you know
what I mean? And they don’t even like tell you or make you aware of
what you have to pay back. They’re more or less giving you the money and
then coming the following week and you have to start paying it back and
they just don’t tell you about the rest.
Another negative practice is rollover loans, which get low-income consumers

into a cycle of debt. As one respondent explained:
€300, that’s what you can start off at and if you pay it back every week
you can get €500 and it goes up and up, but sure the more it goes up the
more debt you have.
5.6 Department of Social

and Family Affairs
Some of the public officials interviewed highlighted that extra credit
could also be accessed by low-income groups through the DSFA. The
supplementary welfare allowance (SWA) is offered to people whose means
are insufficient to meet their needs and those of their dependants. Additional
credit can be accessed through 2 discretionary payments: the exceptional
needs payment (given for maternity items, buying or repairing essential
household items) or the urgent needs payment (given in the form of a
repayable loan to help with emergencies).

5.7 Consequences
Even though the focus of the research was on individual consumers, 2
interviewees raised the difficulties faced by communities in accessing credit.
One interviewee argued that communities who were successful in obtaining
grants (in particular childcare and LEADER grants) were more financially
included and capable and had more resources than those communities who
were less likely to access grants. Financial exclusion among individuals may
therefore heighten financial exclusion for the community.
If they can’t access finance as individuals, or say they don’t have a bank
account as an individual, the chances are that issues are going to arise in
terms of making an application for funding as a community […] So I think
that the issue of financial exclusion is a continuum between the ability of
the individual and individual families to access credit, and also of particular
communities. And it manifests itself in infrastructure deficits getting wider
and wider and wider. So communities won’t have a crèche or they won’t
have a community centre or it’ll be run down.
5.8 Conclusions
Banks: The main barriers to accessing bank loans were the perception that
people on low incomes were unlikely to pass credit scoring assessments
and that bank interest rates were too high. This finding is concurrent with
observations in other Irish research (Byrne et al., 2005; Conroy and O’Leary,
2005a; Daly and Leonard, 2002) that low-income households are less likely to
source credit through banks.
Credit unions: The credit union loan was a popular form of credit for focus
group participants. The perception among respondents was that loans were
accessible and flexible, interest rates were low and loans were automatically
insured at no extra cost. Similar to Daly and Leonard’s (2002) finding, credit
unions did seem to offer a viable alternative to moneylenders as some
respondents changed from borrowing from a moneylender to a credit union.
However, this was also associated with an improvement in circumstance (e.g.
gaining employment), which would indicate that it could prove challenging
for more vulnerable consumers (e.g. unemployed) to end their relationship
with a moneylender.

Some respondents felt that credit unions were less likely to lend to more
vulnerable groups such as lone parents, members of the Travelling community
and asylum seekers. The main barrier cited was not being able to build up the
required savings history to qualify for a loan, due to low income. Other Irish
research has stressed that the need to build up a savings history may result
in some low-income consumers resorting to moneylending (Byrne et al.,
2005; Quinn and NiGhabhann, 2004). One of the difficulties for credit unions
offering ‘high-risk’ loans is that their interest rate is capped at an annual rate
of 12.68% APR. This issue was addressed in the UK in June 2006, when the
interest rate for credit unions was increased from a monthly rate of 1% to
2%. According to FITF (2005), this would enable credit unions to serve lower
income and more excluded groups and may remove the need for members to
save before they can apply for a loan.
Informal networks: Another popular form of borrowing among focus group

participants was from friends and family, which concurs with other national
research (Byrne et al., 2005; Conroy and O’Leary, 2005a; Daly and Leonard,
2002). However, Rogaly et al. (1999) stress that ‘relational capital’, accessed
through networks of neighbours and kin, is ‘double-edged’ as it can cause
conflict with family or friends.
Sub-prime credit: A small minority of focus group respondents were using

moneylenders, while several others had past experiences of them. Consistent
with UK studies (Whyley and Brooker, 2004), mail-order catalogues were
the most trusted form of home credit. The main push factor towards
moneylenders was the denial of credit from mainstream financial institutions,
which is consistent with national (Byrne et al., 2005; Daly and Walsh, 1988;
Quinn and McCann, 1997; Quinn and NiGhabhann, 2004) and international
literature (Regan and Paxton, 2003). Pull factors included accessibility, the
fact that no credit history is needed, reduced bureaucracy, convenience,
transparency, simplicity and payments are collected in cash on a weekly basis.
The main barrier for low-income consumers was high interest charges and
this did appear to influence some focus group respondents’ decisions to
borrow, which contradicts previous Irish research (Byrne et al., 2005). These
high interest rates can cause further financial strain and unmanageable levels
of debt for low-income households (Herbert and Hopwood-Road, 2006).
Similar to findings in the UK (Whyley and Brooker, 2004), there was also
evidence of ‘information asymmetries’, where the moneylender has better or
more information than the customer and may be able to exploit this gap in
knowledge. Another negative practice was rollover loans, whereby customers
nearing the end of one loan are persuaded to take out another. Whyley and

Brooker (2004) note that this practice has been criticised because borrowers
end up paying interest on interest, are subjected to pressure from agents and
become ‘locked into’ home credit use as they always have an outstanding
balance to repay.

Chapter 6
Savings and other
financial services
This chapter examines low-income consumers’ experiences of savings and
other financial services. It considers levels of usage of savings accounts
and insurance policies and discusses the barriers faced by the focus group
respondents. It then reviews preferred bill payment methods and the
advantages and disadvantages of different facilities.
6.1 Savings
Attitude towards savings
Focus group respondents were asked what they perceived as the advantages
of accumulating savings. They felt that savings helped to plan for a ‘rainy
day’, as well as other events such as confirmations, Communions, holidays,
Christmas and back-to-school expenses. However, several commented that it
was difficult to save due to lack of resources.
Because the money you receive through the dole, nobody can save. It is
money only to survive. The only thing we can do everyday is economise as
much as we can.
In addition to low income, other barriers included lack of tradition of saving,

concern in relation to how savings would affect social welfare entitlements
and the identification requirements for some savings accounts. Interviewees
also highlighted several consequences related to having no savings, e.g. lack
of security for the medium to long-term and increased social inequity as low-
income consumers are unable to benefit from the same tax breaks as more
affluent customers.
It’s inequitable. Rich people get large tax breaks if they save. Poor people
get nothing because they’re not taxpayers.

Banks
Focus group respondents were unlikely to use banks for savings. The small
minority who did, encountered problems in relation to anti-money laundering
legislation. This is highlighted by the following exchange involving a
respondent who had encountered difficulties lodging savings.
R4: I might save a fiver one week […] I thought I shouldn’t keep it in the
house, I’ll put it into the bank. They wanted to know how I had that much
money […] because I had taken out money for something and I didn’t put
it back in. Say I took out €500 and then I’d my savings […] I had to say
like I was owed it, do you know what I mean? Like it was a deposit for
something that I lent to one of the family and I got it.
R3: That was terrible, now. You must have felt terrible about it, did you?
R4: But they have to ask those questions for security.
R7: That’s only a recent thing though, isn’t it?
R4: No, it’s in place for years.
Credit unions
All focus group respondents who were members of the credit union had
savings, which they found particularly beneficial in planning for expected
and unexpected events. These respondents commented that there were
no charges for withdrawing money from their savings and they were also
entitled to dividends and free savings protection.
Life savings insurance is payable on the death of the member, subject to the
policy terms and conditions. The insurance benefit payable is a proportion of the
deceased members closing savings balance; the size of the payment depends on
the age of the member at date of death and will decrease as the member gets
older. Usually the amount payable is double that saved (up until 70 years of age).

Post offices
Some focus group respondents used post offices for savings for themselves,
as well as for their children. The main advantages cited were that there were
no charges, it was possible to lodge small amounts of money and it was
perceived to be more suited to the needs of those on low incomes.
6.2 Insurance
The majority of focus group participants did not have home contents
insurance and affordability was the most pertinent barrier.
I did start one and I couldn’t afford it, ages and ages ago. I just didn’t have
enough money for the insurance, because they are expensive. I couldn’t
afford it.
Focus group respondents in one particular urban area stated that insurance
companies were reluctant to insure them, not only for house contents
insurance but also for motor insurance, due to high crime rates in the area.
Consequently, premiums were very high and conditions attached, such as
the installation of burglar alarm systems, deterred most participants from
accessing premiums.
The only way you’ll get insurance out here is if you have a full burglar
alarm installed. Which makes me laugh, because it doesn’t stop anybody
who wants to break in. My neighbour does have hers insured but the
rigmarole she had to go through to get it insured, I couldn’t afford it.
I can’t afford to lose what I’ve got either but I can’t afford to pay the
premiums; they’re extremely high.

Furthermore, direct debit payments, either annually or monthly, are becoming
a common way of paying insurance premiums and it was highlighted that
this would exclude those without a bank account and would pose difficulties
for those who manage weekly budgets.
Some of the focus group participants aspired to having home contents

insurance and claimed that they would obtain home contents insurance if
they got a full-time, permanent job. Until then they have to prioritise their
spending, and insurance premiums are low on their agenda. While a minority
of focus group respondents did not believe the contents of their house
merited insurance, the majority were concerned about the consequences of a
fire or burglary.
[Interviewer: Are you concerned about not having home contents

insurance?]
R7: Yeah, I am.
R6: I am, because if anything happened, I can’t afford to replace what’s

gone.
R7: None of us can afford to replace what we have.
R6: No, it took us all long enough to get what we’ve got, let alone have to
worry about replacing it.
Life assurance
A few focus group participants had life assurance premiums in the past,
usually bought from door-to-door salespeople, but had let their policies
expire due to high costs. Hence, focus group participants stated that they
would only consider acquiring life assurance when they were older or
gained full-time, permanent employment. However, there was a general
level of mistrust in relation to door-to-door insurance salespeople due to
misinformation in the past.
Though not numerous, door-to-door insurance salespeople still exist in Ireland.

Interviewees also highlighted mistrust as a barrier for low-income consumers,
as well as lack of knowledge and understanding. Furthermore, those with
poor health or a disability would pay more and hence are more likely to be
deterred by costs.
6.3 Bill payment

Bill payment was given priority by most focus group respondents when
managing their finances and many said it was becoming increasingly difficult
due to the growing number of bills they needed to pay.
You have your utility bills; that’s your gas, your electric, your telephone,
your rent, cable, binman. You have at least 6 bills that you have got to pay,
and the others you choose to take on top of that.
Money management was challenging due to income inadequacy and several

ran short of money before the end of the week.
R3: Oh, it’s difficult. Because the way it is, when you’re finished doing your
shopping for the weekend, you’ve nothing left.
R4: You don’t even get out at the weekends.
I cannot afford this job and my house, I can’t. My rent is more or less the
same as the wages. So I’m robbing Peter to pay Paul till I get sorted.
Banks
Very few of the focus group respondents preferred the convenience of paying
their bills by direct debit (even though it could sometimes work out cheaper
than other methods). The main concern was not having sufficient funds in
their account or losing control of their finances.

I pay my own bills out of my welfare because then I know exactly how
much it’s costing me.
However, some focus group respondents noted that it was becoming

increasingly necessary to have a bank account with direct debit facilities to
pay for a number of services and products, and that it could also cost more to
pay certain bills in cash.
R8: Even joining [a fitness centre], you have to be in a bank for them to set
up direct debit […] If I said, ‘No, I don’t want direct debit I want to pay it
by cash’, it’s an extra tenner a month to pay it by cash.
R2: Yeah, I knew there was things that you had to have a bank account.
R3: No, but that’s not fair on people who haven’t got a bank account.
R8: It means there’s things that you can’t access if you haven’t got a bank
account.
Other comments made included that direct debits were not an option for those
without current accounts, charges could be applied and some had experienced
difficulties stopping direct debits. One respondent complained about utility
companies not adhering to agreements in relation to direct debits:
I had an agreement with them, that they would take my money by direct
debit, but I would get 14 days’ notice so that I know there’s enough
money in there. And they actually sent me out a bill and it was only 2
days’ notice.
Credit unions
Very few focus group participants paid their bills in credit unions. For those
that did, the main advantages were that it is possible to pay for several bills
simultaneously and there are no charges.

Post offices
The vast majority of focus group respondents paid their bills in cash at the
post office. Participants chose this method out of habit and because it made
it easier to manage their money and they were able to pay small amounts
towards several bills each week.
I finish here at 4 o’clock on the Friday and then I go straight to the post
office to pay my bills. You can pay the ESB, you can pay the cable, you can
pay rent and you can pay your gas; that’s 4 bills, right. That’s not counting
heating for the home.
There was limited use of An Post’s Household Budget Scheme, although

those that used it found it extremely beneficial for managing their bills as it
was straightforward and paid weekly.
R1: You just send away the form and you write down what you want
taken out and what for and you send it away and they get you a card and
your money on Thursday, the Post Office, they take your rent or electricity
out and then whatever’s left is yours.
R3: So that when your [electricity] bill comes in, you have no bill to pay.
They owe you money.
R4: Yeah, because you’re paying so much every week. That’s the thing
about paying so much every week.
Several of the focus group respondents were unaware of the Household

Budget Scheme, although they felt it would suit their needs. One interviewee
felt that this lack of knowledge was due to a reluctance to promote the
scheme as it was a costly service to provide. A further barrier highlighted
by another interviewee was that there was no flexibility with the weekly
payments, which could cause problems for a low-income consumer who
needs extra money urgently.

Other facilities
Some focus group respondents also liked to use ESB’s Easypay, which makes
it possible to pay off small amounts regularly (usually weekly) against their
electricity bill.
But if you had the [ESB] card, and if you’re in town, you just have your few
pennies on you or something or just something like that, and then your bill
isn’t as big.
However, some focus group respondents were concerned about the effect of
the ESB shop closures.
Members of the Travelling community living on halting sites were more likely
to use meter cards to pay for electricity, although this could sometimes work
out more expensive.
Yeah, well it’s a rip-off because if you run out you get €4 credit like. But
when you put in that card then they take that double amount off of you. It
would take back the €4 off you.
6.4 Conclusions
Savings: Several of the focus group respondents had savings, and credit
unions and post offices were the most popular institutions. The perceived
advantages are that it is possible to lodge small amounts of money and
there are no charges for withdrawing money. However, similar to findings
from UK literature (Kempson et al., 2000; Sinclair, 2001), many focus group
respondents were unable to save, due to lack of resources. This is what Devlin
(2005) describes as resource exclusion as lack of savings is due to a lack of
discretionary income rather than a lack of need or desire.

Insurance: As found in British studies (Kempson and Whyley, 1999),
ownership of insurance policies (including home contents and life assurance)
was rare among focus group respondents and the most pertinent barrier was
affordability. One focus group also reported that insurance companies were
reluctant to cover their area, indicating possible ‘redlining’.
Bill payment: In relation to money management, priority was given to bill

payment. Despite having bank accounts, respondents preferred to make
small, regular payments in cash, usually weekly, at post offices. Weekly
repayments were preferred as this works within the same timeframe as social
welfare payments and CE and FÁS payments. However, paying bills in cash
each week is time-consuming and it can also put low-income consumers
at risk of theft (Collard et al., 2003). Nevertheless, there was a general
reluctance among participants to change to direct debit payments as they
were concerned about not having sufficient funds in their accounts. Daly
and Leonard (2002) also found it unlikely for low-income households to use
this type of payment. Other popular methods of payment were An Post’s
Household Budget Scheme and ESB’s Easypay. A number of respondents
were concerned about the closure of ESB shops in Ireland and Rossiter and
Kenway (1997) point out that the disappearance of electricity showrooms
from high streets makes cash payment much harder and access to a bank
more important than in the past.

Exploring policy
options for
low-income
consumers in
Ireland
T h re e
Part
Chapter 7
Policy responses to
financial exclusion
Since the late 1990s, various policy initiatives to increase financial inclusion
have been developed internationally. Financial inclusion is defined as:
When citizens have access to appropriate financial products and services

and the opportunity, ability and confidence (and appropriate support and
advice) to make informed decisions about their financial circumstances,
as would be regarded as a minimum to organise their finances in society
effectively (Regan and Paxton, 2003: 8).
Although some of the policy initiatives have yet to be evaluated, this chapter
will discuss those which have the potential of reducing financial exclusion in
the medium and longer term and moving Ireland towards the goal of greater
financial inclusion.
7.1 Financial exclusion as a

public policy issue
Social exclusion policy
Regan and Paxton (2003) have stressed the need for financial exclusion
to be a priority in social exclusion policies. Financial exclusion has become
a key element of the NAPs/incl in many EU member states. Furthermore,
the European Commission made a commitment in 2006 to develop more
coherent and integrated policies in relation to financial exclusion with a
particular emphasis on disadvantaged groups.
Despite financial exclusion becoming an important global issue, it was largely

ignored in debates around social exclusion in Ireland until recently. The key
strategic frameworks on poverty in Ireland are the NAPS and the NAPs/incl.
However, there is little recognition of the issue of financial exclusion within
these frameworks, although the first annual report on the implementation of
NAPs/incl 2003–2004 (OSI, 2004) did mention that financial inclusion should
be a key component of social inclusion. Ireland is currently developing a new
NAPs/incl for 2006 to 2008. In recent consultations on the development of
this plan, several organisations (including Combat Poverty) recommended
that a greater focus be placed on the relationship between financial exclusion
and social exclusion in Ireland, with a particular ‘commitment to identifying

and addressing barriers to financial services’ (OSI, 2006: 71). The Irish
government has also recognised the need to address financial inclusion in its
work in the British–Irish Council (BIC, 2004).
Financial services
Financial exclusion also received little recognition, until lately, from the
Irish financial services sector and the Department of Finance. However, in
its Strategic Plan 2004–2006, the Financial Regulator (2004: 22) made a
commitment to ‘develop an Action Plan in co-operation with other agencies
and Government departments’ in relation to access to financial services.
Furthermore, in August 2006, the Financial Regulator published its Consumer
Protection Code, which is designed to protect consumers in their dealings
with regulated firms and to clarify for firms the standards they are expected
to follow when dealing with customers. The eleventh general principle
requires that a regulated entity ‘does not, through its policies, procedures,
or working practices, prevent access to basic financial services’ (Financial
Regulator, 2006a: 9).
The equivalent of the Financial Regulator in the UK, the Financial Services
Authority (FSA), has a similar statutory role to secure appropriate consumer
protection and to promote public understanding of financial services and
products. It has stated that ‘while tackling financial exclusion is not a
direct responsibility of the FSA, we need to take into account the differing
experiences and expertise of consumers and the impact our regulations have
on the more vulnerable sectors in society’ (FSA, 2000). To this end, the FSA
commissioned research examining financial exclusion (see Kempson et al.,
2000). HM Treasury (the UK’s economic and finance ministry) has taken the
lead on financial exclusion policy in the UK. In 1998, 18 policy action teams
(PATs) were set up by the Social Exclusion Unit to help the UK government to
tackle problems faced by people living in disadvantaged areas. PAT 14, which
was set up specifically to address access to financial services, was overseen
by HM Treasury and chaired by Melanie Johnson (Economic Secretary to the
Treasury). In 2005, HM Treasury set up a Financial Inclusion Taskforce (FITF)
with responsibility for monitoring progress and considering solutions in 3 key
areas: access to banking, access to affordable credit and access to free, face-
to-face money advice.

7.2 Improving access to banking services
7.2.1 Anti-money laundering legislation
In 1994, the first EU Anti-Money Laundering Directive was transposed into

Irish legislation under the Criminal Justice Act, 1994. As a result, financial
institutions are required to obtain 2 separate documents (usually a passport/
driving licence and a utility bill) from potential customers to prove their
identity and address. Guidance Notes for Credit Institutions, published in
2001 and revised in 2003, outlined alternative identification which could be
accepted. The 2003 guidelines state:
Any measures adopted to establish the identity of a person it proposes

to provide the service to should not deny a person access to financial
services solely on the grounds that they do not possess certain specified
identification documentation such as a passport or driving licence and/or
whose name and Irish address does not appear on a utility bill, electoral
register or directory (MLSC, 2003: 21; italics added).
This stance was reiterated in the recently published Consumer Protection Code
(Financial Regulator, 2006a: 11), which emphasises that a regulated entity:
[…] must take into consideration the provisions of the relevant anti-
money laundering guidance notes issued with the approval of the Money
Laundering Steering Committee, and in particular any guidance in such
notes on how to establish identity.
However, groups working with low-income consumers (e.g. NTMABS, 2006)

as well as the IBF (O’Rourke, 2006) have found that there are inconsistencies
across various financial institutions in applying the guidelines, given that they
are free to decide which options are most acceptable to them. Consequently,
Reidy (2004: 11) argues that the problem with the identification procedures
stems from ‘the policies put in place by individual institutions to comply
with the 1994 Act’. Reidy also points out that financial institutions are at
These alternatives include: identification form with photograph (ML10 form

or Age ID card) signed by a member of the Garda Síochána; documentation/
card issued by a government department; letter/statement from a person in a
position of responsibility (e.g. solicitor, accountant, doctor, minister of religion,
teacher, social worker, CE scheme supervisor); or letter/statement from a licensed
employment agency.

risk of indirectly discriminating against certain groups of people, as laid out
in the Equal Status Act, 2000 and the European Convention on Human
Rights (Article 1 of Protocol 1), and she advises that the Financial Regulator
should be required to make sure that financial institutions are in compliance
with the standards set out in these Acts and that policies do not result in
discrimination. A further problem highlighted by NTMABS (2006) is that
the guidelines assume that the non-financial sector (e.g. Garda Síochána,
government officials, solicitors) will provide proof of identification and this is
not necessarily happening.
The anti-money laundering regime will be changing again as a result of the

Third Anti-Money Laundering Directive, which was published in November
2005. Ireland and other EU member states are required to introduce the
provisions of the third directive by 15 December 2007. The third directive is
viewed by the IBF as ‘conservative’ and ‘fairly stringent’ and it has stressed
that ‘more work will need to be done to find practical solutions which address
the needs of those who do not possess the standard documentation whilst
meeting the fairly stringent legislative requirements placed on credit institutions’
(O’Rourke, 2006: 20). Organisations working with low-income consumers
also recognise the need to address the anomalies with the current guidelines
(NTMABS, 2006; Reidy, 2004) and have made several recommendations to be
considered when implementing the third directive, including:
» Revising the guidelines to make them more specific in detailing what is an

acceptable form of identification
» Involving the non-financial sector (e.g. solicitors) and other organisations

(e.g. MABS) who are in a position to vouch for a person’s identity
» Developing a standard form to verify identification (similar to the ML10

form) which may be signed and stamped by the statutory/non-statutory
sectors
» Addressing the problem with the asylum seekers’ Temporary Residency

Card, which is not an ID card
» Ensuring that the guidelines remain flexible and are displayed clearly in
financial institutions so that all customers know the requirements
» Ensuring structures are in place to have a senior member of staff to deal

with cases where regular documentation is not available.

7.2.2 Codes of practice
The most common international response from banks to financial exclusion

has been the creation of voluntary charters or codes of practice, which
have been developed through their trade associations to make provision for
basic banking services. There are no voluntary codes of practice in Ireland
in relation to the banking needs of vulnerable groups or basic banking
services. A number of codes of practice have been developed in Ireland by
the IBF. These codes are monitored by the IBF and by third parties (e.g. the
EU Voluntary Code, European trade associations, European Commission).
However, there is no independent body, such as the Banking Code Standards
Board (BCSB) in the UK, with a specific remit to monitor compliance. Codes
with a significant operational impact, such as the switching codes, are subject
to weekly reporting to the IBF with statistical data. Also, an independent
review was commissioned one year into their operation to assess the codes,
and recommendations from the review are being addressed. The Financial
Services Ombudsman also has regard to voluntary codes.
Statutory codes also apply to banking and a number of Central Bank/Financial

Regulator sector-specific codes have now been replaced by the Consumer
Protection Code (Financial Regulator, 2006a) and the range of voluntary
codes in existence are likely to be reviewed in light of this.
Internationally, the first voluntary code of practice was introduced in France in

1992. It outlined the services that banks needed to provide in order to adhere
to 1984 legislation on the right to a bank account. In Germany a similar code
of practice was introduced to facilitate an ‘Everyman’ current account in
1996, and in 1997 Belgium’s voluntary code of practice made provisions for a
‘call deposit account’. In March 2005 a revised banking code was introduced
in the UK to include more stringent requirements in relation to access to basic
bank accounts. The UK code states that individuals will be offered basic bank
accounts if they are suited to their needs. According to the British Bankers’
Association (BBA), this new code is equivalent to the French statutory right to
a bank account and offers consumer protection that could not be achieved
through legislation.
These include Codes of Practice on: Business Account Switching, Personal Account
Switching, Personal Customers, Transparency in Credit Charges for Personal
Customers, Branch Restructuring, Customer Communications and Relations, Pre-
Contractual Information for Home Loans, Mortgage Arrears, Code of Ethics, and the
Equal Status Act; A Compliance Guide; and a Code of Practice for Credit Institutions.

Research in France, Belgium and the UK reveals that voluntary agreements
from banks might not necessarily end the difficulties that low-income
consumers face in opening an account. Brown and Thomas (2005: 1) argue
that, under a voluntary banking code, ‘the major banks have little incentive to
promote uptake of accounts or to invest in innovative solutions’. One of the
first research reports carried out after the new banking code was introduced
in the UK found that ‘some bank branch staff appear, at best, to be ignorant
of the undertakings in the Banking Code or, at worst, seem intent on
ignoring them’ (Herbert and Hopwood-Road, 2006: 14). Similarly, there were
mixed reports on the impact of the banking codes in Belgium, where a study
commissioned by the Ministry of Economic Affairs found that the banking
charter was ‘having little or no effect in overcoming financial exclusion’
(Kempson et al., 2004: 25). According to Kempson et al. (2004), the most
effective model is a voluntary agreement underpinned by legislation.
7.2.3 Legislation
Banks in Ireland are subject to a broad range of national legislative

requirements (e.g. Consumer Credit Act, Central Bank Acts) and other
legislation emanating from the EU (e.g. Consumer Credit Directive, Third
Anti-Money Laundering Directive). To date, there has been no legislation
enacted in Ireland around a ‘right to a bank account’. Therefore, access to
a bank account is based on the principle of contractual freedom, where
consumers do not have an absolute right to have a particular type of contract
with a credit institution.
Some countries (e.g. France, Belgium, Sweden, Portugal, Canada) have

legislated around the right to a bank account. The aim of such legislation
is to enable people without bank accounts to open one at a bank of their
choice. In 1984 France was the first country to recognise the right to a bank
account and this right was further strengthened by a 1998 law that not
only reiterates the right to an account but also affirms the right to basic
banking services. In Belgium legislation was enacted in 2003 as a result of
inconsistencies among banks in their adherence to the charter.
Kempson et al. (2004) stress that legislation will only succeed if appropriate
accounts are developed simultaneously. Furthermore, they note that even in
countries with a legal right to a bank account, people who have been refused
seldom appeal against the decision and are usually unaware of their right to

do so. Gloukoviezoff (2006) also highlights difficulties with the procedure,
including the complexity of its implementation and the lack of information
from banks.
Some commentators recommend the introduction of some form of

universal service obligation on the banking sector, which would ‘mandate
the affordable provision of basic bank accounts to all individuals, making
this inherent in the receipt and continued operation of a banking licence’
(Brown and Thomas, 2005: 4). They argue that this is important to ensure the
financial sector’s commitment to addressing financial exclusion and it would
also commit banks to work with policymakers and the government to drive
forward solutions to financial exclusion. However, banks in France opposed
a universal service obligation as they felt it was ‘an impeachment of their
contractual freedom’ (Kempson et al., 2004) and was ‘at variance with the
principles of safe and sound banking’ (Carbo et al., 2005). Similarly, Herbert
and Hopwood-Road (2006) feel that while a universal service obligation
may seem attractive, the practicalities are more complex. This is because it is
necessary to designate which providers should have full responsibility (e.g.
in France this lies with the post office). Also, accounts carrying an overdraft
facility cannot be offered universally as this requires credit scoring.
In contrast to the ‘legislator’ role taken by the French, Portuguese and

Swedish governments, the UK government has been categorised as a
‘mediator’ (Carbo et al., 2005: 108) as it has encouraged the financial
industry to tackle financial exclusion and to co-operate with other sectors.
However, in HM Treasury’s first major strategy on Access to Financial Services
in 1999, the then Economic Secretary to the Treasury Melanie Johnson did
threaten the banks with legislation if they did not voluntarily implement
the proposals. She stated, ‘We do not want to have to legislate, as some
have urged, to compel banks to serve all sections of the community. But if
voluntary action is unproductive and monitoring shows insufficient progress,
it may be necessary to consider other options’.
Currently, the FITF (2005) is monitoring progress by the banks in the UK, in
particular in relation to the shared goal of halving the number of adults in
households without a bank account and of making significant progress in
that direction within 2 years (i.e. by 2006).

7.3 Development of basic banking
services
7.3.1 Basic banking services
The development of basic banking services is the main initiative that has
been introduced internationally to bring financially excluded people into the
banking system. Basic banking services involve the provision of basic bank
accounts by banks and building societies. These are simple, low-cost, ‘no
frills’ current accounts designed for people who are ‘unbanked’ and for those
who want to ensure that they cannot overdraw their account or who might
not meet the banks’ criteria for opening a standard current account. Since
basic bank accounts were introduced in the UK in April 2003, over 6 million
have been opened, one million of which were by people who were previously
‘unbanked’ (BBA, 2006). While the facilities provided vary from country to
country, general features include:
» Free or low-cost transactions (e.g. the ANZ bank in Australia offers an

unlimited number of free transactions; in Belgium the ATM withdrawals
are free of charge as well as a number of face-to-face transactions)
» ATM/debit cards
» No account-keeping fees (although in Australia this only applies to people

who qualify for government benefits, while in Belgium there is a €12
annual ceiling on charges for managing the account)
» Direct debit or standing order facilities
» No overdraft facility
» Buffer zone
» No minimum opening or monthly balance
» No chequebooks (except for France where cheques are still the most
common form of payment)
» Ideally a linked bill payment/budget account

» Collard et al. (2003) also suggest that attaching savings accounts would
increase their attractiveness to people on low incomes.
Basic banking services are considered a major step towards financial inclusion
(Kempson et al., 2004), although research studies have found a number
of obstacles for people accessing and using them. Even though banks are
expected to be more flexible in the identification requirements for opening
basic bank accounts, proof of identity is still deterring some low-income
consumers (BCSB, 2005; Herbert and Hopwood-Road, 2006; Regan and
Paxton, 2003). Furthermore, even though banks are supposed to advertise
basic bank accounts, research in Australia and the UK found that any type
of promotion is severely limited (BCSB, 2005; Herbert and Hopwood-
Road, 2006; Kempson et al., 2004; Regan and Paxton, 2003). This lack of
promotion can cause particular problems, as Herbert and Hopwood-Road
(2006: 13) observe, because low-income consumers ‘may lack the confidence
to ask for information relating to a basic bank account, or may not even be
aware of the existence of basic bank accounts’.
As there is no credit facility provided with a basic bank account, a client’s

credit history is irrelevant. However, in their mystery shopping exercises,
BCSB (2005) found that some banks in the UK are carrying out credit scoring
prior to opening a basic bank account. Other obstacles faced by low-income
consumers in the UK in accessing basic bank accounts include: staff’s
knowledge of basic bank accounts can be unsatisfactory; there are attempts
to sell accounts other than basic bank accounts; basic bank accounts have
been upgraded when it is not in the individuals’ best interests; there are
difficulties opening accounts in rural areas due to bank closures; and there
may be delays in opening basic bank accounts due to over-centralisation
(BCSB, 2005; Herbert and Hopwood-Road, 2006).
Low-income consumers also face difficulties using basic bank accounts,

particularly in relation to charges levied by banks for items such as failed
direct debits/standing orders, unauthorised overdrafts and bounced cheques
(Herbert and Hopwood-Road, 2006). Charges for unauthorised overdrafts in
the UK range from £15 (€22) to £39 (€57). Clearance times for cheques also
usually take longer for basic bank accounts (BCSB, 2005). Finally, in an analysis
of 435 evidence reports submitted to 290 citizens advice bureaux, Herbert and
Hopwood-Road (2006) found evidence in 40% of cases of banks exercising
their right to ‘set off’ (i.e. where banks transfer money from an account that is
in credit in order to make payments that are due on another account).

Despite the number of problems with basic bank accounts, commentators
still regard them as an essential service for low-income consumers. For
instance, the BCSB (2005) has noticed real improvements in the provision of
basic bank accounts since it began carrying out annual independent reviews
in 2002. The latest review found an increase in the production of clear and
straightforward literature and this literature was given greater prominence
in branches. However, recommendations have been made to improve the
services provided (BCSB, 2005; Brown and Thomas, 2005; Herbert and
Hopwood-Road, 2006; Regan and Paxton, 2003), including:
» Anti-money laundering rules should be revised to ensure identification

requirements do not prevent account opening
» Credit scoring should not be used to determine access to a basic bank

account
» Basic bank accounts should not exclude people in financial difficulties or

with a history of debt
» People with basic bank accounts should receive the same level of service as
those with current accounts
» Banks should not exercise their right to ‘set off’ from basic bank accounts
» Charges for failed direct debits and standing orders should be capped
» All banks should offer a buffer zone of approximately €15
» Information about basic bank accounts should be prominently displayed in

bank branches and information provided should be transparent and simple
» On opening an account, a client should be given basic information on

budgeting and handling money, preferably through face-to-face advice.
7.3.2 Universal banking services

especially basic bank accounts, through intermediaries (e.g. post offices,
credit unions, savings banks). In countries such as Germany and France,

where post offices and savings banks are important players in the provision of
banking services, the numbers holding accounts tend to be higher (Kempson
et al., 2004).
Although Ireland has no basic banking or universal banking services, the

Irish banking sector proposed the development of a universal bank account
in 2002 (IPSO, 2002) as part of the government’s wider National Payment
Strategy. The IBF (2005b: 1), reactivating this idea in 2005, recommends that
it should be delivered by banks in conjunction with An Post (and perhaps
also credit unions) and sees it as providing ‘basic access to the Irish payments
infrastructure enabling citizens to make and receive payments electronically’.
It envisages that a universal bank account would provide a ‘straightforward,
no-frills banking solution for facilitating wider financial inclusion’.
The role of post offices
Post offices are seen as playing a crucial role in tackling financial exclusion
as they provide delivery facilities and wide geographical access (Carbo et
al., 2005). A key feature of universal banking in the UK is the fact that all
16 banks offering a basic bank account are required to have an agency
agreement with the UK Post Office, allowing account-holders to carry
out transactional banking at their local post offices. However, one of the
drawbacks is that these accounts still need to be opened in bank branches.
Since the UK’s launch of universal banking in 2003, 1.97 million basic bank
accounts have been accessed through post offices, 171,571 of which have
been upgraded to fuller featured accounts (BBA, 2006).
In Ireland, An Post is uniquely positioned to play a crucial role in tackling

financial exclusion given its large network (1,450 offices) in urban and
particularly rural areas – four-fifths (80%) of post offices are in rural areas
(IPU, 2005). It also has experience working with vulnerable consumers,
as 40% of all counter business is connected to social welfare (65% of all
social welfare payments). Furthermore, An Post already provides a range of
agency banking services on behalf of AIB through more than 1,000 local
post offices. There is room for improvement, however, and the Minister
for Communications, Marine and Natural Resources Noel Dempsey has
In 2003 the UK Post Office also introduced a post office card account (POCA). This
is not a basic bank account but a stored value card for receiving benefits, pensions
and tax credit payments. It is to be phased out by 2010.

stated that An Post must be flexible and adaptable, and introduce ‘new
technologies, new work practices and new ways of doing business’ to
compete in the current market (Dempsey, 2005).
A most significant development was the agreement in April 2006 between

An Post and Dutch/Belgian financial services company Fortis to create a new
banking joint venture, which is likely to operate from early 2007. Fortis will
be taking responsibility for the design of the financial products. Both groups
are to invest a combined €112 million in the project on an equal basis. The
joint venture company will operate a fully functioning retail bank, offering a
broad range of financial services and products to the Irish market, including
insurance, mortgages, credit cards and telephone and Internet banking. An
Post has said that the services will appeal to the ‘banked’ and ‘unbanked’
alike and Chief Executive Donal Curtin has stated that An Post will be
providing ‘a suite of financial products that will be relevant and accessible
to all customers including the significant portion of Irish customers who are
currently unbanked’ (Oliver, 2006; italics added).
Credit unions are often posited as a viable alternative to the mainstream

banks in broadening access to bank accounts (Herbert and Hopwood-Road,
2006). The main strength of the credit union movement in Ireland is its
appeal to low-income consumers, although its existing network, which is
‘extremely variable in quality and professionalism’, is considered its major
weakness (Millward Brown IMS, 2005). According to the Association of
British Credit Unions (ABCUL, 2006), ‘credit unions’ ability to offer basic
banking services to their members is a key missing part of the jigsaw which
makes up a successful credit union movement’. In the UK an increasing
number of credit unions are becoming linked to the clearing system and are
developing basic bank accounts, which are expected to ‘have a significant
impact on financial inclusion’ (ABCUL, 2006). This initiative is being
Fortis has experience of working with post offices in Belgium, where it already
delivers free banking services (bank accounts, savings products) through the
post office (Banque de La Poste). The cash transfer service offered by La Poste is
used extensively by the government for the payment of social security benefits.
However, Fortis was criticised by a Belgian trade union in 2001 for setting up
a special unit aimed at identifying and closing unprofitable bank accounts in
underprivileged urban districts. According to Kempson et al. (2004: 25), Fortis
denied this charge ‘but admitted that they had pilot experiments in ten branches
aimed at redirecting unprofitable clients towards Banque de La Poste’.

supported by the Co-operative Bank. The proposed bank accounts will be low
cost and will offer direct debits, standing orders, debit cards and ATM access
but no chequebooks or overdrafts.
Credit unions in Ireland have been put forward by the IBF (2005b) as
potentially playing a key role in future universal banking services in Ireland.
Furthermore, in its Strategic Plan 2004–2006, the Financial Regulator
(2004: 16) made a commitment to ‘encourage and support the movement’s
continuing role in widening access to financial services’. The Irish credit
union movement can be a significant player in the provision of basic banking
services given its wide distribution (435 credit unions) and large membership
(approximately 2.67 million – 63% of the population). Some credit unions
already offer some of the facilities required for a basic banking service. A
small number can accept wages by EFT (via Paypath), while others offer direct
debit/standing order facilities attached to their budget account. Some credit
unions also offer an ATM service and 4 credit unions offer ‘IQ’ cash cards,
which can be used at any credit union, Bank of Ireland or AIB ATM.
7.4 Financial advice and education

Lack of financial education and advice is a major barrier to full financial
inclusion. It can result in people making poor financial choices and feeling
uncomfortable when dealing with banks. International commentators
(Gloukoviezoff, 2004; Regan and Paxton, 2003) have argued that developing
banking products suitable to the needs of low-income consumers and
increasing access is only the first step towards financial inclusion. According
to Regan and Paxton (2003: 27), ‘it is impossible to achieve any depth
of financial inclusion without improving financial literacy’ and they
recommend that banks in the UK should recognise the benefit of having a
more financially literate population. Gloukoviezoff (2004) claims that once
an account has been opened there is a need for financial institutions to
develop a relationship with their customers and to educate them in the use
of financial services. This financial education should not just be concerned
with basic numeracy and literacy skills, but it should provide individuals with
high levels of understanding of financial issues. Several programmes have
been introduced in the UK to address such issues: in 2003 the FSA created
a Financial Capability Steering Group, which was relaunched in March 2006
along with the results of a baseline survey on financial capability (Atkinson et
al., 2006); and financial education has been incorporated into the National

Curriculum. In France the Caisee d’Epargne (savings bank) set up a training
entity which offers advice on money management and attempts to develop
people’s basic knowledge of banking.
To date, there has been no financial literacy or educational campaign

targeted specifically at low-income consumers or vulnerable groups in Ireland.
Furthermore, there has been no response to the general issue of financial
literacy at a national policy level (Conroy and O’Leary, 2005b). The most recent
research in Ireland has found that low financial literacy is a barrier to accessing
and using financial products and services and has called for a working group
on financial literacy to be established (Conroy and O’Leary, 2005b). Those
financial literacy programmes which have been developed in Ireland include:
» Irish Bankers Federation: The IBF provides free education on finance to

schools in the form of the Money-Go-Round Programme (primary) and the
Paymaster Programme (post-primary). Many IBF members have embedded
the principles of plain English into the development of their promotional
and marketing materials
» EBS and The National Adult Literacy Agency: EBS and NALA joined
together to launch a 3-year financial literacy strategy to provide consumers
with information on financial products in plain English. It includes a plain
English guide to financial terms, a media-related promotional campaign,
printed support material and assistance for producing materials to support
financial literacy tuition (Conroy and O’Leary, 2005b)
» Financial Regulator: One of the high-level goals of the Financial Regulator’s

Strategic Plan 2004–2006 (2004: 3) is ‘helping consumers to make
informed choices through education and codes of practice in a fair financial
services market’. In addition, one of its key actions in 2006 was to develop
a new consumer website (www.itsyourmoney.ie) and initiatives in consumer
education, including guides, cost surveys and fact sheets. To achieve this
goal, the Financial Regulator is committed to providing information as
simply and clearly as possible, developing financial planning and education,
fostering access to financial services, ensuring that financial service
providers act in a fair and transparent way and monitoring competition.

The role of the Money Advice and Budgeting Service
As part of the Irish government’s response to over-indebtedness, MABS

was established by the DSFA to address the problems of moneylending and
over-indebtedness. MABS was established in 1992 as 5 pilot projects, and
by 2005 it had developed 65 centres in Ireland. The overall aim of MABS is
to work towards the elimination of over-indebtedness through the provision
of a free, confidential, independent, community- and rights-based money
advice and budgeting service. Its target group comprises people vulnerable to
poverty and over-indebtedness, particularly those on low incomes and those
experiencing inequality in terms of access to financial services and capacity
for self-help. The majority of MABS clients are social welfare recipients (71%).
Among its 16,000 new clients in 2005, 7% were unemployed, 12% were
on the one-parent family payment and 12% were on supplementary welfare
allowance (O’Loughlin, 2006).
MABS has built up a successful relationship with the credit union movement,
enabling clients to open savings accounts and obtain affordable credit and
to move away from reliance on moneylenders (Korczak, 2004; Quinn, 2005).
Facilities include:
» Special budget accounts, which allow MABS clients to pay their creditors
through the credit union. This helps introduce clients to the credit union
and helps them regain control over their finances. It also creates a pathway
leading away from the moneylender and back to mainstream financial
services (Byrne et al., 2005)
» Loan guarantee fund, which is used to guarantee loans advanced by

the credit unions to MABS clients who do not satisfy the credit union’s
criteria for loans. These loans are not issued to clear existing debts but are
instead issued for emergency needs. The client makes a weekly payment
to the local credit union and payments are made to the various creditors
in accordance with the budget agreed between the money advisor and
the client. It is funded but not administered by the DSFA. Quinn (2005: 6)
recommends that this fund be extended and that money advisors should
make more use of it ‘as it has the capacity to provide guarantees for a
much larger number of clients than it does at present’.
MABS is consistently posited as a model of best practice at EU level. In a peer

review, Korczak (2004) concludes that the particular strengths of MABS that
could be transferred to other EU countries include its ‘people-oriented style’,

central funding and coordination, collection of standard quarterly statistics,
evaluation methods, private-public partnership model and accounting software
that enables MABS (through the credit unions) to make a single regular
payment for distribution among creditors. Furthermore, the peer review praises
the mix of national coordination and local diversity, the strong emphasis
on social cohesion and the quality of human contact. Moreover, MABS has
received positive feedback from clients and stakeholders. Almost three-quarters
(73%) of MABS clients have paid or are currently paying off their debts, 70%
state that they can manage their money better and 82% claim to have greater
peace of mind. Furthermore, 90% of stakeholders, including creditors, were
pleased with the service MABS provides (Korczak, 2004).
The main criticism of MABS in the peer review is that it has no statutory base
(Korczak, 2004). Furthermore, an evaluation of MABS recommends the
need for strategic planning at national level; the need for a greater focus on
community education, which prevents people falling into debt; and the need
to focus on low-income consumers (Eustace and Clarke, 2000). In response,
MABS is currently developing a community education function and this will
not only provide financial education to those who are indebted, but will
also be performing a preventive role. MABS is also developing a new service
delivery model where those with financial literacy and a certain educational
standard and income level will be provided with financial counselling through
a telephone service, and those with less capacity will receive one-to-one
counselling. Furthermore, MABS is continuing to develop closer relationships
with community and voluntary groups.
7.5 Affordable credit

Lack of access to affordable credit is one of the most significant costs
related to financial exclusion. The importance of access to affordable
credit was emphasised in the UK government’s pre-budget report in 2004
when the Financial Inclusion Fund of £120 million (€172.8 million) over 3
years was announced. Almost one-third of this fund (£36 million) is to be
made available for a Growth Fund to support the coverage, capacity and
sustainability of third-sector lenders, including credit unions.
MABS is likely to be restructured on a statutory basis in 2007.

Ireland has one of the strongest credit union movements in Europe (Carbo
et al., 2005) with 63% of the population (2.67 million) being credit union
members. Credit unions, in conjunction with MABS, have developed
numerous services targeted at those who are over-indebted. More recently,
the ILCU has developed advertising literature with OPEN (One Parent
Exchange and Network) and MABS to increase credit union awareness and to
combat moneylending. Individual credit unions have set up pilot educational
initiatives to inform people about moneylending. Each autumn, Tralee Credit
Union and Kerry MABS run such a campaign, entitled ‘Keep the Wolves from
the Door this Christmas’.This campaign has also been widened to other credit
unions (e.g. Waterford and Sligo). A minority of credit unions in Ireland have
a social fund, which is used for small loans at a nominal rate of interest. To
avail of this loan, members must be referred by MABS. The purpose of the
social fund is to meet the emergency needs of people who may resort to
moneylenders when an unforeseen need arises. The fund, in operation since
early December 2004, is still at the pilot stage.
Recent research in Ireland has found that credit unions need to develop their
services in order to continue to attract and appeal to low-income consumers.
Byrne et al. (2005: 69–71) recommend that credit unions need to:
» Improve their marketing to low-income groups and schools
» Work on improving the financial literacy and autonomy of low-income

groups
» Develop and introduce targeted educational programmes
» Offer small loans and emergency loans not linked to the requirement to
save
» Promote small savings (possibly through a promotional or educational

campaign)
» Further develop budget accounts
» Further develop EFT services
» Collect socio-economic data on their members.

7.6 Savings
The main initiative introduced by the UK government to encourage savings
among low-income adults (people of working age who are in receipt of state
benefits or in-work tax credits) is the Saving Gateway Scheme, which was
introduced on a pilot basis in 5 disadvantaged areas in 2002. The scheme
was initially intended not only as a savings product, but also as an initiative
‘which improves people’s welfare and inclusion in a broader sense’ (Regan
and Paxton, 2003: 23). The scheme’s main features were that people could
save up to £25 (€36) per month to a maximum of £375 (€542) over 18
months and when the account matured the government added a matching
contribution of £1 (€1.44) for £1 (€1.44). The final evaluation of the pilot
project found that the scheme did act as an incentive to save (with 52%
of participants saving the maximum amount of £375), it was simple to
understand and it encouraged people to save regularly. However, those with
the lowest incomes found it more difficult to save (Kempson et al., 2005). At
the completion of the pilot project a high proportion of participants said that
they felt more in charge of their life and felt more secure financially. Three or
more months after maturity, more than 9 in 10 Saving Gateway participants
(91%) still had a savings account of some kind and 4 in 10 (41%) were still
saving fairly regularly (Kempson et al., 2005). The scheme is now in a second
larger pilot, but it no longer focuses on those with low incomes.
Unlike the UK government, the Irish government has not introduced a pilot
savings scheme specifically targeted at those on low incomes. Although
the NAPs/incl 2003–2005 states that the government will ‘determine if any
further initiatives are required, such as special schemes for saving for those
on low incomes’ (OSI, 2003: 9), no action was ever taken. Instead, SSIAs
were introduced in the Finance Act, 2002 to encourage people to save for a
5-year period during which time the government would add 25% tax-free to
their savings. The main features of this scheme were:
» Accounts had to be opened between 1 May 2001 and 30 April 2002
» It was confined to one SSIA per adult resident in the state
» The account holder committed to save between €12.70 and €254

per month

» The account was for a 5-year term and there was a penalty clause for early
withdrawal
» The government paid a 25% top-up on all monies saved.
As Chapter 3 highlighted, over one-third of the Irish population (38%)

aged 21 and over took out an SSIA. Credit unions alone have 170,000 SSIA
accounts. The unemployed are less likely to have an SSIA (16%) compared
to those in employment (47%). Hence, MABS has argued that the scheme
was of ‘minimal benefit’ to low-income consumers as the minimum amount
of savings required was too high, the duration of the scheme was too long
and the incentive provided for smaller savers was too low (MABS, 2004).
When SSIAs were first introduced, organisations such as MABS criticised
the government for not consulting with those working with low-income
consumers and for not poverty-proofing the scheme.
Since 2001, MABS and Combat Poverty have proposed an alternative to

the SSIA in consecutive pre-budget submissions, based on the UK’s Saving
Gateway Scheme. The proposed scheme would be confined to MABS clients
with the aim of aiding the transition of previously indebted low-income
clients into independent financial managers. These proposals have not been
accepted by the government. The proposed scheme is costed at €6 million
over a 2-year period and features include:
» Savings requirements ranging from €1 to €5 per week or €5 to €25

per month
» Participants would receive an extra €1 from the government for every

€1 saved, to a maximum of €600
» A minimum saving period of 6 months would be required to retain the

top-up.
MABS (2004) highlight several benefits to the scheme including:
» Provides help on the road to financial independence for indebted

MABS clients
» Encourages a savings culture among those on low incomes, thereby

helping to prevent a recurrence of indebtedness

» Builds up the asset base of poor households on a long-term basis
» Promotes access to financial services among low-income groups
» Encourages financial institutions to provide services for

low-income households.
MABS (2004) also recommends that if the pilot is successful, then the scheme
should be operated on an ongoing basis and extended to the general low-
income population.
7.7 Other financial services
7.7.1 Electronic payment of benefits
Some commentators argue that the continued payment of state benefits

in cash is significantly related to financial exclusion (Kempson et al., 2000;
Sinclair, 2001). In countries such as Australia, Sweden, France and Germany,
very few adults lack a bank account as payment of social security benefits
and pensions has been made directly into bank accounts for a number
of years. However, even though electronic payment of benefits has the
possibility of increasing financial inclusion, it is important that appropriate
accounts are available to receive payments.
In Ireland the DSFA is currently carrying out a review of its payment systems,
which will take account of the effectiveness of currently used systems, new
trends and offerings in the financial services sector and the rapid advances
in card-based technology (EC, 2005). This review will complement the
Department of the Taoiseach’s formulation of a National Payment Strategy,
which, according to Accenture (2003: 35), has the potential to ‘significantly
improve access to banking products and services for the traditionally under-
served segments of the Irish population and also contribute towards greater
technology adoption by these segments’. However, the DSFA will have to
address the fact that it estimates that approximately 30% of its customers
do not have access to an account which would facilitate EFT payments.
Furthermore, even though all social welfare customers in Ireland have the
choice of receiving their payment electronically, just over one-third (36.1%)
was using this facility in April 2006.

7.7.2 Insurance
The main response to the lack of home contents insurance among low-
income consumers in the UK has been the Insurance with Rent Schemes.
These involve social landlords (local authorities and housing associations)
arranging contents insurance cover for tenants via group policies. The
main benefits for residents are that payments are weekly, they have strong
collective purchasing power and hence premiums are lower, and they deal
directly with the local authority. The benefits for the insurer include lack of
competition, high levels of customer loyalty and assured regular collection of
premiums by the housing provider (Sinclair, 2001). Although initially the take-
up of these schemes was slow, the numbers accessing them has increased.
7.7.3 Addressing over-indebtedness
Unlike many other EU countries (e.g. Scandinavian and Benelux countries,

France, Germany and Austria), Ireland does not have a Debt Settlement Act.
Imprisonment for debts is still possible, and the vast majority of applications
to the courts for committal orders are made by non-banks and are mostly
for non-repayment of civil debt (e.g. statutory charges). The issue of over-
indebtedness is becoming an important policy issue in many EU countries.
For instance, a UK ministerial group set up to oversee the development and
implementation of policies on over-indebtedness includes representatives
from the government, voluntary sector and credit industry, working in
partnership with a special focus on poverty and social exclusion.
The IBF has been to the fore in championing for change that would provide
for effective alternatives (to imprisonment) for non-repayment of debt. To
this end, it is working on an initiative (the Pilot Debt Settlement Programme)
launched in conjunction with MABS in June 2003. The aim of the initiative is
to offer debtors an agreed long-term repayment programme with the write-
off of residual debt after an agreed period of 3 to 5 years. The scheme is in
a pilot phase and has yet to be formally evaluated. Korczak (2004) highlights
that the scheme allows a ‘fresh start’, although it remains to be seen whether
creditors can be persuaded to make the scheme work on a voluntary basis.
Furthermore, only MABS clients will benefit from the voluntary scheme.
Korczak (2004) recommends that a legal basis would create a better
framework and that consideration should be given to financial institutions

(banks, insurance companies, mail-order companies, moneylenders etc.)
donating 0.1% or 0.2% of their turnover towards debt management services
as a cost-effective system of recovering debts.
7.7.4 Social finance
The concept of social finance in Ireland is relatively new, although greater

awareness is emerging. In 2004 research on social finance in Ireland
recommended that a national framework for social finance be developed
and promoted (SCSF, 2004). To this end, in the 2006 budget, Minister for
Finance Brian Cowen created a fund to back socially useful projects that have
struggled to get loans in the past. To date, the only party currently financing
the government’s social finance initiative is the banking sector, to the sum of
€25 million. In addition, bank expertise is being provided in the formulation
and delivery of the initiative. Described as ‘social finance’, the money is to be
used to fund projects which will have a positive impact on local communities.
Given that the fund has just been set up, it will take time before its impact
can be assessed.
The provision of social finance by the Irish credit union movement is being
given increasing priority. The ILCU (2005b: 3) define it as ‘the provision of
finance by organisations which seek a social return or social dividend, as well
as financial return’. In order to quantify the extent of social finance provided
by credit unions, the ILCU carried out a survey in 2004 among 137 member
credit unions. The survey revealed that all the credit unions provided small
loans to already indebted or low-income families. Over half the credit unions
surveyed (58%) were providing social finance, which constituted 10% of
loans made. The majority of social finance lending was to individual members
(70%), which included members who could not borrow elsewhere (8%),
individual members who would be regarded as disadvantaged (31.1%)
and members setting up or expanding their businesses (30%). The report
concluded that social finance and its development are a key area of concern
for credit unions and, despite difficulties encountered in processing social
finance, credit unions are ‘keen to develop a social finance policy which they
consider a crucial element in fulfilling their responsibility in line with the credit
union ethos and its operating principles’ (ILCU, 2005b: 10).

7.8 Conclusions
This chapter summarises the main policy initiatives that have been developed
to address issues related to financial exclusion. At EU level, financial
exclusion has become a key element of several member states’ NAPs/incl.
Internationally, banks have responded to the issue of financial exclusion by
producing voluntary charters or codes of practice and some countries have
legislated around the ‘right to a bank account’. The main initiative introduced
internationally to bring financially excluded people into the banking system
has been the introduction of basic banking services. The basic banking
service is closely associated with universal banking services, where basic
bank accounts are provided through a partnership (usually the banks and
post offices and credit unions). Lack of savings, insurance and pensions is
also related to financial exclusion and to this end the UK government has
introduced a pilot savings scheme and home contents insurance scheme
targeted at low-income households.
Nationally, financial exclusion has been largely ignored in debates around

social exclusion in Ireland and discussions within the Irish financial services
sector until recently. Although Ireland has no basic banking or universal
banking services, the Irish banking sector proposed the development of
a universal bank account in 2002, which could be delivered by banks in
conjunction with An Post (and perhaps credit unions). In Ireland the DSFA is
currently carrying out a review of its payment systems and moving towards
electronic payment of benefits, which has the potential of bringing more
people into the banking system. As part of the Irish government’s response to
over-indebtedness, MABS was established and has been consistently posited
as a model of best practice at EU level. In relation to affordable credit, credit
unions provide the most accessible low-cost personal loans. Although Ireland
does not have a Debt Settlement Act, MABS has launched a Pilot Debt
Settlement Programme in partnership with the IBF and other creditors.

Chapter 8
Respondents’ views
on policy responses
The policies presented in the preceding chapter were discussed with the
38 interviewees, where appropriate, and to a lesser extent with the 59
low-income consumers who participated in the focus groups. This chapter
presents the respondents’ views on the merits of different initiatives and the
feasibility of developing new policies in Ireland to respond to the issue of
financial exclusion. The first section examines stakeholders’ views on how
financial exclusion could be addressed as a public policy issue and the role
of different organisations. Thereafter, the chapter addresses the areas of
banking, credit, savings and other products.
8.1 Financial exclusion as a

public policy issue
There was a general consensus among interviewees that financial exclusion
was not a public policy priority for the Irish government. Several interviewees
suggested that financial exclusion needed to become an integral part of
policy to tackle social exclusion in Ireland (i.e. it should be incorporated into
the NAPs/incl). Some interviewees also felt that if financial exclusion is to be
addressed in poverty policy, this should be complemented in the work of the
financial services sector.
The government has set up the Irish anti-poverty strategy and at the same
time the banks are acting against that strategy. There should be coherence
somewhere but I don’t see that coherence.
While many of the interviewees working with low-income consumers

recognised the complexity of the issue and the need to approach it in a
holistic way, other interviewees perceived financial exclusion as purely a
consequence of social exclusion and did not recognise that financial exclusion
could also be a cause of poverty.

Financial exclusion is a symptom of a different problem. The problem is
exclusion. It doesn’t occur independently. It occurs as a by-product of
something else […] If you tackle exclusion, financial exclusion disappears
as an issue, but if you tackle financial exclusion, you do nothing I think to
deal with exclusion.
8.2 The role of different stakeholders

While many interviewees felt financial exclusion should be put on the
policy agenda in Ireland, there was a divergence of opinion concerning
which organisation should take responsibility for financial exclusion. Several
interviewees thought it was the role of the Department of Finance (DoF),
while others felt the issue should be championed by the Financial Regulator,
DSFA, MABS or a partnership between the DoF and DSFA.
It would involve the Department of Finance and really it’s their baby, I
suppose at a policy level. Or it would have to be done jointly [i.e. between
the DoF and DSFA] […] At the end of the day, it’ll have to be a Finance
issue because they have the purse strings. So they can do more than
anyone else can do about it.
(Interviewee 15: departmental official)
However, other interviewees pointed out that the DoF’s key role is to provide
a regulatory framework and, therefore, financial exclusion would not be part
of its remit. Other barriers cited included lack of political will, the tradition
and culture within the DoF and lack of resources. A minority of interviewees
favoured the DSFA leading on the issue as they perceived it to be more
‘socially responsible’ and more ‘customer-orientated’, especially given its new
Quality Customer Service process. Furthermore, it is currently working with a
large proportion of the financially excluded.
Despite the lack of consensus on which organisation should lead on financial

exclusion, all interviewees stated that the most appropriate way forward was
working in partnership.

At the end of the day, the partnership approach is probably the one that
will deliver the most effective results.
The interviewees working with low-income consumers and the interviewees

from the financial services industry both supported the setting up of a
steering committee comprising representatives of the DoF, DSFA, MABS,
Financial Regulator, financial services industry (e.g. banks, building societies,
credit unions, An Post, home credit providers) and organisations working
with people living in poverty and vulnerable groups (e.g. Combat Poverty,
NALA, SVP, INOU, Integrating Ireland). Interviewees from financial institutions
expressed their willingness to become involved in a steering group, but
several bank officials stressed the need for guidance on the issue.
If there are customers that are alienated from the total banking system,
they should be telling us how to give these people access.
What we don’t want to do as a sector is to address the recommendations

in the area of financial inclusion, literacy, only to be faced with another set
of recommendations 6 months later. So we just need that clarity.
Interviewees working with low-income consumers also supported

collaborating with financial institutions to address the issue.
But even the banks, even around something as basic as making some of
their financial thinking and financial expertise available to a process, you
know. I think that in itself would be useful.
Interviewees stated that alliances had already been set up that were
successful and that would be a good base for starting collaboration on
financial exclusion. These alliances include the National Payments
Implementation Programme comprising government departments and

financial services; AIB and An Post’s banking relationship; alliance of credit
unions/An Post and Bank of Ireland to gain access to the clearing system; and
credit union and EBS partnerships in providing mortgages.
8.3 Improving access to banking services
8.3.1 Anti-money laundering legislation
A Money Laundering Steering Committee was established in Ireland, under

the aegis of the DoF, representing the various sectors of the financial services
industry and the regulatory authorities. One of the main challenges for this
committee was addressing the issues around identification requirements.
Several interviewees who were also committee members said that it was
difficult to come to an agreement on identification requirements as there
were differences both within the committee and with external organisations
on what were considered appropriate forms of identification. However, there
was a general consensus among interviewees that the guidelines produced
by the committee in 2001 (and revised in 2003) have not succeeded in
addressing the problems that some consumers experience in opening bank
accounts because customers are not being made aware of alternative
options in relation to identification and there are inconsistencies in their
interpretation.
We thought we had solved it vis-à-vis additional options in the guidance

notes but from some of the feedback we are getting it is obviously not
always percolating down to the front desk.
The issue is that people should have access to bank accounts when the
legislation says, or the guidelines say, that alternative forms of
identification are possible. So why can’t people open them?
I mean we thought that our work was done when we got the guidelines in
place, but the banks are not offering people the options.

One interviewee explained that inconsistencies might be occurring because
the guidelines do not offer enough clarification and hence banks have to
make their own interpretations.
And the guidance notes do accept government documentation. But

what we’ve kind of been trying to address is what is government
documentation? Does it have to be a government department? Are
we saying local county councils, local authorities, are they considered
government documentation? So what we tried to do is narrow it down.
Interviewees from financial institutions also highlighted the increasing

pressure being placed on staff to be stringent with identification
requirements as they are personally legally liable (although there have yet to
be any prosecutions in Ireland).
The Third Money Laundering Directive was formally adopted by the EU in

2005 and is to be implemented in member states by the end of 2007. This
development offers an opportunity to re-assess the guidelines and the
identification requirements in particular. Some of the interviewees hoped that
the outcome would make it easier for low-income consumers to access bank
accounts as the emphasis will be placed on high-risk products and customers.
Conversely, others were concerned that the guidelines could become more
‘stringent’ instead of more ‘flexible’ and ‘accessible’.
Some interviewees recommended that PPSNs and Temporary Residency Cards

should be included as appropriate identification in the new guidelines. Staff
in financial institutions suggested that addresses could be verified using
electronic means and that discounted passports could be provided to those
on low incomes. A minority mentioned introducing a national ID card. A
few interviewees felt that legislation may be necessary, given the current
difficulties in adherence to the existing guidelines.
Notwithstanding the importance of addressing the identification problems,

several of the interviewees felt that the focus of anti-money laundering
legislation should shift from identification requirements to monitoring
irregular transactions.

I mean if you’re sophisticated enough to money launder, you’re
sophisticated enough to probably get your hands on false documentation.
So all of the emphasis on the documentation end of things is ridiculous.
Several interviewees advised that low-income consumers needed to be

informed about the documents required to open a bank account, not only
through the production of information leaflets but also through a targeted
public awareness campaign.
According to one interviewee, the DSFA has already made attempts to

facilitate ease of access to bank accounts for low-income consumers and has
reached an agreement with the Revenue Commissioners so that they can
open bank accounts on behalf of their customers.
So what we have looked at as part of our overall payment strategy is that

when somebody comes in and say makes a claim with us, that information
is sufficient to open an account with a financial institution, or to set up an
account, and Revenue will accept that. So the people don’t have to go to
the financial institution then and open the account. We look after all that
with the claim form.
Other recommendations made included that anti-money laundering training

for bank staff should address the needs of low-income consumers and that
low-income consumers should be made aware of the relevant complaints
procedures.
8.3.2 Banking codes versus legislation
Interviewees were asked during the in-depth interviews whether there was a
need for a banking code and/or legislation to facilitate the provision of basic
banking services in Ireland. Some of those from financial institutions stressed
that any banking code needed to be ‘appropriate’ and ‘balanced’, and as
the following quote exemplifies, some preferred the idea of a banking code
to legislation.

If you don’t comply with a principle-based voluntary code, well then you’re
into a legislative code, which has penalties. So there is an earnest effort
from all financial institutions to respond to the code.
One bank official thought legislation would only make the government ‘feel
good’, while another felt that legislation was probably necessary if all the
banks were to comply.
If [the government] comes out and tells us to do it, we’ll have to do it.
And that’s the only way to do it. We’re not going to do it otherwise. I’m
just being very, very brutally honest about it […] PLCs will not find this very
attractive unless there’s a threat that it’s going to be a requirement and all
of our competitors are doing it.
However, one departmental official interviewed did not favour legislation

being introduced.
We don’t see a pressing need to introduce legislation. We don’t yet see

a pressing need to say yes there is market failure that even needs state
intervention […] we would really be waiting to see does anybody have
a substantive case to contradict that view and fair enough if there is a
substantive case well that can be looked at.
Many of the interviewees working with low-income consumers thought

that legislation, or the threat of legislation (as in the UK case), should not be
dismissed, but another commented that he was unsure if the ‘atmosphere is
there for it’. Another interviewee claimed legislation is unlikely as he believed
there is a ‘pro-bank’ ethos among policymakers in Ireland.

8.4 Developing basic banking services
Basic bank accounts have been introduced in many European countries as a
response to financial exclusion. They are simple, low-cost, ‘no frills’ current
accounts designed for people who are ‘unbanked’ and for those who want
to ensure that they cannot overdraw their account or who might not meet
the banks’ criteria for opening a standard current account. When a model
of basic bank accounts was described to focus group participants, there was
overwhelming support for them and most thought it was an appropriate
product that they would use. Some of the focus group respondents stated
that they would prefer to receive their social welfare/wages into a bank, while
others stated that they would ‘not object to it’. Only one respondent said
she would not use it, and would ‘probably just keep the account that I have’.
However, there was some scepticism among the focus group respondents as
to whether basic bank accounts would actually be implemented and would
meet their required needs.
Many of the interviewees working with low-income consumers also welcomed

the idea of introducing basic banking services into Ireland. The main
advantage, according to them, was that they would be appropriate products
designed specifically for the needs of those on low incomes. Furthermore, it
was hoped that they would address disengagement from banks.
However, there were several concerns raised in relation to the merits of a

basic banking service. Some interviewees were concerned that those living
in remote or disadvantaged areas would not benefit, and bank officials
were anxious that it would mainly attract existing customers. Many of the
interviewees were aware of the developments in basic banking in the UK
but were unsure whether this initiative had actually achieved its objectives.
Factors that concerned interviewees included slow take-up, lack of promotion
and a belief that those who had opened basic bank accounts were not
actually the ‘financially excluded’. Furthermore, several interviewees raised
concerns that, if basic bank accounts were provided in Ireland, customers
would receive a second-class service as they would be perceived as
unprofitable.
The most recent figures from the British Bankers’ Association show that, between
April 2003 and October 2006, over one million basic bank accounts were opened
in the UK by people who were previously ‘unbanked’ (BBA, 2006).

The banks will say, ‘We have to deal with our normal customers. We have
to make a profit’. We can understand that, but before we go down the
line of that happening, we’re saying that this is a concern. This needs to be
addressed.
According to many of the interviewees, the most pertinent barrier to setting

up a basic banking service is the cost involved.
I don’t think we’re ever going to have a universal account as in the basic
bank account that’s in the UK. I don’t think that’s ever going to happen.
[Interviewer: And why not?]
Who’s going to fund it? You know the cost issue. Who’s going to run the
accounts?
Some felt the government should fund the service as it would save money by
paying social welfare electronically and it already receives substantial levies
from the banks. Others thought the banks should take responsibility in the
costs as they would also save money from fewer cheques in the payment
system, they would make money from receiving social welfare payments
electronically and they should take a socially responsible role to providing
services to vulnerable consumers. However, several interviewees felt that
banks would be unwilling to provide a basic banking service. One bank
official said it would not be a cost-effective exercise given the technological
developments and systems which would need to be put in place. Some
others felt it was not necessary in Ireland given the movements towards ‘free’
transactional banking. Conversely, another bank official pointed out that
providing ‘free’ or ‘basic’ bank accounts would not be that costly for banks.
There’s 2 ways you make money in current accounts, well, 3 really. The
first is fees. The second is net interest income, because if we have €500
million balances in our current accounts, we’ll use that €500 million to
give mortgages to people, and then we’ll make a profit on that. So we
start making money from it. And the third thing is it is more likely then
that the current account customer will come over and buy a pension from
us or a mortgage from us or a credit card, and we’ll make money on that.

So they’re the 3 ways you make money. Now, if you don’t charge for
charges, number one, you’re only cutting off one of the revenue streams.
And secondly, it’s not the most significant revenue stream.
One interviewee who had experience of setting up basic bank accounts in

other countries felt it was feasible in Ireland as some banks would see it as a
niche market, others would provide the service because they felt obliged to
and some would introduce basic bank accounts to promote their corporate
social responsibility roles.
But I think you will find, as we have, that there will be a small number
of providers who are actually interested in this as a market, and others
who would go along with it because they’ve been threatened, and some
who will do it for PR purposes […] you can put it in your corporate social
responsibility reports and it earns you points by doing it.
Interviewees who supported the introduction of basic bank accounts stressed

that they needed to be appropriate and simple and above all attractive to
low-income consumers. For the focus group respondents, the most important
factor would be no hidden fees or bank charges.
R5: Do we want a new type of account, a chargeless account brought in? I

guess we do.
R3: I feel that across the board, all of the charges, if they want to bring
people into banking, have them charge-free while they’re on social welfare
incomes, end of story.
Another essential service for focus group respondents would be the provision
of an ATM card; although it was highlighted that government stamp duty
on these cards would need to be abolished. Several focus group respondents
suggested that this card should also be used as a debit/Laser card as this is
becoming a common method of payment.

R2: Everyone pays by card now.
R1: The majority do.
R2: The smallest little thing like, out with Laser.
R1: Yeah, for shopping and stuff like that.
The majority of focus group respondents also felt that direct debit facilities
are essential as they are becoming a necessity to pay for certain bills.
R5: But it’s still necessary. It’s nice to have it there like, even if they never
use this, it’s nice to actually have it.
R7: It’s handy now, do you know.
However, the vast majority did not feel that a chequebook or overdraft were
necessary facilities to provide alongside a basic bank account.
R2: We wouldn’t be in a position to overdraw.
R3: Not at all.
R4: So that would suit us.
R3: Yeah that’s a good thing, not to be able to overdraw.
R2: And a lot of people can’t afford to anyway.
Both focus group respondents and interviewees recommended that basic

bank accounts should be advertised and marketed appropriately and people
should be educated around the use of basic bank accounts. Interviewees also
suggested that banks produce annual audits on the socio-demographics of
people accessing basic bank accounts to ensure they are appealing to the

people for whom they were designed. Some thought it would be necessary
to attach a savings account to a basic bank account and offer bill payment
facilities suited to the needs of low-income consumers.
8.4.1 Universal banking services
Universal banking services involve the delivery of current account facilities,

especially basic bank accounts, through intermediaries (e.g. post offices,
credit unions). This research has already highlighted that several focus group
respondents would prefer to carry out their financial transactions in a credit
union or post office rather than a bank. Therefore, interviewees felt that one of
the main advantages of universal banking is that it would enable low-income
consumers to access basic bank accounts in a financial institution of their choice
and could also bring those who are ‘unbanked’ into the banking system.
We are convinced, and have been for a number of years, that the universal
account would offer a very significant solution to the huge number of
people who for whatever reason are outside the banking system.
The role of post offices
Several of the focus group respondents preferred to carry out their financial
transactions at a post office. According to them, the benefits of post offices
are their convenience (geographically as well as opening times); their service
to remote communities, particularly those not served by banks; they are
‘socially responsible’ and not profit-driven; and they are more customer-
oriented than other financial institutions. Hence, the majority of focus group
respondents supported the proposal of basic banking services provided in a
post office as it would be ‘handy’.
I would say the post office because you could do everything at once while
you’re in there.

Interviewees also felt that the provision of basic banking services in post
offices would ease low-income consumers into banking and act as a gateway
to a suite of other financial products.
A lot of people might feel a lot more comfortable and it might progress
people a little bit more into the financial services area, where they would
feel confident and comfortable knowing that they have a safety net. If they
don’t want to deal with the banks, they don’t want to involve themselves
with that, they can simply keep with the post office, their payments, paying
their bills. If they decide to start saving for their children, if they decide to
start looking at a mortgage or if they start to find themselves in a situation
where they’re employed and they’re moving into a job and they now have
money and they want to invest and they want to save and they want to
build a credit rating, it’s an excellent way to move forward.
Interviewees felt that An Post has the potential to play an important role in
universal banking services given its large distribution network and its unified
structure.
The advantage An Post would have over the credit unions is, while they
don’t have the same financial savvyness, they do have a much bigger
network and they are on a common platform. They’ve a common
operating system. They’re on a common IT platform.
Like the preceding respondent, some interviewees thought post offices

lacked the financial competencies for basic banking services, while other
interviewees pointed out that post offices already provide transactional
banking services on behalf of AIB.
But I’d have no doubt they’d have the competence to do it. Absolutely.
Once the technology systems are there as well to support it. I’d have no
qualms at all about it.

In addition to some interviewees’ concerns in relation to financial expertise,
others highlighted that post offices were not designed for personal
consultations, where customers could discuss their business in private. Other
factors raised were post office closures (particularly for those living in remote
areas), the current lack of access to the clearing system and long queues.
It was also stressed that post offices in Ireland need to learn from the
experiences of the UK and not follow the route of the POCA, which only
acted as a stored-value card and is to be phased out by 2010.
And the general view is that it is the most retrograde step there ever could
have been as [POCA] offers nothing that a basic bank account doesn’t
offer. People would be an awful lot better off with a bank account […] I
mean it’s literally a stored-value card, which is topped up once a fortnight.
Recommendations made by interviewees included that post offices should

offer low-income consumers appropriate financial products, ensure that basic
bank accounts can be opened, provide further training for staff and develop
services to accommodate one-to-one consultations.
Overall, focus group respondents supported credit unions becoming involved

in universal banking services as many of them preferred to carry out their
financial transactions at a credit union. A minority of focus group participants
already receive their social welfare directly into their credit union account.
However the majority of credit unions do not offer this facility, as it is being
carried out on a pilot basis, and this limits the options for other members
who would prefer to receive their social welfare payments or wages into their
credit union account. Several focus group respondents commented that they
would prefer to receive payments into a credit union account and would
welcome being able to use a credit union ATM card at different credit unions
and other financial institutions.

R3: I’d rather see us paid into the credit union. Because the credit union is
here in the building. It’s within easy access […]
R6: [Credit unions] should be on Paypath. Yeah, if they were on Paypath

we would have the choice then of either opening an account with the
credit union or using the bank, whichever you preferred. At the moment
we have no choice; it has to be banks because banks are the only ones
that operate Paypath. If the credit union operated Paypath, then we could
use the credit union.
However, some interviewees raised concerns that wages/social welfare being

paid into credit union accounts would be used to ‘set off’ other credit union
loans and debt.
As credit unions operate outside the clearing system, it is impossible for

customers to access money outside opening hours. Several focus group
participants stated that they would welcome a move towards universal
banking services as this would mean that credit unions would join the
clearing system and their money would be more accessible. This was also
supported by several interviewees who felt that remaining outside the
clearing system could perpetuate the experience of financial exclusion of
credit union members.
I mean the credit unions, if you take the League of Credit Unions, right, as
an organisation, they are financially excluded as well. They are excluded
from the EFT system, right. And consequently their members are, right.
The unbanked are people who do not have an account into which payments
can be made electronically […] But a lot of other people might have an
account with a credit union or the post office. They would be excluded.
An agreement has been made between the Irish League of Credit Unions (ILCU)
and the DSFA that wages/social welfare payments will not be used to offset other
credit union loans and debt.

Another barrier cited was the fact that the Irish credit union movement
is disparate and uncoordinated. This is reflected by the fact that 8 of the
largest credit unions are not even members of the ILCU. According to
some interviewees, this makes it difficult for other organisations to develop
partnerships around tackling the issue of financial exclusion.
The credit union movement in Ireland is great overall. But there are a
couple of difficulties that operationally have inhibited us from helping
them or working closely with them. The first thing is they’re all very
disparate. They’re all very discrete.
Interviewees recommended that credit unions develop a common operating

system and common set of standards. However, this was attempted several
years ago and did not succeed. Several interviewees also suggested that
credit unions need to become more professional, whilst maintaining their
community focus, in order to develop their products to meet the needs of
low-income consumers (e.g. basic banking services).
Electronic banking
It transpired during the in-depth interviews that another aspect of the

universal account proposal in Ireland is eCards or ‘electronic purses’.
Described by some interviewees as a ‘virtual account’, individuals could
receive their social welfare payment or wages onto an eCard and then use it
for cash withdrawals at ATMs or for payment at a number of retail outlets.
A further idea, at an evolutionary stage, is the ‘ATM mobile’, which is similar
to the eCard except the chip is contained in a mobile phone; this system also
permits some bills to be paid electronically.
These developments were discussed with focus group respondents and

interviewees. There were several advantages noted by interviewees including
that the eCard would be convenient, flexible and facilitate easy access to
cash. Furthermore, it was highlighted that there would be no contact with
financial institutions, which would benefit those who did not want to or
could not engage with banks.

So if it’s on an electronic purse, I’d say that there are huge advantages to
it as well because you go to ATMs, you can only get €20 out or €50 out.
If you go to point of sale, you can get flexible amounts. You know, if you
want to get cash back, if you go into a supermarket, on cards, you can get
cash back on it as well. So I mean card-based technology gives you a huge
amount of flexibility, I would have thought.
Interviewees from financial institutions also felt it would facilitate paper being
taken out of the payments system and hence it would probably be a cost-
effective initiative. Other benefits included that it would reduce the stigma
related to social welfare payments and customers would not get into debt as
no credit is provided.
Focus group respondents were less keen on the idea of an eCard as they
thought it would be difficult to manage their money and keep track of what
they had spent.
But then if you have a card and you’re spending, you’re forgetting to save
and you’re money’s spent and then you’ll pay back that money, plus you
have no money on your card left.
Overall, however, focus group respondents and interviewees did not support
the idea of an eCard or ATM mobile as it would not offer the services of a
bank account; as it was ‘limited’. It was not seen as an appropriate way of
addressing financial exclusion.
Although some interviewees thought eCards were safer than carrying cash, it
was noted by several interviewees that it might not be a safe way of storing
all your money.
I mean everything has its own difficulties too. You bring in electronic
purse, if it gets lost, the value is gone. If it’s stolen, the value is gone.

Furthermore, focus group respondents stated that technology could be a
barrier as some found it difficult to remember different PIN numbers and
interviewees acknowledged that eCards may be issued with a different PIN
number each time.
One interviewee thought it would introduce low-income consumers to credit

and other financial products, while several others noted that it would not be
possible to build up a good credit scoring and therefore it would not, like a
basic bank account, act as a gateway to other financial products.
You know, it’s a payment mechanism. It’s the 21st-century version of just
getting the cheque.
Finally, some bank officials were also concerned about the implications for
money laundering as it would be easier to conceal transactions with an eCard.
8.5 Financial advice and education

Many of the interviewees felt that issues related to self-exclusion and lack
of demand and awareness of bank accounts could be addressed through
advice and education. Several organisations were posited as playing a role in
financial education, including the Financial Regulator, MABS, community and
voluntary organisations, CE and FÁS employers, adult literacy programmes
and community welfare officers. Several interviewees stressed that any
educational programme should provide advice on available options, the
potential benefits of different products and the benefits of using a bank
account to manage personal finances. Interviewees also thought it was
crucial that these programmes are delivered in plain English and address
feelings of mistrust and disengagement.
Several interviewees recommended that financial education should be

provided alongside basic bank accounts, if they are introduced, in order that
they fulfil their full potential.

I mean for instance if somebody who is in a financially excluded group
now only uses the account for just taking the cash out, it’s become a
payment mechanism that’s simply sort of getting a cheque and getting
a card. The card gives me cash rather than the cheque giving me cash.
None of the other problems have been solved. You know, their financial
understanding is no better, their financial education is no better, their
budgeting is no better, their planning is no better. The problem hasn’t
been solved. It’s just a ‘looks good’ solution has been put in place.
Some of the focus group respondents also highlighted the need for financial
advice and education.
I think we need to reduce the charges, and try to educate people more on
the banking system. Like me, when they say ‘current’, ‘savings’, I don’t really
understand what they mean. I need to be more educated about the banking
system and let’s enjoy it and enjoy the advantages because I pay for it.
Several focus group respondents felt that the frontline service in banks
could be improved by increasing staff training, especially around literacy and
intercultural issues.
They should help the ones that can’t read and can’t fill in the forms; you’re
sent here and sent there and back. They send them off, they won’t help fill
them in or do anything only send them away and come back again.
Other suggestions made by interviewees included that educational

programmes should promote planning ahead for the long term as well as
for anticipated and unexpected events (e.g. through savings); focus on the
benefits of credit unions compared to moneylenders; and address differences
between unauthorised and authorised moneylenders.

8.5.1 The role of MABS
Several of the focus group respondents reported positive experiences of

MABS and others had heard of the service through community and voluntary
organisations, where MABS newsletters had been advertised and money
advisors had visited.
I think that the MABS are brilliant. You can go to them and spill your beans
and then they’ll help you […] They’ll explain what you have moneywise
and what you need to pay out, and they will even get onto the people you
built up a loan or credit or a bill or whatever.
According to interviewees, one of the main benefits of MABS was that it

targets the most disadvantaged. Furthermore, the Loan Guarantee Fund was
perceived as one of the most beneficial services offered through MABS and
was described by one interviewee as a ‘poverty alleviation’ programme. While
it was regarded as an essential source of credit for people repaying debts, a
minority of interviewees raised concerns about inconsistencies in the manner
that money advisors applied it and fears that some people who default on
the fund might lose contact with MABS.
Some of the focus group respondents had not heard of MABS and some
stated that MABS was not as well advertised as it used to be.
I mean the electricity board used to have their thing up behind the
counter, for MABS, if you had to pay your bills. Come to MABS for advice.
It’s not as well advertised now as it used to be. Even in the welfare office it
used to be well advertised, but you don’t see any of their signs anymore.
It transpired that one of the main challenges for MABS was that some focus
group respondents self-excluded themselves as they preferred to seek advice
from peers or they could not perceive that MABS could offer any additional
help managing a very low income. This was particularly prevalent among
members of the Travelling community.

I think Travellers are more confident talking to each other about problems
than taking it somewhere else to someone else that doesn’t know
anything. They like to take it to themselves because they know what’s
going on and what the problem is.
Interviewees were also concerned that MABS might not be reaching those
most in need of its service. It was suggested that MABS should continue
to develop links with the community and voluntary sector as well as VECs
(vocational education committees) and social housing associations. One social
housing provider recommended that money advisors could contribute to pre-
tenancy courses and address access to financial services as well as providing
budgeting and money advice. It was highlighted that MABS is already
developing its community education role and is developing a protocol with
building societies to enable them to refer clients to MABS. Other suggestions
made were that MABS should increase the number of services, target services
at vulnerable groups, such as homeless people and asylum seekers, and offer
generic non-brand-specific advice in relation to financial products.
8.6 Affordable credit

As highlighted above, credit unions provide an essential form of credit to
low-income consumers. Nevertheless, respondents made several
recommendations on how credit unions could improve service delivery to
low-income consumers.
Access
Similar to banks, credit unions also need to adhere to anti-money laundering

legislation. Although credit unions were perceived as being more flexible than
banks in relation to acceptable forms of identification, many of the focus
group respondents expressed concern that it was becoming increasingly
difficult to open a credit union account. The following conversation is
indicative of discussions in all focus groups:

R2: [The credit union is] like going into another bank now isn’t it?
Group: Yeah it is […]
R4: There’s a lot of red tape.
R3: They are getting more complicated now […] The very same as what
you’d get in a bank now. The very same. Which it wasn’t before it was a
lot easier to go to. Now you would be more sceptical to go to them. You
would think twice now.
In order to join a credit union, a potential member needs to be within the

common bond. However proving an address in the locality is particularly
difficult for those without a permanent address, such as asylum seekers and
members of the Travelling community. As a response, one credit union official
suggested that credit unions should not be subject to the same level of
regulation as other financial institutions, while other interviewees suggested
that credit unions remain flexible around identification requirements.
Overall, geographical access was not a barrier for most focus group
respondents and in fact one credit union official stressed that credit unions
were ‘in every disadvantaged community and rural community in this
country’. However, one of the focus groups took place in a disadvantaged
urban area, which is not served by a credit union; the focus group
respondents stated that they had tried to get a credit union established in the
area and were unsuccessful. Nevertheless, interviewees from credit unions
stated that they try to provide services in disadvantaged or remote areas and
had recently set up 2 sub-offices in the west of Ireland for communities that
had lost mobile bank services.
The common bond is the factor that unites the members of the credit union and
is most often a community bond (where all the members live, and in some cases
work, in a particular locality).

Targeted services
Many of the focus groups respondents were unaware of the services offered
by credit unions. Some focus group respondents asked if credit unions offer
home contents insurance; others enquired whether it is possible to have
savings accounts from which one can withdraw money. Indeed some asylum
seekers had not heard of the credit union.
The credit union? I haven’t heard of it. The only credit I know is the credit
for your mobile phone.
(Male asylum seeker, focus group 4)
Focus group respondents felt that credit unions should make a concerted
effort to target disadvantaged groups who are unaware of their services.
I think the credit union has a bigger role to play in our community. Now,
I’m in the credit union, would be nearly 40 years. There’s people out there
who don’t know about credit unions, who couldn’t afford to go down
that road because of one thing and another. The credit union has a bigger
role to play in the community. Let them come in and speak to people, with
posters. Do you know what I mean? There is another alternative for people
who can’t go to banks, but people don’t know.
It’d be better if they made people aware of what they actually do because
most people don’t actually know.
Similarly, several interviewees felt that credit unions should target

disadvantaged groups through educational programmes and campaigns,
addressing the benefits of membership and the advantages of credit union
loans compared to those from moneylenders.
They should be competing with moneylenders, right […] I think they

should have a single blinkered role in getting people who are borrowing

from moneylenders to come and save and borrow with themselves. That
should be their mission really.
Further suggestions made included that credit unions should design products
specifically for low-income consumers and develop social funding for those
experiencing financial hardship. However, one credit union official did not
think it was necessary to have specific marketing strategies for low-income
consumers as it would be time-consuming, would involve more staff and she
felt this was primarily the role of MABS.
[Interviewer: Well do you let people on low incomes know what services
are available?]
Well, from that point of view, the fact that MABS is here, we don’t feel
that it’s sort of our business to really be going targeting that group […]
We know that they’re there and it’s a matter of us working closer together
to get to these people, rather than the credit union marketing it.
Self-exclusion
Two polarised views emerged during the fieldwork in relation to the Irish
credit union movement which could impact on whether those on low
incomes would exclude themselves from the services offered. Several focus
group participants and interviewees viewed the credit union movement
as a community-based initiative providing services to those who may be
excluded from other services. Credit unions were described by focus group
respondents and interviewees as ‘approachable’, ‘personable’, ‘friendly’,
‘ordinary’, ‘community-run’, ‘volunteer-based’, ‘genuine’, co-operative’
and ‘customer-based’. Consequently, many of the focus group respondents
closely identified with credit unions, particularly if they had a tradition of
credit union membership in their family. Conversely, a number of focus group
A minority of credit unions do have a social fund which provides emergency small
loans to MABS clients.

respondents felt that credit unions in Ireland have moved away from their
original aims and philosophies and that their main focus is now on providing
services to a predominantly ‘middle-class’ clientele and on generating profit.
So they were never, at any point in their existence, to my knowledge

anyway, looking at the socially excluded as a target group in any shape
or form. They may have purported to it, but in reality, I think myself, they
never were.
What they’ve become is something quite different from where they started
out from, and maybe the evolutionary path of the credit union movement
actually needs to be checked, because my concern is that they are actually
evolving towards becoming banks.
Interviewees from credit unions felt that they this was a natural progression
in a time of unprecedented economic growth, but maintained the movement
was still community-based and focused.
Have we become more middle-class? Yes we have in some respects.

But that doesn’t mean that credit unions are not still rooted in the
communities, because they’re owned by the communities. […] If the
community grows wealthier, obviously the credit union develops with it.
But the credit union never ever loses its roots.
The 10th Operating Principle adopted at the ILCU’s annual general meeting (1984)
stated that: ‘Continuing the ideals and beliefs of co-operative pioneers, credit
unions seek to bring about human and social development. Their vision of social
justice extends both to the individual members and to the larger community in
which they work and reside. The credit union ideal is to extend service to all who
need and can use it. Every person is either a member or a potential member and
appropriately part of the credit union sphere of interest and concern. Decisions
should be taken with full regard for the interests of the broader community within
which the credit union and its members reside’ (ILCU, 1984).
Currently, there is no information on the socio-demographic profile of credit union

members.

Some interviewees thought that credit unions should develop along similar
lines to community development credit unions in the US, which were set up
because traditional credit unions were not meeting the needs of low-income
consumers. Some interviewees advocated this due to the perceived changing
ethos of credit unions. However, credit union officials argued strongly that
this was not necessary given that credit unions are in so many disadvantaged
areas and still provide small loans to those on low incomes.
8.7 Savings
Only a couple of focus group respondents had a government SSIA. The main
barrier cited by other focus group respondents was the minimum monthly
repayment (€12.70), although some were unaware of the scheme and others
had missed the final date to enrol. Those who were participating in the
scheme were confused about the length of the term and whether gains were
tax-free. The SSIAs were also criticised by some interviewees as ‘regressive’
and favouring high earners.
The UK’s Saving Gateway Scheme was described to participants in the focus
groups and there was widespread support for introducing a similar scheme
in Ireland. In fact several focus group respondents asked when they would
be able to start such a scheme. The main advantages for the focus group
respondents were that the minimum payments were manageable, it was
flexible and it would help them plan for a ‘rainy day’. Similarly, the vast
majority of interviewees supported the introduction of such a scheme, as
proposed by MABS (2004). They felt that it would act as an incentive to save,
especially for those who do not have a history of saving, the proposed cap
(€5 per week) would ensure that people were not tempted to save money
they could not afford, and the scheme would be cost-effective (€6 million).
Focus group respondents were concerned about how the threshold for
eligibility to such a scheme would be decided. Similar concerns were raised by
interviewees, some of whom felt that people who move from social welfare
to CE schemes or back-to-work schemes should be entitled to participate, as
well as low-income workers.
Focus group respondents felt the government was unlikely to promote savings
for those on low incomes, a point endorsed by some of the interviewees.

But we seem to have a problem about giving poor people money. And we
give it to them just as much as we feel they need it and we’re afraid to
give them bread for tomorrow.
Given the confusion in relation to other savings schemes, the focus group
respondents recommended that any new savings scheme be publicised and
explained appropriately.
[Interviewer: Do you think people on low incomes would use the savings
scheme?]
R1: Definitely, if it’s publicised and explained.
R2: Yeah.
R1: If it’s explained properly.
Furthermore, interviewees pointed out that publicity should highlight that the
savings scheme would not affect people’s social welfare, secondary benefits
or rent supplement.
You need to give them an assurance at the start. ‘Listen, this is not going
to affect your secondary benefits. This is not going to affect your rent
supplement. This is not going to affect your social welfare payment. The
state is guaranteeing that this will not happen.’ You would find that there
would be greater take-up.
It was also suggested that the scheme could be promoted through

community development projects. Several interviewees were aware of the
successes of the UK’s pilot Saving Gateway Scheme, but highlighted that the
main problem was that it is planned to be rolled out to people who claim tax
credits of up to £50,000 (€72,149) per year.

But I fear if it ceases to be targeted at poor people, and it just becomes the
general saving scheme, it just becomes a saving account which will be tax-
free saving. So I fear that may go down that same road.
One departmental official also pointed out that it would only work
electronically so issues around electronic funds transfer (EFT) would need
to be addressed. Another interviewee suggested that it could be funded
through the dormant accounts fund.
8.8 Other financial services
8.8.1 Electronic payment of benefits
The Irish government is moving towards paying social welfare benefits

electronically. This facility was discussed with both focus group respondents
and interviewees. Many of the focus group respondents were unaware that
this was currently an option for receiving social welfare payments. Some
supported the move as they felt it was more convenient and eliminated the
need to queue for payments at post offices.
I wouldn’t mind if they paid it into the bank. It would save you going and
queuing up at the post office every Thursday.
Similarly, several interviewees supported the move as they felt it was a safer
and more convenient way of paying social welfare payments and it would also
ensure that budget increases in relation to social welfare would be paid on
time. Financial service providers and public officials particularly advocated EFT
as it is more cost-effective, takes cheques out of the clearing system, prevents
fraud and complements the government’s National Payment Strategy.
The high level of support among focus group respondents may be due to the fact
that the majority of them were ‘banked’. Hence, lower levels of support may be
found among the ‘unbanked’ population.

But certainly if people were paid electronically, the change in their rates
would be paid straightaway, on time; it would help combat fraud and
other issues. And it brings in the financial inclusion thing, it gives people
access to a service that they wouldn’t normally have access to.
However, a minority of focus group respondents did not favour EFT and their main
concern was that their payment would not be received on the expected day.
I was talking to a girl that did that, I don’t know was it her Child Benefit
or Lone Parent’s that she missed out on – it must have been Lone Parent’s
– but they held back a week of it or something, she didn’t get it one week
or something. So I said no, the book is fine for me for now.
The main concern for some interviewees was that EFT is being introduced
primarily to reduce costs rather than to address issues around financial exclusion.
But in relation to why the system wants to move from one to another, and
again the appearance would be that it is a cost-saving exercise and that
would be a concern for a lot of people, both ourselves and for the users as
well, the reason as to why it’s happening.
Some interviewees working with low-income groups also stressed that EFT
would not appeal to some groups, such as pensioners. Furthermore, they
noted a level of confusion among some social welfare recipients who have
begun to receive payments by EFT. Others disagreed with the assertion that
it is a safer way of receiving money as recipients could still be vulnerable
to theft at ATMs. Finally, several interviewees were concerned about the
potential impact of bank closures, ATM failures, bank charges and stamp
duty. Consequently, both focus group respondents and interviewees
recommended that EFT remain optional and that recipients should choose
whether and where they would like to receive EFT.

They should ask you if you want to, but not make it compulsory [...] it’s
not fair to sort of dictate how you want your money. That’s my opinion.
I think it is about having the choice but don’t create the short-term choice
and then let the market decide and then for one provider just to have
the monopoly then or for people just to have the one choice in their
community or no choice in their community or that they have to travel.
8.8.2 Insurance
A model based on the UK’s Insurance with Rent Schemes was described
to focus group respondents and interviewees. The majority of focus group
respondents stated that they would welcome such a scheme.
I think that would be great because every time I get something I’m like,
‘Oh God, imagine if something happens’.
According to the focus group participants, the main advantages of such a

scheme would be peace of mind and the weekly repayments, which would
suit their budget cycle, and they recommended that this would be added to
their weekly rent.
Even if it’s only €2 or €3 extra they took off us in rent, towards insurance.
You know what I mean? I would have no bones about it anyway.
Even if the council took it and put it on to your rent. You know a couple
of pound every week going on your rent. At least you know you’re safe
enough then, you know it’s coming out.

An interviewee, who was knowledgeable about the developments in the
UK, highlighted that such a scheme would benefit all the key stakeholders:
tenants, housing associations and insurance companies.
The housing authorities pool the risk, rather than some people having
phenomenally high premiums [… and] they either use the commission to
reduce the premiums, or they use it to put in security devices, which in
turn reduces the premium the next year. But the other thing they do to
make it affordable, which is far more important, is you can pay in weekly
instalments […] The local authority gets money in its hands it wouldn’t
have and it’s got tenants who are now insured. […] And the insurance
companies do very little for it as the local authority gets out and signs
people up and collects the premiums.
Focus group participants did raise questions on how a potential scheme

would be administered and interviewees were concerned that housing
associations may be reluctant to manage the scheme due to high
administrative costs. Moreover, one interviewee wondered how feasible such
a scheme would be in Ireland given the much smaller risk pools compared to
the UK. A further issue raised was that of liabilities and the effect one large
claim could potentially have on the risk pool.
Other suggestions made by interviewees included a needs analysis on the

potential requirements among local authority, social housing and private
rented tenants for such a scheme, as well as research examining the costs. It
was also suggested that to address the administrative burden, a broker could
carry out the administration.
8.9 Conclusions
Policy: Concurrent with international literature (Carbo et al., 2005), there
was a general consensus among interviewees that financial exclusion is not
a public policy priority for the government. It was suggested that financial
exclusion needs to become a key element of Ireland’s NAPs/incl 2006–2008.
In addition, it was felt that the financial services industry needs to work in
partnership with government departments and organisations working with
those living in poverty to address the issue of financial exclusion. Another
policy initiative discussed was codes of practice and legalisation in relation

to the provision of basic banking services. While there was a divergence
of opinion among the interviewees as to whether Ireland needs a code of
practice or legislation, most favoured a code of practice.
Improving access to banking services: There was a general consensus among

interviewees that the guidelines produced by the Money Laundering Steering
Committee in 2001 (and revised in 2003) have not succeeded in addressing
the problems that some consumers were experiencing in opening bank
accounts. Interviewees felt that the Third Money Laundering Directive, which
will have to be implemented by the end of 2007, offers an ideal opportunity
to address problems faced by vulnerable consumers in relation to identification
requirements. Research in Ireland (Conroy and O’Leary, 2005a) and the UK
(Collard et al., 2003; Herbert and Hopwood-Road, 2006) supports financial
institutions taking a more flexible approach to identification requirements and
looking at a broader range of acceptable identification.
Delivering basic banking services: There was overwhelming support among

respondents for basic bank accounts, with most deeming it an appropriate
product that they would use. However, some interviewees were aware of
developments in basic banking services in the UK and were unsure whether
this initiative had actually achieved its objectives. This fear is not borne out by
the experience in the UK, where one million basic bank accounts have been
opened by those previously ‘unbanked’ and the BCSB (2005) has noticed real
improvements in the provision of basic bank accounts since it began carrying
out annual independent reviews in 2002.
Universal banking services: Several respondents preferred to carry out their

financial transactions at the post office and stated they would welcome the
provision of basic banking services through the post office network. Post
offices are seen as playing an important role in tackling financial exclusion
internationally (Carbo et al., 2005). However, some interviewees stressed
that post offices in Ireland need to learn from the experiences of the UK and
not follow the route of the POCA, which is to be phased out by 2010. This
has been described as restrictive and limited as no other payments, such as
wages, can be paid into it, and withdrawals can only be made with a plastic
swipe card and PIN number at a post office counter (Kempson et al., 2004).
Furthermore, it does not have the functionality to allow customers to make
the savings associated with holding a bank account, such as cashing cheques
free of charge or paying bills by direct debit (FITF, 2006).

Overall, focus group respondents supported credit unions becoming involved
in universal banking services as many of them preferred to carry out their
financial transactions at a credit union. However several suggestions were
made on developments credit unions would need to address beforehand.
These include joining the clearing system, developing a common operating
system, agreeing a common set of standards and enhanced technical
proficiencies. Both IPSO (2005) and The Competition Authority (2005) are
supportive of credit unions’ involvement in the clearing system and this is
feasible given that a number of credit unions already have access to the
clearing system through Bank of Ireland.
Electronic banking: Although there were several advantages noted to the

use of eCards, overall this move was not supported by respondents as it was
considered to be limited and potentially unsafe and the technology could be
a barrier for some groups. Most importantly, it was not perceived as a positive
move towards greater financial inclusion as it is a payment mechanism
without any of the benefits of a bank account. Similarly, ATM mobiles
(which are similar to eCards except that the chip is contained in a mobile
phone which permits bills to be paid electronically) were not supported by
respondents. CGAP (2006) highlights several issues with mobile banking.
These include that mobile banking applications cannot yet be operated
between different banks, payments may not conform to international
security standards, it may not be easy to use for illiterate and older users and
regulation surrounding mobile phone banking is not yet clear.
Financial advice and education: Many of the interviewees felt that issues
related to self-exclusion and lack of demand and awareness of bank accounts
could be addressed through advice and education. Similarly, research in the
UK (Collard et al., 2003) has found that low-income consumers need advice
and information about different financial products and services. In addition,
Gloukoviezoff (2004) emphasises that any advice needs to be provided by
trained and experienced staff.
Several of the focus group respondents reported positive experiences of

MABS. However, it was recommended that MABS increase the advertising
of its services to target the most disadvantaged and develop its links with
the community and voluntary sector. Similarly, Quinn (2005) recommends
that MABS should develop services particularly for minority ethnic groups
in Ireland, and Eustace and Clarke (2000) recommend a greater focus
on community education. To this end, MABS is currently developing a
community education function.

Affordable credit: Credit unions were seen as providing an essential form of
credit to low-income consumers. Nevertheless, several suggestions were made
on how credit unions could improve service delivery to low-income consumers.
Similar to other Irish studies (Millward Brown IMS, 2005), it was felt that credit
unions should target disadvantaged groups through educational programmes
and campaigns, addressing the benefits of membership and the advantages of
loans from credit unions compared to moneylenders. Byrne et al. (2005) found
that financial advice and education in credit unions was of an ad-hoc nature
and that credit unions should be more proactive in terms of providing financial
education to their members and in turn building their members’ financial
autonomy. National (Byrne et al., 2005) and international (Conaty and
Bendle, 2002) research has concluded that Irish credit unions have been weak
innovators in terms of developing products for low-income groups and that
this issue should be addressed. Interviewees in the current study also proposed
that products be designed to meet the needs of low-income consumers.
Savings: There was widespread support among both focus group participants
and interviewees for a savings scheme similar to the UK’s Saving Gateway
Scheme. The perceived advantages were that minimum payments would be
manageable, it would be flexible, it would help low-income consumers to
plan for a ‘rainy day’, it would act as an incentive to save and it would be
cost-effective. The final evaluation of the first pilot scheme in the UK found
that it was far more effective than other incentives to save for low-income
groups (Kempson et al., 2005).
Electronic payment of benefits: The Irish government is moving towards

making EFT the normal method of payment for all social welfare payments.
Those respondents that supported the move felt that it would be convenient,
cost-effective, eliminate the need to queue for payments and complement
the National Payment Strategy. However, several respondents stressed that
the focus should not only be on reducing costs but on increasing financial
inclusion. It was also suggested that social welfare recipients should be
encouraged to use it but it should not be made compulsory.
Insurance: A house contents scheme based on the UK’s Insurance with Rent
Schemes was widely supported. The perceived advantages were it would
offer peace of mind and a system of weekly repayments that would suit
low-income consumers’ budget cycles. UK research has highlighted that
the schemes have benefits for both tenants and local authorities and the
numbers of tenants accessing them in the UK has increased (Sinclair, 2001).

Chapter 9
Policy implications
This chapter sets out policy issues for Ireland in relation to financial exclusion.
These are based on the review of financial products and secondary data,
the findings from the focus groups and in-depth interviews, and learning
from relevant international developments. Similar studies, such as Kempson
and Whyley’s (1999) pioneering research, led to the development of a
financial exclusion policy in the UK (HM Treasury, 1999; HM Treasury, 2004).
Although views on this chapter were received from the Stakeholder Forum,
the recommendations do not necessarily reflect the views of individual
organisations represented in the forum.
Policy issue 1: National strategy to

promote financial inclusion
Strategic approach to financial inclusion
Despite financial exclusion becoming a key policy issue in many EU member

states, this research has shown that the issue was largely ignored in Ireland
until recently. Interviewees suggested that financial exclusion should be
incorporated into social inclusion policy in Ireland. Similarly, Regan and Paxton
(2003: 9) stress that ‘financial exclusion should be seen as a subset of social
exclusion and tackling social exclusion comprehensively must involve tackling
financial exclusion’. The present lack of reliable data makes setting specific
targets (e.g. the UK target of halving the number of households/individuals
without a bank account in the next 2 years) challenging and therefore issues
related to collecting reliable and timely data in Ireland must be addressed.
Notwithstanding this, targets could be set in relation to product design and
service delivery.
» Financial inclusion should be included in the forthcoming National

Action Plan for Social Inclusion.
» Consideration should be given to developing a national strategy on

financial inclusion in conjunction with the forthcoming National Action
Plan for Social Inclusion and to setting specific actions and targets in
order to monitor any progress towards greater financial inclusion.

Partnership approach
Similar to international studies (e.g. Regan and Paxton, 2003), the

interviewees felt that the most appropriate means of addressing financial
exclusion was to work in partnership, preferably through the establishment
of a steering committee comprising representatives from government
departments, state agencies, the financial services sector and organisations
working with people living in poverty. This approach would ensure
that the work carried out by the anti-poverty sector is complemented
by developments in financial services provision and would foster an
understanding among all parties that financial exclusion is both a cause and a
consequence of poverty. This type of approach is considered best practice in
the UK, where HM Treasury set up a Financial Inclusion Taskforce in 2005.
There was a divergence of opinion concerning which government

department or agency should take responsibility for financial exclusion
in Ireland, although several interviewees thought that it should be the
Department of Finance. In the UK, HM Treasury has taken the lead on
financial exclusion policy since 1998 and has pledged to tackle financial
exclusion and to work in collaboration with the public, private and
community and voluntary sectors in consecutive budget reports.
» Consideration should be given to the establishment of a Steering

Committee on Financial Inclusion, which would foster a partnership
approach between government departments, state agencies, the
financial services sector and organisations working with people living in
poverty.
» The key role of this steering committee should be the development,

coordination and monitoring of a national strategy to promote financial
inclusion.
» This steering committee should liaise with government, agencies

and the financial services sector in relation to the impact of anti-
money laundering legislation on vulnerable consumers, and with the
National Payments Implementation Programme to ensure that any new
developments complement the goal of greater financial inclusion.

Policy issue 2: Access to bank accounts
Anti-money laundering legislation
The most pertinent issue that arose in relation to access to bank accounts was
the difficulty that low-income consumers face in producing the appropriate
identification to open an account. It was unlikely for focus group respondents
to possess a passport or driving licence and many had difficulty producing
a utility bill. It was reported that this situation is also becoming a problem
for low-income consumers accessing credit union accounts as credit unions
also have to adhere to anti-money laundering legislation. There was also a
level of confusion among respondents about what is considered acceptable
identification. The finding that anti-money laundering legislation poses a
significant barrier for low-income consumers is consistent with other Irish
research (Conroy and O’Leary, 2005a; Conroy and O’Leary, 2005b; NTMABS,
2006; Quinn and NiGhabhann, 2004; Reidy, 2004). Even though the MLSC’s
Guidance Notes for Credit Institutions, published in 2001 and revised in
2003, allow for a range of alternative identification, this research shows that
low-income consumers are not always made aware of these alternatives and
there are inconsistencies in how the guidelines are being adopted by financial
institutions. While it is essential that procedures be put in place to prevent
criminals from laundering money through bank accounts, it is imperative that
these do not prevent people on low incomes from opening bank accounts
and hence act as an obstacle to greater financial inclusion.
It was felt that the Third Money Laundering Directive, which will be
implemented by the end of 2007, offers an ideal opportunity to address
problems faced by low-income consumers. It was advised that staff training
in respect of the application of anti-money laundering procedures should
address the difficulties vulnerable consumers face with account opening.
Also, it was suggested that alternative identification requirements in
accordance with the Third Anti-Money Laundering Directive should be agreed
with organisations working with low-income consumers. Several suggestions
were made on acceptable alternative forms of identification, including
PPSNs and asylum seekers’ Temporary Residency Cards. Some interviewees
suggested that low-income consumers could be offered a discounted
passport and a minority mentioned introducing a national ID card.

» The legislation and administrative measures implementing the Third
Anti-Money Laundering Directive should not deter low-income
consumers from opening a bank account. Efforts to identify a range of
appropriate identification documents should continue in consultation
with organisations working with low-income consumers.
» Training provided to staff of financial institutions should improve their

awareness of the difficulties that vulnerable consumers face and should
foster a more enabling approach to account opening and operation.
» The Financial Regulator should continue to develop its work on access

to financial services.1
Bank closures
Banks in Ireland offer a widespread service through 900 bank branches/

sub-offices and 2,700 bank ATMs. Many ATMs have been opened in retail
locations in recent years and banks are also piloting self-service devices,
which allow customers to do a broad range of activities themselves (e.g.
lodging cheques). However, there is no up-to-date information on the
numbers of bank closures or their geographical distribution. Two of the
focus groups took place in disadvantaged areas that are not served by banks,
a situation which contributes to exclusion from financial services. Other
respondents from rural areas experienced difficulties getting to banks. It is
acknowledged that banks make commercial decisions about the location
of bank branches, however some respondents were concerned that bank
closures in Ireland may be following international trends, which show
that closures have been disproportionately concentrated in poor urban
neighbourhoods and remote rural areas (Kempson et al., 2004; Kempson and
Whyley, 1999).
Despite bank closures, access to banking services has improved for many
consumers due to the increase in the number of ATMs and developments
in telephone and Internet banking. However, this research shows that these
developments have not increased access among low-income consumers.
Respondents encountered difficulties accessing money at ATMs (e.g. unable
In its Strategic Plan 2007–2009, the Financial Regulator (2006c) has committed
to continuing to foster access to financial services by working with relevant
agencies and government departments, and to provide consumers with clear and
appropriate information about the costs, risks and benefits of financial services.

to withdraw small amounts of money, ATMs out of order). Their low income
also impacted on their use of telephone and Internet banking and there
were high levels of technophobia. Therefore, bank closures are likely to have
the most negative impact on low-income consumers and those living in
rural areas. Hence, there is a need for more information and transparency
in relation to bank closures. In 2001, the then Director of Consumer Affairs
Carmel Foley recommended that a code on branch restructuring should
commit institutions to commission specific, post-closure, independent
research to monitor the impact of bank closures on the local community
(Foley, 2001). The Financial Regulator’s Consumer Protection Code (2006a)
requires that regulated entities must not prevent access to basic financial
services through their policies, procedures or working practices. This code
(informed by the IBF’s Code on Branch Restructuring) does not entail post-
closure social audits, but requires that when a branch is withdrawing from
an area it must inform its customers in writing at least 3 months in advance,
advise the Financial Regulator immediately and inform the wider community
through the local media.
» Consideration should be given to carrying out independent social

audits2 on the effects of bank closures and to addressing any remedial
actions which the audits recommend.
Policy issue 3: Design and delivery of basic banking services
Basic banking services
There is limited Irish data on non-ownership of bank/current accounts,

although the data available indicate it is an issue. Surveys have found that
over one-quarter of individuals/households in Ireland are without a current
account and 10% of individuals are without any type of bank account.
Low-income households are less likely to have a bank/current account. The
research highlighted that organisations working with low-income consumers
A social audit is a systematic assessment of the social impact of a business and

involves key stakeholders. Social audits have been completed by a number of
European banks and have proved to be a practical way for banks to understand
and report on the social impact of their actions.

made a substantial effort to assist people in opening a bank account, which
would indicate that low-income consumers who are not linked in with these
organisations are less likely to have an account.
Increased competition in the banking sector in Ireland has produced a huge

move towards ‘free’ transactional banking. This is a positive development
and some of the charges that respondents complained of (e.g. for ATM
withdrawals) no longer exist. This move is likely to attract more people into
the banking system. However, ‘out-of-course’ transaction charges still apply
and respondents were particularly concerned about charges for unauthorised
overdrafts, failed standing orders/direct debits and bounced cheques. A major
concern for respondents was government stamp duty. Another barrier was
higher charges for over-the-counter transactions, which are often preferred
by this group.
Discussions in the focus groups showed that the terms and conditions
attached to bank accounts are not always appropriate or suited to the needs
of low-income consumers. For instance, those with a deposit/savings account
were unable to set up direct debits. Also terms and conditions attached to
many of the ‘free’ banking offers, such as minimum account balances or the
requirement to carry out a number of transactions via the Internet, do not
suit the needs of those on low incomes.
‘Free’ banking is not enough, therefore, to ensure that accounts are suitable
for the needs of low-income consumers or those who are ‘unbanked’. The
policy review of international basic banking services showed that basic
bank accounts are not just concerned with providing low-cost services, but
also supply appropriate and simple products to financially excluded people.
There was widespread support in this study for the introduction of basic
banking services in Ireland. This is because basic banking services could
address the barriers low-income consumers still face in relation to ‘out-of-
course’ transaction charges and government stamp duty. For instance, buffer
zones attached to basic banking services enable low-income consumers to
withdraw a little more money than is available in their account, which would
address the problem of not being able to withdraw small amounts of money
Many of the developments in ‘free’ banking happened in 2006, after the focus
group research was carried out.
‘Out-of-course’ transaction charges are penalty charges applied by banks if

customers break a term of their contract with the bank (e.g. unauthorised
overdraft).

from ATMs. A buffer zone also assists in avoiding charges for unauthorised
overdrafts. Furthermore, some basic banking services offer a bill payment
facility that accepts weekly payments, which would suit the budgeting needs
of low-income consumers and could help avoid failed standing order/direct
debit payments.
» Consideration should be given to the provision of basic bank accounts

in Ireland. Features of such basic bank accounts could include:
• Debit (ATM and point of sale) card with no government stamp duty
• Flexible account opening requirements around identification in

adherence with the anti-money laundering guidelines
• No minimum opening or monthly balance
• Free transactions
• EFT facilities
• No account-keeping fees
• Direct debit/standing order facilities
• No overdraft facility or chequebook
• Buffer zone of €20
• Weekly bill payment account
• Financial advice and information.
Code of practice on basic bank accounts
Internationally, banks in some countries have made provision for basic

bank accounts through the creation of codes of practice. Other countries
have legislated around the ‘right to a bank account’, which enables people

without a bank account to open one at a bank of their choice. There was a
preference in the current study for a code of practice rather than legislation.
Kempson et al. (2004) argue that the most effective model is a code of
practice underpinned by legislation. They also stress that codes should be
provided alongside appropriate low-cost, no-frills accounts and be subject to
independent monitoring (e.g. banking codes have been effectively monitored
by mystery shopping exercises carried out by the BCSB in the UK and by the
Financial Consumer Agency in Canada).
» Consideration should be given to developing a code of practice in

relation to the provision of basic banking services in Ireland.
Universal banking services

especially basic bank accounts, through intermediaries. Post offices and credit
unions have been posited nationally (IBF, 2005b) and internationally (ABCUL,
2006; Herbert and Hopwood-Road, 2006; Kempson et al., 2004) as playing
an important role in universal banking services.
Several respondents preferred to carry out their financial transactions at the

post office and stated they would welcome the provision of basic banking
services through the post office network. The main advantages of An Post
are its large distribution network, its unified structure and its experience
in working with social welfare recipients. An Post already offers financial
products that appeal to low-income consumers (in particular its deposit
account, bill payment service and Household Budget Scheme). It also has
experience offering basic transactional services on behalf of AIB (including
cash withdrawal, lodgments and bill payment), which has increased access to
banking services for many customers. A recent move has been the agreement
between An Post and Dutch/Belgian financial services company Fortis on a
new banking joint venture. A significant development was An Post’s public
announcement that its new services should appeal to ‘the significant portion
of the Irish customers who are currently unbanked’ (Oliver, 2006). In order to
deliver on this, it is important that An Post provides appropriate products as
part of its service.

» In its new banking venture, An Post should give consideration to
developing an appropriate basic bank account.5
Credit unions are often posited as a viable alternative to the mainstream

banks in broadening access to bank accounts (Herbert and Hopwood-Road,
2006) and this view was supported by respondents in the current study.
The Irish credit union movement has the potential to play a significant role
in the provision of basic banking services, given its wide distribution and
large membership. Some credit unions already provide basic transactional
services and some respondents were receiving their social welfare by EFT
through their credit union. Other features of credit union accounts, such
as no account-keeping fees and no minimum opening or monthly balance
requirements, are key features of a basic bank account and elements that
are likely to appeal to low-income consumers. It has also been suggested
that basic bank accounts be linked to a bill payment account and the credit
union budget account could provide such a facility. Collard et al. (2003)
suggest that attaching savings accounts to a basic bank account would
increase their attractiveness to people on low incomes. The credit union
share account could offer such a facility and is likely to appeal to low-income
consumers as the minimum requirement to open the account is only €3 and
withdrawals can be made on demand. However, the fact that credit unions
operate outside the clearing system limits the facilities that they can offer,
which could perpetuate the financial exclusion of their members. Both IPSO
(2005) and The Competition Authority (2005) are supportive of credit unions’
involvement in the clearing system, although this would require them to meet
the applicable membership rules and criteria developed by IPSO. It was also
suggested by some interviewees that credit unions should develop a common
operating system, a common set of standards and enhanced technical
proficiencies. Similar developments by credit unions in the UK have been
supported by the Co-operative Bank.
» Consideration should be given to how the credit union movement can

be given access to the clearing system so that it can develop additional
appropriate products for its low-income members.
» The credit union movement should consider the introduction of an

appropriate basic bank account (i.e. transactional account).
The features of a basic bank account are listed above.

Policy issue 4: Financial information, advice and education
Even though many respondents had a bank account, many of them

reluctantly opened those accounts in order to receive wages and continued
operating a cash budget for fear of losing control of their finances. This
‘under-use’ of bank accounts keeps customers on the margins of financial
exclusion. The issue of use is gaining increasing currency in literature
both nationally (Byrne et al., 2005; Quinn and NiGhabhann, 2004) and
internationally (Gloukoviezoff, 2004; Gloukoviezoff, 2006; Regan and Paxton,
2003). These commentators show that increasing access to bank accounts
is only the first step towards financial inclusion. They stress that it is also
important to enable and empower people, through advice and education,
to use bank accounts effectively. Kempson et al. (2004) link ‘under-use’ to
the absence of appropriate financial products, which reinforces the case for
simple basic banking services as well as appropriate advice and education.
Lack of demand (i.e. respondents felt they did not need a bank account) was
also an issue for those who chose to remain outside the banking system.
Other respondents lacked the confidence or self-esteem to engage with
banks and antipathy and mistrust of financial services contributed to levels
of disengagement. There was also a socio-cultural barrier as low-income
consumers felt that banks were not interested in poor people. Several were
more attracted to alternatives, in particular credit unions and post offices.
Low levels of financial capability were also an issue. A minority of

respondents were unsure which type of account they had, and others were
unable to differentiate between a savings account and a current account.
There was some confusion around the identification needed to open a bank
account and the charges applied to bank accounts. Many respondents stated
that they often found financial literature difficult to understand. Members
of the Travelling community face particular literacy obstacles and found it
difficult to fill out forms, and asylum seekers and refugees reported language
barriers. Similarly, Conroy and O’Leary’s study (2005b) on financial literacy
in Ireland found that socially and economically disadvantaged groups had
more acute experiences of the barriers that face consumers in accessing
and understanding financial services. Therefore, even though there is an
increasing range of products available on the Irish market, particularly in
relation to the ‘free’ current account market, low-income consumers may not
have the financial capability to choose the product best suited to them. The
new Consumer Protection Code (Financial Regulator, 2006a) and Minimum
Competency Requirements (Financial Regulator, 2006b) have made provisions

for customers to receive clear and comprehensible information and advice,
although it is too early to assess whether these will have a positive impact on
low-income consumers.
Many of the interviewees felt that demand could be stimulated through

advice and education. The main proposal made was to promote the role of
organisations working with disadvantaged groups (e.g. MABS, CE/FÁS schemes,
adult literacy programmes and community and voluntary groups). This research
shows that many of these organisations already provide crucial assistance to
low-income consumers opening bank accounts. It was felt that their role could
be developed if staff members were trained to provide non-brand-specific
advice in relation to financial products and that they could offer a forum for
one-to-one work and group sessions in relation to financial education.
» The Financial Regulator should continue to develop its financial

education programme with the aim of increasing consumers’
knowledge of financial products and services and their capacity to use
them.
» Training and support should be provided to organisations working with

vulnerable consumers to promote their role in providing non-brand-
specific advice in relation to financial products.
» Staff training in financial institutions should cover literacy and

intercultural issues in order to address the socio-cultural barriers that
some vulnerable groups face when accessing financial services.
The role of MABS
MABS was established by the DSFA to address the problems of moneylending

and over-indebtedness. Several respondents reported positive experiences
of MABS, which is widely regarded as a model of best practice in other
European countries (Korczak, 2004). However, it was suggested that MABS
increase the advertising of its services to target the most disadvantaged and
develop its links with the community and voluntary sector. This research
supports MABS’ new community education initiative. MABS was also posited
as playing a key role in contributing to financial education programmes and
providing generic non-brand-specific advice in relation to financial products.

Similarly, Conroy and O’Leary (2005b: 56) posit MABS as playing a key role
in collaborating with ‘financial services and adult literacy services to develop
new and innovative ways to advertise to consumers that independent,
confidential and free money advice is available before and during the
transaction of financial products and services’. They advise that this should
be funded by the DSFA. The MABS National Advisory Committee has already
established an Access to Financial Services Committee with a remit to look at
ways in which MABS can promote access to financial services for its clients
and wider target group.
» MABS should expand its community education role and continue to

develop its links with community and voluntary groups in order to reach
the most excluded.
» MABS should promote access to financial services for its clients and
wider target group. This could include provision of non-brand-specific
advice in relation to financial products.
Policy issue 5: Affordable credit
Similar to other Irish research (Byrne et al., 2005), this study has found that
credit unions provide an essential service to those on low incomes,
particularly through savings and loan products. Many of the barriers
associated with accessing loans in banks (e.g. credit scoring, minimum
amount loaned, monthly repayments) do not apply to credit unions. The
research also showed that credit unions offer a viable alternative to
moneylenders and some respondents ended their relationship with
moneylenders when they became credit union members. This change was
also related to an improvement in circumstances, such as gaining
employment. However, a minority of respondents did turn to moneylenders
because they were denied credit by mainstream financial institutions. Pull
factors included that the moneylending product is perceived to be accessible,
transparent, simple, convenient, no credit history is required and weekly
payments suit the customers.

The research indicated that credit unions may not be appealing to and
reaching excluded groups. The main barrier highlighted was building up a
savings history, which is often a prerequisite for a credit union loan. There
is also a move towards assessing a credit union loan on capacity (i.e. credit
scoring), which is less likely to appeal to low-income groups. One solution to
this issue is loans provided through social finance for those who do not meet
these criteria. In 2005, over half of credit unions (58%) were providing social
finance, mainly to individual members, but this was not being publicised ‘due
to perceived problems of loan assessment/risk, staffing requirements and
systems support’ (ILCU, 2005b: 4). This research supports the credit union
movement’s aim of developing a social finance policy (ILCU, 2005b), which
should be provided to those who need credit but do not have a savings
history or who need money for an emergency or unexpected event. In the
UK, similar developments by credit unions have been supported financially by
the government’s Financial Inclusion Growth Fund.
There were also demand-side barriers to accessing and using credit union
services. Some respondents were unaware of the services offered by credit
unions; while others felt credit unions were less likely to give credit to
vulnerable groups (e.g. lone parents, members of the Travelling community).
There was also a perception that credit unions were focusing less on their
low-income members. It was felt that lack of knowledge of credit union
services and products could be addressed through a marketing or educational
campaign. Some credit unions (e.g. Tralee Credit Union in conjunction with
Kerry MABS) have set up pilot educational initiatives to inform people about
moneylending and lessons could be learnt from this to develop similar
initiatives. Some credit unions have also developed information leaflets with
the support of NALA and Comhairle.
» The credit union movement should continue to develop a social finance

policy, which should be applied across all credit unions. This policy
should prioritise its emergency loan facility, which should assist those
who need money for an unexpected event.
» The credit union movement should consider the development of a

national educational campaign specifically designed for low-income
consumers. This material should be used by all credit unions to market
the benefits of becoming a member, the services offered in credit unions
that would be appropriate to the needs of those on low incomes and
the attractiveness of the credit union as an alternative to moneylenders.

Policy issue 6: Savings
The most common institutions for saving were credit unions and post offices.
However, the main barrier to accumulating savings was a lack of resources.
Similarly, the EU-SILC in 2004 found that over half (55%) of the Irish
population had difficulties saving income regularly and this was a particular
problem for those living in income poverty (83%) and consistent poverty
(90%). There was widespread support among respondents for the proposed
MABS (2004) savings scheme, which is based on the UK’s Saving Gateway
Scheme. As highlighted in Section 7.6, this scheme aims to aid the transition
of previously indebted low-income clients into independent financial
managers. The perceived advantages were that it has manageable minimum
payments, flexibility and allows low-income savers to plan for the future.
» The government should consider allocating additional resources to

MABS to develop its existing role in terms of encouraging savings
among its clients. This could be facilitated through piloting the
proposed MABS savings scheme. If successful, this scheme could be
extended over time to a wider pool of low-income consumers.
Policy issue 7: Other financial services
Electronic funds transfer
Direct payment of welfare benefits into bank accounts has the potential to
bring those who are ‘unbanked’, or on the margins of financial exclusion,
into the banking system. Similar to other governments, the Irish government
is moving towards making EFT the normal method of payment for all social
welfare benefits. This move was supported in the study as it was felt it would
be convenient, cost-effective, eliminate the need to queue for payments
and complement the National Payment Strategy. However, it was stressed
that the focus should not be on reducing costs but on increasing financial
inclusion. This issue was addressed in the UK when the government changed
to EFT as the normal way of paying benefits and simultaneously introduced
appropriate products for low-income groups (i.e. basic bank accounts and

universal banking services). It was also stressed in the current study that EFT
should remain optional with recipients able to choose whether and where
they would like to receive EFT.
» Direct payment of welfare benefits should be provided through relevant

institutions of people’s choice (e.g. banks, post offices, credit unions)
and consideration should be given to an opt-out clause for people who
might face difficulties with it.
» It is desirable that any move towards EFT is complemented by the

provision of appropriate products (e.g. basic bank accounts).
» Uptake of EFT facilities could be greatly increased if the DSFA had an

information campaign outlining the benefits.
Over one-quarter (28%) of the Irish population do not have home contents
insurance. Those living in income and consistent poverty are less likely to
have insurance, as are individuals in private rented accommodation or local
authority housing. Ownership of home contents insurance was rare among
respondents and the most pertinent barrier was affordability. There was
widespread support for examining the feasibility of providing a low-cost,
flexible insurance scheme, similar to the UK Insurance with Rent Schemes.
» Providers and funders of social housing should consider commissioning

a feasibility study on providing low-cost group insurance to local
authority and social housing tenants as well as those in receipt of rent
allowance in the private rented sector.

Policy issue 8: Measuring and researching financial exclusion
Measuring the extent of financial exclusion
It is important to collect reliable and valid data on financial exclusion.

However, this research has shown that there is a dearth of data related
to financial exclusion in Ireland. In 2008 a module of the EU-SILC will
be undertaken on financial exclusion and debt, which will be the first
opportunity to collect detailed quantitative data on financial exclusion
in Ireland, as well as offering the opportunity to compare data across EU
countries. However, this will only provide a snapshot of financial exclusion
at a point in time. Adding further questions to the EU-SILC on key indicators
of financial exclusion would allow the phenomenon to be measured
longitudinally, given that the survey is carried out annually. These questions
should measure both access and use issues. Suggested indicators include:
» Number of households/individuals with no account of any kind (including

bank/building society account, credit union account or post office account)
» Number of households/individuals with no bank account (including a

current account or savings/deposit account)
» Number of households/individuals with no current account
» Number of households/individuals with no access to affordable credit
» Number of households/individuals with no savings
» Number of households/individuals with no home contents insurance
» Number of households/individuals with no access to independent money

advice.
See Appendix (Section A.1.2) for an overview of available data sources.
Modules are added to the EU-SILC each time it is carried out in order to collect
data on social topics. This module will examine the levels of access to financial
services, the impact of financial exclusion on access to other services (e.g.
education, health, housing and transport) and access to credit.

» Combat Poverty should liaise with the CSO in order to get further
questions added to the EU-SILC in Ireland that will enable the
monitoring of financial exclusion annually.
Further research
There is insufficient evidence-based information specifically relating to

financial exclusion in Ireland. It is hoped that this study will be used as a
launching pad for further research into the issue. In February 2007 the
new HBS results will provide up-to-date information on current account
ownership. Also the 2008 module of EU-SILC on financial exclusion will
provide further invaluable quantitative data. However, these surveys will
exclude those living in temporary accommodation and other vulnerable
groups such as members of the Travelling community and those living in
institutions. The aim of this research was to examine financial exclusion
among low-income consumers, as low income has the most significant
impact on financial exclusion. However, the literature review highlighted that
some vulnerable groups (e.g. homeless people, people with disabilities) face
particular problems and these issues should be explored.
» Research should be undertaken to examine financial exclusion among

other vulnerable groups (e.g. homeless people, people with physical or
intellectual disabilities) and the barriers they face in accessing and using
financial services.
There is also inadequate information on credit use among the Irish

population. Again, the EU-SILC module in 2008 will provide data on this
topic. However, further information is needed on credit use among low-
income consumers in order to identify the most appropriate ways of
providing low-income households with affordable credit and offering them
viable alternatives to the expense of moneylenders.
Discussions in the focus groups revealed that credit scoring carried out by
financial institutions with data provided by the ICB could make it more
difficult for low-income consumers to access affordable credit. While credit
scoring is important to ensure that lending is responsible, the impact it has on
low-income consumers merits further investigation.

» A survey should be commissioned to examine credit use and needs
among low-income groups. It should identify the most appropriate ways
of providing affordable credit to low-income consumers and of offering
viable alternatives to high-cost credit.
» A review of the impact of credit scoring on low-income consumers

should be conducted to identify the most transparent and responsible
manner in which to carry out credit scoring so that it does not have a
long-term negative impact on low-income consumers.

Appendix
Methodology
This Appendix describes the research methodology that was employed to
achieve the objectives of the study. It summarises how the financial services
and products were profiled and provides an overview of the secondary data
sources used to estimate the extent of financial exclusion. It describes the
rationale for carrying out focus groups and in-depth interviews and explains
how these were conducted. Finally, it outlines how the data were analysed
and demonstrates the role of qualitative research in influencing policy.
A.1.1 Profiling financial services and products
There is limited information available in Ireland pertaining to the availability

of financial services and products for low-income consumers. Therefore, this
study profiled the financial services and products that could potentially be
accessed and used by low-income consumers and examined the barriers that
may act as an obstacle. This involved:
» Examining literature in relation to financial institutions and the services and

products they provide
» Researching various websites of different financial institutions
» Requesting relevant financial institutions to complete a standardised

checklist on their products and services.
A.1.2 Reviewing secondary data sources
As part of this research, details were requested on the profile of clients of

financial institutions. For various reasons, including market sensitivity and the
inability of current banking systems to generate such data, the amount of
information made available for analysis was limited, and hence not included.
The main sources for estimating the extent of financial exclusion in Ireland
were therefore secondary data sources. These are an important resource for
social research (National Statistics Board, 2003) and are an under-utilised
and cost-effective method of gathering research data (Conroy and O’Leary,
2005a). The main advantages of secondary data analysis are that it is less
expensive than surveys and it reduces the risk of research fatigue among

very researched populations. However, the disadvantages are that they may
not correspond to the research question or may not be covered by the Data
Protection Act, 1988.
There is no dedicated data source to measure financial exclusion in Ireland.

The main sources available are official statistical data and data from market
research surveys.
Official statistical sources
The EU-SILC is an annual survey of a representative sample of 5,000

households or 14,000 individuals in Ireland. While it does not collect data on
ownership of bank/current accounts, it provides data on ownership of house
contents insurance and reports on the number of households that have
difficulty saving money regularly. As well as the large sample size, the main
advantages of the EU-SILC are that interviews are carried out face to face and
comparisons can be made across European countries as the same survey is
carried out in all EU member states. The survey is carried out in Ireland by the
CSO on behalf of Eurostat (the statistical office of the EU). Currently Eurostat
is developing a specific module on financial exclusion and debt, which will
be included in the 2008 EU-SILC. This will be the first opportunity to collect
detailed quantitative data on financial exclusion in Ireland.
To date, the most reliable source of information on financial exclusion

in Ireland is the HBS survey carried out by the CSO, which quantifies the
number of households without a current account. The HBS is a survey of
households’ income and expenditure and is a representative sample of 8,000
households in Ireland. Interviews are carried out face to face. However, the
main disadvantage is that the HBS is only conducted every 5 years and the
latest data available are for 1999/2000. The survey results for 2004/2005 will
be released in February 2007.
The QNHS, also carried out by the CSO, provides data on the percentage of
people with an SSIA. The main advantages of this survey are that 39,000
households are interviewed every quarter by face-to-face interview and it
provides the official measure of employment and unemployment in the state.
The main disadvantage is that the range of socio-economic characteristics
collected is much smaller than those collected in the EU-SILC.

Market research surveys
The Eurobarometer survey is regularly undertaken on behalf of the European

Commission on the attitudes and experiences of consumers relating to
financial services. It quantifies the number of people with a current account
(which comes with a payment card and/or a chequebook) and life assurance,
as well as providing a range of other measurements in relation to the access
and use of financial services and products. The latest Eurobarometer survey,
entitled Public Opinion in Europe on Financial Services, was conducted
in 2005 and 997 interviews were carried out in Ireland (24,708 in 25
EU member states). The main advantage of the survey is that it enables
comparisons to be made across EU member states. Interviews are conducted
face to face in people’s homes in their national language. However the
sampling error can range from +/-1.9% to +/-3.1%.
Market research surveys carried out by the Financial Regulator and the
IBF provide information on bank account and current account ownership.
These surveys have smaller sample sizes (approximately 1,000) than the CSO
surveys, producing a maximum sampling error of +/-2.8%. Those surveys that
use telephone interviews are less likely to generate a representative sample as
they exclude households without a home telephone.
Overall, these data sets are a useful means of profiling the scale and extent of
financial exclusion. However, they potentially exclude a number of vulnerable
groups without permanent accommodation such as homeless people,
members of the Travelling community and asylum seekers.
A.1.3 Focus groups
Fifty-nine low-income consumers participated in 8 focus groups and

discussed their experiences of, and aspirations for, financial service provision
in Ireland. Focus groups are particularly suited to exploratory studies (Kreuger,
1994) and ‘are ideal for exploring people’s experiences, opinions, wishes and
concerns’ (Kitzinger and Barbour, 1999: 5). Focus groups also provide an
opportunity to observe a large amount of interaction on a topic over a short
period of time and generate rich data as respondents rise to challenges and
defend views (Dobson, 2004). Furthermore, focus groups have been widely
used in research on financial exclusion internationally (see Kempson and
Whyley, 1999; Collard et al., 2001; Collard et al., 2003).

Sample selection
Purposive sampling is most suited to applied qualitative research as

respondents are chosen based on particular characteristics (in this case
low-income consumers) and this enables a more detailed exploration and
understanding of the issues under study. Focus group participants were
accessed through a number of community development organisations
based in different disadvantaged localities (including urban, provincial and
rural areas). Two of the urban focus groups took place in disadvantaged
housing estates on the edge of cities. The sample was selected to reflect
various types of low-income consumers (those on social welfare or in low-
waged employment) and areas of residence (urban and rural). Low-income
consumers were chosen as this is the single factor that is most closely
associated with financial exclusion (Carbo et al., 2005; Kempson et al., 2000).
However groups that may experience specific barriers, such as the Travelling
community and asylum seekers and refugees, were also included. Participants
were from pre-existing groups as respondents then feel more comfortable
discussing issues in each other’s presence (Kreuger, 1994).
Sample profile
Fifty-nine participants participated in the 8 focus groups. Among the

respondents 44 were female and 15 were male. Ages ranged from 17 to
55 and the average age was 33. The majority of the respondents were Irish
(36), 9 were members of the Irish Travelling community, 2 were English, 1
was Polish and the remaining respondents were from outside the EU. Almost
half the focus group respondents were unemployed or on social welfare
(24). The other respondents were on CE schemes (16), participating in
Youthreach or other education programmes (10), or in full-time (4) or part-
time (2) employment. Over half the respondents were living in local authority
accommodation (33), 10 were living with their parents, 9 were housed in
direct provision, 4 were renting in the private rented sector and 3 were
owner-occupiers.
Focus group process
The focus groups were carried out in the last 6 months of 2005 by the
author, who has wide experience conducting qualitative research with
vulnerable groups. A topic guide was devised based on the literature review

and policy analysis. The main focus of the study was on banking, although
issues were also discussed in relation to credit, savings, home contents
insurance and bill payment. Each focus group lasted approximately 90
minutes and involved 6 to 8 participants. Focus groups were carried out at
the community development projects as it is generally considered that the
most effective focus groups take place at locations that are convenient and
familiar to respondents (Kreuger, 1994).
A.1.4 In-depth interviews
In-depth interviews are the most widely used method in qualitative research.
They were used in this study as they are particularly suited to research that
requires responses to complex questions (i.e. policies on financial exclusion)
and are also considered the most appropriate way of interviewing public
figures, leading professionals or ‘experts’, given their highly specialised role
and knowledge of issues (Ritchie and Lewis, 2003).
Sample selection
A purposive sample of interviewees was chosen from a range of financial

services, government departments and organisations working with low-
income groups, as well as academic experts. Interviewees were chosen based
on their detailed knowledge of financial service provision, the policy context
and/or the needs of low-income consumers.
Sample profile
Twenty-six in-depth interviews were carried out. Nine of these were paired or
triad interviews (i.e. were carried out with 2 or 3 people at the same time).
This is appropriate when 2 or more people form a naturally occurring unit (i.e.
colleagues) and when the subject matter is complex and would benefit from joint
reflection (i.e. policies to address financial exclusion). Therefore, the 26 in-depth
interviews yielded a total sample of 38 interviewees. They represented: banks
(11), community and voluntary groups (8), financial institutions (7), government
departments (5), credit unions (4), public bodies (2) and academics (1).

Interview process
A topic guide was devised based on the findings from the policy analysis.
Each in-depth interview lasted for approximately 60 minutes and discussed
policy responses to financial exclusion and explored the most appropriate and
effective ways of addressing the phenomenon in Ireland. The interviews were
carried out at times convenient to the interviewees and at their place of work.
A.1.5 Qualitative data analysis
All the qualitative information was analysed in a systematic and

comprehensive way. The in-depth interviews and focus groups were
transcribed verbatim and analysed using Nud*st 6. Both these factors
increased the reliability of the research as, according to Silverman (2000:
186–187), ‘computer-assisted recording and analysis of data means that
one could be more confident that the patterns reported actually existed
throughout the data rather than in favourable examples’.
Further techniques were employed to increase the reliability and validity of

the data:
» Comprehensive data treatment: All data were included in the analysis
» The constant comparative method: Numerous respondents and cases were

used to examine emerging themes and ideas
» Deviant case analysis: Information which contradicted, or seemed to

contradict, emerging theories was also considered
» Reflexivity: This involved reflection by the author on the social processes

that could impinge upon and influence data, such as the location of the
setting, the sensitivity of the topic and the nature of the social interaction
between the researcher and participants
» Triangulation: One of the main ways of checking the validity and reliability
of research is through triangulation. This involves comparing the results from
either 2 methods of data collection or 2 or more data sources. This can lead
to a greater understanding of the issue under investigation. The data from
the focus groups, in-depth interviews and secondary data analysis were
compared with each other and national and international literature.

Ritchie and Lewis (2003) argue that if these issues are addressed in the
qualitative research process, the researcher can be more confident that the
findings are true.
A.1.6 Ethical issues
Participation in the research was voluntary and each focus group respondent
and interviewee received a detailed explanation of the purpose of the study
and a description of the research process. Confidentiality and anonymity was
assured. Interviews were tape-recorded, with participants’ consent.
A.1.7 Qualitative research and policy
Until the late 1970s, ‘evidence-based’ policymaking was largely influenced

by quantitative research and the main methods used were statistically
based, usually involving large-scale surveys. Since then, qualitative research
is increasingly being recognised as playing an equally important role in
influencing policy (Ritchie and Lewis, 2003). For instance, Kempson and
Whyley’s (1999) pioneering focus group study in the UK was instrumental
in the development of financial exclusion policy, in particular HM Treasury’s
(1999; 2004) main policy documents on this topic.
The main advantages of qualitative research are that it describes experiences

of the study population (e.g. low-income consumers’ experiences of financial
services); it explains why phenomena occur and what influences them (e.g.
barriers that deter low-income consumers in accessing and using financial
services); it explores how different initiatives work (e.g. the role of credit
unions in providing affordable credit to low-income consumers); and it
contributes to the refinement or stimulus of policy solutions (e.g. the financial
service needs of low-income consumers).
Therefore, qualitative research is an appropriate method to generate new

solutions to the persistent problem of financial exclusion, to identify strategies
that can overcome financial exclusion and to determine what programmes,
policies or services are needed to deal effectively with financial exclusion.

Glossary
An Post is a state-owned company since 1984 and
a deposit-taking institution whose deposits
are all loaned to the government. An Post
operates an extensive network of post offices,
the national postal services, a range of savings
and investment products, as well as other
products such as bill-pay and money transfers.
It is currently developing retail banking services
in conjunction with Dutch/Belgian financial
services company Fortis.
APR is the total cost of the credit, expressed as an

annual percentage of the amount of the credit
granted.
Bank account is a monetary account with a financial

institution recording the balance of money for
a customer. The 2 main types of bank account
in Ireland are current accounts and deposit/
savings accounts provided by banks and
building societies. Savings accounts provided by
credit unions and An Post are not included as
the vast majority do not offer EFT facilities (only
0.04% of credit unions offer EFT facilities and
EFT is only provided by An Post on child save
and pension save accounts).
Basic bank account is a simple, low-cost, ‘no frills’ account

designed for people who want to ensure that
they cannot overdraw their account or who
might not meet the banks’ criteria for opening
a standard current account.
Bord Gáis is a statutory body that was established under

the 1976 Gas Act. The company is responsible
for the transmission, distribution and supply of
natural gas in Ireland.

Building society is an organisation owned by its members
(rather than by shareholders). EBS is the main
building society in Ireland; its existing products
and services range from the provision of home
loans to savings and investment options,
mortgage protection, travel insurance and
credit and debit cards.
Buy-back store is a shop where customers buy items – usually

furniture or white goods – on credit, and if
they are unable to maintain repayments they
can return the items to the shop, which agrees
to retain them for 28 days so that they can be
bought back by the customer.
Cheque casher is a business that cashes third-party cheques for

customers and holds the cheque for a period of
one month before clearing it through the bank.
In other words, customers borrow in advance
against the security of the cheque.
Clearing system is a set of agreed procedures for the exchange

and settlement by participating banks of paper
and electronic payment instruments, including
cheques, credit transfers and direct debits.
Consistent poverty is relative income poverty combined with the

lack of one or more basic deprivation items
(e.g. warm coat, sufficient food, adequate
heating).
Credit scoring is carried out by financial institutions to assess

a customer’s ability to repay a loan. Credit files
produced by the Irish Credit Bureau are used by
financial institutions to measure the probability
of repayment. A value is given to different
categories (e.g. employment history, income,
home ownership, age, credit track record).

Credit union is a mutual organisation, independent and
autonomous, which operates on a not-for-
profit basis and is managed by a voluntary
board of directors elected from its shareholders
(i.e. members). There are over 435 credit unions
in the Republic of Ireland.
Current accounts are solely provided by banks in Ireland and offer

a wide range of transactional services, including
an ATM card, debit card, chequebook, standing
orders/direct debits and overdraft facilities.
Demand-side barriers are reasons why customers give up or refuse to

use financial services.
Desertification is the withdrawal of financial services from

deprived areas.
Electronic funds transfer (EFT) is a system of transferring money electronically

and is widely used by employers to transfer
wages into employees’ bank accounts.
ESB is the Electricity Supply Board and Ireland’s

premier electricity utility with 1.8 million
customers.
Financial exclusion is exclusion from affordable and appropriate

financial products, including bank accounts,
current accounts, credit, savings and insurance.
Financial literacy is the term given to the range of literacy and

numeracy skills required to access and manage
everyday finances.
Financial services are those used for personal financing, including

bank accounts, current accounts, savings,
credit, insurance and bill payment services. In
Ireland these are mainly provided by banks,
building societies, credit unions, post offices
and insurance companies.

Garda Síochána is the national police force of Ireland. Members
of the force, gardaí, are colloquially known as
Guards.
Home credit providers see moneylenders.
Income poverty is a term that refers to an income which is less

than that regarded as acceptable by general
society and which gives a lower than normal
standard of living. It is measured as the share
of persons with an equivalised income below
60% of the national median income. This is
also known as relative income poverty or at risk
of poverty.
Indicators are statistics that provide valid, empirical

measurements of areas of significant social
concern.
Information asymmetries or imbalances of information, typically occur

when the seller has better or more information
than the buyer and may be able to exploit this
gap in knowledge.
Irish Credit Bureau (ICB) is the largest credit-referencing agency in

Ireland and is owned and financed by its
members (mainly financial institutions).
The database contains information on the
performance of credit agreements between
financial institutions and borrowers.
LEADER is an EU initiative for rural development

that provides approved local action groups
with public funding (EU and national) to
implement multi-sectoral business plans for the
development of their own areas.
Low income see income poverty.

Mail order is a system in which customers purchase items
from a catalogue, through an agent, and pay
for them on a weekly basis at a fixed rate of
interest.
Moneylenders or home credit providers, make door-to-door

calls offering primarily cash loans. The agent
usually collects set weekly repayments and no
additional charges are made for default. They
are legislated for under the 1995 Consumer
Credit Act, and there are 47 organisations
regulated by the Financial Regulator.
‘Out-of-course’ charges are not normal transaction charges but penalty

charges applied by banks when a customer
breaks a term of a contract with a bank (e.g.
unauthorised overdraft).
Pawnbroker is a business offering small cash loans secured

on property, usually jewellery.
Payday loan is a short, single payment loan where the

customer writes a personal cheque for a set
sum and receives that amount less an agreed
fee. The company providing the advance agrees
to wait for up to 30 days before presenting the
cheque to the bank.
Rollover loans are further loans taken out by borrowers before

they have fully repaid their current loans.
Sampling error is the difference between the sample estimate

and the actual population estimate. In crude
terms, the larger the sample size, the smaller
the sample error, and hence it gives a more
accurate representation of the characteristics of
the population as a whole.

Savings/deposit accounts offer limited money transaction services and are
aimed at those who wish to build up savings
and/or earn some interest. Such accounts are
offered by banks, building societies, credit
unions and post offices in Ireland.
Social audit is a systematic assessment of the social impact

of a business and involves key stakeholders.
Social audits have been completed by a number
of European banks and have proved to be a
practical way for banks to understand and
report on the social impact of their actions.
Social exclusion is a process whereby certain individuals are

pushed to the edge of society and prevented
from participating fully by virtue of their
poverty or lack of basic competencies and
lifelong learning opportunities, or as a result of
discrimination. This distances them from jobs,
income and education opportunities as well as
social and community networks and activities.
They have little access to power and decision-
making bodies and thus often feel powerless
and unable to take control over the decisions
that affect their day-to-day lives.
Social finance is the provision of repayable finance at affordable

rates for community-based projects and local
development initiatives (including social and
community enterprise) yielding a social return.
Supply-side barriers or institutional barriers, are policies applied by

financial services which exclude or deter people
from their services.
Universal banking service is the delivery of current account facilities,

especially basic bank accounts, through
intermediaries (e.g. post offices, credit unions).

Bibliography
Accenture, (2003). Delivering a World Class Payments Environment. Dublin:
Information Society Commission.
ANZ, 2004. A Report on Financial Exclusion in Australia. Australia: Australia

and New Zealand Banking Group Ltd.
Association of British Credit Unions (ABCUL), 2006. ‘MPs Hear about Credit
Unions’ Basic Banking Potential’. Press release, 28 February. Manchester: ABCUL.
Atkinson, A., McKay, S., Kempson, E. and Collard, S., 2006. Levels of
Financial Capability in the UK: Results of a Baseline Survey. London: Financial
Services Authority.
Banking Code Standards Board (BCSB), 2005. Survey of Subscribers Providing

Basic Bank Accounts. London: BCSB.
British Bankers’ Association (BBA), 2006. ‘1m Basic Bank Account Milestone
Reached’. Press release, 5 October. London: BBA.
British–Irish Council (BIC), 2004. Report on Financial Inclusion Work since

November, 2002: For Social Inclusion Ministers’ Meeting, July, 2004. Dublin:
Office for Social Inclusion.
Brown, J. and Thomas, W., 2005. Basic Bank Accounts: The Case for a
Universal Service Obligation. London: New Economics Foundation.
Byrne, N., McCarthy, O. and Ward, M., 2005. Meeting the Credit Needs of
Low-Income Groups: Credit Unions versus Moneylenders. Dublin: Combat
Poverty Agency.
Carbo, S., Gardner, E. and Molyneux, P., 2005. Financial Exclusion.

Hampshire: Palgrave Macmillan.
Central Statistics Office (CSO), 2001. Household Budget Survey, 1999/2000.

Cork: CSO.
Central Statistics Office (CSO), 2005. EU Survey on Income and Living

Conditions (EU-SILC) 2004 (with revised 2003 estimates). Cork: CSO.
Central Statistics Office (CSO), 2006. Quarterly National Household Survey,

Special Savings Incentive Accounts (SSIAs), Quarter 4 2005. Cork: CSO.

Collard, S. and Kempson, E., 2005. Affordable Credit: The Way Forward.
Bristol: University of Bristol.
Collard, S., Kempson, E. and Dominey, N., 2003. Promoting Financial

Inclusion: An Assessment of Initiatives Using a Community Select Committee
Approach. Bristol: University of Bristol.
Collard, S., Kempson, E. and Whyley, C., 2001. Tackling Financial Exclusion:
An Area-Based Approach. Bristol: The Policy Press and the Joseph Rowntree
Foundation.
Collins, M., 2006. ‘Exploring the Experience and Nature of Deprivation in a

Disadvantaged Urban Community: A Socially Perceived Necessities Approach’.
Paper presented to the Combat Poverty Agency Research Seminar Series,
Dublin, 28 June.
Comhairle, 2003. Money Advice Manual: A Good Practice Manual for Money
Advisors. Dublin: MABS.
Competition Authority, The, 2005. Study of Competition in the (Non-

Investment) Banking Sector. Dublin: The Competition Authority.
Conaty, P. and Bendle, S., 2002. Ending Fuel Poverty and Financial Exclusion:
Community Reinvestment Partnership for Factor Four Bill Payment, Money
and Energy Advice Services. London: New Economics Foundation and
National Energy Action.
Conroy, P. and O’Leary, H., 2005a. Do the Poor Pay More? A Study of Lone
Parents and Debt. Dublin: OPEN – One Parent Exchange and Network.
Conroy, P. and O’Leary, H., 2005b. Identifying How Literacy and Numeracy
Difficulties Act as a Barrier to Understanding and Accessing Financial Services.
Dublin: The National Adult Literacy Agency.
Consultative Group to Assist the Poor (CGAP), 2006. Mobile Phones for
Microfinance. London: CGAP.
Daly, M. and Leonard, M., 2002. Against All Odds: Family Life on a Low
Income. Dublin: Combat Poverty Agency.

Daly, M. and Walsh, J., 1988. Moneylending and Low-Income Families.
Dublin: Combat Poverty Agency.
Dempsey, N., 2005. ‘Speech by Mr. Noel Dempsey, T.D., Minister for
Communications, Marine and Natural Resources’. Irish Postmasters Union
Conference, Castlebar, 30 April.
Devlin, J., 2005. ‘A Detailed Study of Financial Exclusion in the UK’. Journal of
Consumer Policy. 28: 75–108.
Dobson, B., 2004. ‘Focus Groups’. In Becker, S. and Bryman, A. (eds.).

Understanding Research for Social Policy and Practice. Bristol: The Policy
Press.
European Commission, 2004a. Joint Report on Social Inclusion. Brussels:

European Commission.
European Commission, 2004b. Public Opinion in Europe: Financial Services

Report B. Brussels: European Commission.
European Commission, 2005. Public Opinion in Europe on Financial Services.

Brussels: European Commission.
European Community (EC), 2005. ‘Irish Government to Develop Electronic

Welfare Payments’. Press release, 30 March. www.europa.eu.int.
Eustace, A. and Clarke, A., 2000. National Evaluation of the Money Advice
and Budgeting Service. Report for Phase Two. Dublin: Eustace Patterson Ltd.
Financial Inclusion Taskforce (FITF), 2005. Report on Progress towards the

Shared Goal. London: HM Treasury.
Financial Inclusion Taskforce (FITF), 2006. Treasury Committee Inquiry on Financial

Inclusion: Submission from the Financial Inclusion Taskforce. London: FITF.
Financial Regulator, 2004. Strategic Plan 2004–2006. Building a New

Regulatory Structure: Our Emerging Strategic Approach. Dublin: Financial
Regulator.
Financial Regulator, 2006a. Consumer Protection Code. Dublin: Financial

Regulator.

Financial Regulator, 2006b. Minimum Competency Requirements. Dublin:
Financial Regulator.
Financial Regulator, 2006c. Strategic Plan 2007–2009. Dublin: Financial

Regulator.
Financial Services Authority (FSA), 2000. ‘FSA Publishes Research on the

Causes and Issues of Financial Exclusion’. Press release, 12 July. London: FSA.
Fischer, T., Mayo, E. and Rogaly, B., 1999. ‘Conclusions’. In Rogaly, B., Fisher,
T. and Mayo, E., (eds.). Poverty, Social Exclusion and Microfinance in Britain.
London: Oxford GB and New Economics Foundation.
Foley, C., 2001. ‘Statement by Carmel Foley, Director of Consumer Affairs,

to the Joint Oireachtas Committee on Finance and the Public Service on 21st
November, 2001’. Dublin: Office of the Director of Consumer Affairs.
Galvin, T., 2006. ‘No Reversal of Glenamaddy Branch Closure by Bank of

Ireland’. The Tuam Herald, 31 August.
Gloukoviezoff, G., 2004. ‘The “Caisse d’Epargne” and Households’ Financial

Exclusion. Which Actions Should Be Taken and What Are the Prospects?’.
Paper presented to the Access to Finance Conference, Brussels, 28 to 29
October. Brussels: World Savings Bank Institute – The World Bank.
Gloukoviezoff, G., 2006. ‘From Financial Exclusion to Overindebtedness: The

Paradox of Difficulties for People on Low Incomes?’. In Aderloni, L., Braga,
M. D. and Carluccio, E. (eds.). New Frontiers in Banking Services: Emerging
Needs and Tailored Products for Untapped Markets. Berlin: Springer Verlag.
Herbert, T. and Hopwood-Road, F., 2006. Banking Benefits: CAB Evidence on

Payment of Benefits into Bank Accounts. London: Citizens Advice.
HM Treasury, 1999. Access to Financial Services. London: HM Treasury.
HM Treasury, 2004. Promoting Financial Inclusion. London: HM Treasury.
Irish Bankers Federation (IBF), 2005a. IBF Fact File on Financial Inclusion.
Dublin: IBF.

Irish Bankers Federation (IBF), 2005b. ‘Banks Present Proposals for Greater
Financial Inclusion’. Press release, 19 May. Dublin: IBF.
Irish League of Credit Unions (ILCU), 1984. Operating Principles: Annual

General Meeting of the ILCU (1984). Dublin: ILCU. www.creditunion.ie.
Irish League of Credit Unions (ILCU), 2005a. Annual Report 2005. Dublin:
ILCU.
Irish League of Credit Unions (ILCU), 2005b. Prioritising Social Gain. Dublin:
ILCU.
Irish Payment Services Organisation (IPSO), 2005. Annual Report 2004/2005.

Dublin: IPSO.
Irish Payment Services Organisation (IPSO) in conjunction with Participant

Banks and An Post, 2002. Development of Universal Account Solution:
Discussion Paper for Government. Dublin: IPSO.
Irish Postmasters Union (IPU), 2005. ‘Submission to the Oireachtas Sub-

Committee on Behalf of the Irish Postmasters Union’. February. Dublin: IPU.
Joyce, P., 2003. An End Based on Means: A Report on How the Legal System
in the Republic of Ireland Treats Uncontested Consumer Debt Cases with
an Examination of Alternatives and Proposal for Reform. Dublin: Free Legal
Advice Centres.
Kelly, F. and Parker, A., 2005. The Elderly Poor and Their Access to Grocery
and Financial Services in Dublin. Dublin: The Centre for Retail Studies,
University College Dublin.
Kempson, E. and Whyley, C., 1999. Kept Out or Opted Out? Understanding
and Combating Financial Exclusion. Bristol: The Policy Press.
Kempson, E., Atkinson, A. and Piley, O., 2004. Policy-Level Response

to Financial Exclusion in Developed Economies: Lessons for Developing
Countries. Bristol: The Personal Finance Research Centre, University of Bristol.
Kempson, E., McKay, S. and Collard, S., 2005. Incentives to Save:

Encouraging Saving among Low-Income Households. Bristol: The Personal
Finance Research Centre, University of Bristol.

Kempson, E., Whyley, C., Caskey, J. and Collard, S., 2000. In or Out?
Financial Exclusion: A Literature and Research Review. London: Financial
Services Authority.
Kitzinger, J. and Barbour, R., 1999. ‘Introduction: The Challenge and Promise
of Focus Groups’. In Barbour, R. and Kitzinger, J. (eds.). Developing Focus
Group Research. London: Sage.
Korczak, D., 2004. The Money Advice and Budgeting Service Ireland.
A Service to Help People with Financial Problems and to Tackle Over-
Indebtedness. Synthesis Report. Peer Review and Assessment in Social
Inclusion Programme: www.peer-review-social-inclusion.net.
Kreuger, R. A., 1994. Focus Groups: A Practical Guide to Applied Research.

London: Sage.
Leyshon, A. and Thrift, N., 1995. ‘Geographies of Financial Exclusion:

Financial Abandonment in Britain and the United States’. Transactions of the
Institute of British Geographers, New Series. 20: 312–341.
Marketing Partners Ireland Ltd, 2006. The Move to Card and Electronic
Payments Tipping Points for Consumers. Dublin: IPSO.
Millward Brown IMS, 2005. Irish League of Credit Unions. Qualitative

Research: Republic and Northern Ireland: Review of Findings. Dublin: ICLU.
Money Advice and Budgeting Service (MABS), 2004. ‘Proposal for a Pilot
Savings Scheme for MABS Clients, to be Forwarded as a Pre-Budget
Submission to the Minister for Social and Family Affairs’. Cork: MABS
National Advisory Committee.
Money Laundering Steering Committee (MLSC), 2003. The Criminal Justice

Act, 1994 (as amended). Money Laundering: Guidance Notes for Credit
Institutions. Dublin: MLSC.
National Statistics Board, 2003. Developing Irish Social and Equality Statistics
to Meet Policy Needs. Report of the Steering Group on Social and Equality
Statistics. Dublin: Stationery Office.
National Travellers Money Advice and Budgeting Service (NTMABS), 2006.

Financial Exclusion: Failure to Access Financial Services. Dublin: NTMABS.

Nolan, B. and Smeeding, T., 2004. ‘Ireland’s Income Distribution in a
Comparative Perspective’. Paper presented at the 28th General Conference
of the International Association for Research on Income and Wealth, 22 to 28
August, Cork.
O’Loughlin, D., 2006. An Investigation into the Current Nature and Incidence
of Consumer Credit and Debt Consumption in Ireland: Developing an
Intervention Strategy for Low-Income Customers. Dublin: Combat Poverty
Agency.
O’Rourke, E., 2006. ‘A New Regime to Counter Money Laundering’. About

Banking. 3: 19–21, May.
Office for Fair Trading (OFT), 1999. Vulnerable Consumers and Financial
Services: The Report of the Director General’s Inquiry. London: OFT.
Office for Social Inclusion (OSI), 2003. National Action Plan against Poverty
and Social Exclusion, 2003–2005. Dublin: OSI.
Office for Social Inclusion (OSI), 2004. National Action Plan against Poverty
and Social Exclusion: First Annual Report: Implementation of Plan 2003–
2004. Dublin: OSI.
Office for Social Inclusion (OSI), 2006. Report on the Consultation for the
National Action Plan against Poverty and Social Exclusion 2006–2008. Dublin:
OSI.
Oliver, E., 2006. ‘An Post and Fortis in Banking Accord’. The Irish Times, 14 April.
Opinion Leader Research (OLR), 2006. Financial Inclusion Deliberative

Workshops. London: HM Treasury/Financial Inclusion Taskforce.
Pahl, J., 1999. Family Finances in the Electronic Economy. Bristol: The Policy
Press.
Quinn, P., 2005. The Irish Money Advice and Budgeting Service (MABS) and
Its Transferability to Europe as a Sustainable Mechanism to Manage and
Avoid Excessive Debt. Dublin: European Anti-Poverty Network.
Quinn, P. and McCann, T., 1997. Access to Credit Facilities for the Traveller
Community in the Greater Dublin Area. Dublin: Exchange House MABS.

Quinn, P. and NiGhabhann, N., 2004. Creditable Alternatives: An Exploration
of New Models of Affordable Savings and Credit Options in Use Worldwide
which may be Adapted by the Traveller Community in Ireland. Dublin:
Exchange House Traveller Service.
Rahman, M. and Palmer, G., 2001. More than just a PIN Number: Young
People, Financial Responsibility and Exclusion. London: New Policy Institute.
Regan, S. and Paxton, W., 2003. Beyond Bank Accounts: Full Financial
Inclusion. London: Institute for Public Policy Research.
Reidy, A., 2004. Briefing Paper on Problems with Accessing Financial Services.
Dublin: Irish Council for Civil Liberties.
Ritchie, J. and Lewis, J., 2003. Qualitative Research Practice. London: Sage.
Rogaly, B., Fisher, T. and Mayo, E., 1999. Poverty, Social Exclusion and
Microfinance in Britain. London: Oxford GB and New Economics Foundation.
Rossiter, J. and Kenway, P., 1997. ‘Introduction’. In Rossiter, J. (ed.). Financial

Exclusion: Can Mutuality Fill the Gap? London: New Policy Institute.
Silverman, D., 2000. Doing Qualitative Research: A Practical Handbook.

London: Sage.
Sinclair, S., 2001. Financial Exclusion: An Introductory Survey. Edinburgh:

Centre for Research into Socially Inclusive Services (CRSIS), Edinburgh College
of Art/Heriot Watt University.
Slattery, J., 2006. ‘Banks Forced to Pay Back €118m in Charges’. The Irish
Times, 26 July.
Stamp, S., 2006. ‘Research Highlights Need to Focus on Higher Persistent

Debt Risk to Poor Households’. Action on Poverty Today. 14: 12–13, Autumn.
Steering Committee on Social Finance (SCSF), 2004. In the Common Interest: The
Case for Social Finance in Ireland. Report and Recommendations of the Steering
Committee on Social Finance 2004. Dublin: Dublin Employment Pact, Westmeath
Employment Pact, Clann Credo and Area Development Management Ltd.
Whyley, C. and Brooker, S., 2004. Home Credit: An Investigation into the UK
Home Credit Market. London: National Consumer Council.

The concept of financial exclusion has emerged as a major international issue as
Research
people increasingly depend on financial products, such as bank accounts, credit
cards and mortgages, to manage their money and plan for the future. Yet, low-
income households are often unable to access or use financial services. For some,
it is a case of not having a bank account (the ‘unbanked’), for others it means using
alternative services that are less suitable and more expensive.
This study examines the nature of financial exclusion in an Irish context from the
perceptions and experiences of low-income consumers. It identifies the reasons
why low-income households do not use financial services and highlights their
unmet needs.
The study also draws on the views of various stakeholders, as well as international
research, to suggest ways to improve the design and delivery of financial services
for low-income consumers, including:
» a national strategy to promote financial inclusion
» easier access to bank accounts
» better design and delivery of basic banking services
» more financial information
» affordable credit and savings products
» further data and research on financial exclusion.
This pioneering study provides a new insight into the usually separate domains Financial Exclusion in Ireland:
of social policy and financial services. As such, it will appeal to those involved in
developing financial and welfare policy, providers of financial services, consumer
advocacy groups and organisations representing low-income households.
an exploratory study
and policy review
ISBN 1-905485-24-7
ISBN-10: 1-905485-24-7
9 781905 485246 ISBN-13: 978-1-905485-24-6 Caroline Corr

Financial Exclusion in Ireland An Explor

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Financial Exclusion in Ireland An Explor

Uploaded by

Copyright:

Available Formats

Financial Exclusion in Ireland: an exploratory study and policy review

The concept of financial exclusion has emerged as a major international issue as

» a national strategy to promote financial inclusion

» easier access to bank accounts

» better design and delivery of basic banking services

» more financial information

» affordable credit and savings products

» further data and research on financial exclusion.

9 781905 485246 ISBN-13: 978-1-905485-24-6 Caroline Corr

Combat Poverty Agency

© 2006 Combat Poverty Agency

British Library Cataloguing-in-Publication Data

Cover design by Red Dog Design Consultants, Dublin

Printed in Ireland by Inkspot, Dublin

Nature and extent of financial exclusion in Ireland

Chapter 2 Understanding financial exclusion 8

Chapter 3 Financial exclusion and financial