Executive summary of report that analyses the data released through the new bank lending data disclosure framework for the first time.
Today it is recognised that fair access to financial goods and services is a basic requirement for full engagement in modern society.
The supply of financial goods and services is dominated by the actions of a small number of financial institutions, but substantial numbers of individuals, businesses and communities remain underserved and excluded from such market provision — or may pay a very high price to gain access to finance.
In the UK, around 1.4 million adults are without a basic bank account, 7 million are accessing sources of high cost credit, substantial numbers of SMEs continue to struggle to access bank finance, and a new round of bank branch closures have just been announced. In 2013, the unmet demand of individuals and businesses excluded from mainstream finance (‘the finance gap’) was estimated at around £6 billion per annum.
But who, and where, are these underserved and excluded businesses and communities — and how can we intervene to support a diversity of providers to best meet their financial needs?
Data disclosure can support the ability to target financial exclusion, by providing the area-based lending data and information necessary to identify local lending markets and finance providers and, crucially, identify market gaps and the excluded.
As has been shown in the USA — using evidence from transparent, comprehensive and robust data disclosure — exclusion can be targeted through the actions of banks themselves, through new competition and financial partnerships with alternative and community-based providers, by the activism of empowered communities and through more effective policy interventions.
In December 2013, the British Bankers Association (BBA) and Council for Mortgage Lenders (CML) voluntarily published net total lending data by Postcode Sector for Great Britain drawn from participating lenders across three categories:
• loans and overdrafts to SMEs;
• mortgages; and,
• unsecured personal loans (excluding credit cards).
This process of voluntary disclosure of bank lending data by the BBA and CML puts the UK at the forefront of international efforts for greater transparency to support financial inclusion.
• assessed the first three quarterly releases of this major new development in data disclosure and its contribution to mapping area-based patterns in personal and SME lending markets in Great Britain (the study did not cover the mortgage lending data release). The process included reviewing the construction and comprehensiveness of the lending data sets as well as conducting an initial analysis of the data made available;
• reviewed the ability to undertake comprehensive areabased lending analysis across providers other than banks in personal and SME markets. To draw a comprehensive picture of financial exclusion across the UK, its implications and how it is being addressed, we need to understand the lending conducted by all major sources of financial provider (bank and ‘alternative’) across the UK.
Overall, the study illustrates the considerable limits of the currently available area-based lending data released by the BBA and other stakeholders and recommends improvements to support the ability to assess (gaps in) local lending markets.