Fair Money Advice Workshop on Financial Capability
WAM UK Member, Christine Murray, writes on a full day workshop with Fair Finance’s, Fair Money Advice on financial capability training to prepare for WAM UK Volunteering opportunities.
Debt is the most salient political issue of our time. Most people in the UK owe money, and whether it’s a mortgage or a student loan, it has become a fact of every day life. For some, however, it can become all-consuming.
There are a litany of reasons why some 28,700 people were made insolvent during the first quarter of this year, down from a 2010 peak of over 35,000.
Given the opportunity to understand such a complex social quagmire, WAM UK (and a few friends) undertook a Financial Capability Workshop with Fair Money Advice. This was with a view to becoming mentors to some of their clients, offering support and information to help them back on their feet.
The company are the charitable arm of Fair Finance, an East London-based social business that aims to revolutionise personal finance, offering loans and advice to those who get a ‘raw deal’ from the mainstream system. The workshop was given exactly as it is to those who walk through their doors asking for help.
The tone for the day was set during the first module on money management with a question from the group.
“Do you ever use those new apps you can get for helping to manage debt?”
“Unfortunately most of our clients do not own iPhones.”
It was a sobering start for the impassioned trainees.
As the day progressed it became clear that many Fair Money Advice clients exist in a world entirely disconnected from what we know. Most are under the burden of multiple debts and have suffered relentless threats from bailiffs and debt collection agencies. For a significant proportion, English is their second language.
Muna Yassin, Managing Director at Fair Money Advice took us through the catalogue of benefits many of her clients receive. The immediate response was shock at how complicated the system is. It is little wonder so many do not end up claiming the right amount. However, Muna showed us a straightforward calculator that advisers use to navigate the bureaucratic system.
Exclusion versus over-inclusion
“We have two types of clients, those who are financially excluded, and those who are over-included,” said Yassin.
Of the excluded, some are, in the jargon, ‘unbanked’. A recent World Bank report on Financial Inclusion shows that although the UK ranks very highly amongst other developed countries, two percent of the adult population are still off the radar.
Muna said that even those with an account sometimes withdraw all their money as soon as it comes in. Many do not trust the banking system or appreciate that having a bank account is vital for building up a credit history and thus being accepted, on paper at least, as a fully fledged member of society.
The ‘over-inclusion’ commands much more attention from the press. Stories of the notorious loan sharks and payday loans companies abound, but more often clients owe money to well-known large banking institutions. In some cases individuals have been allowed to borrow from up to 15 separate creditors. Frequently this includes friends and family, which brings problems all of its own.
How an individual best breaks loose from the spiral has eerie parallels with countries mired in the debt crisis in Europe. Politicians are at loggerheads over whether to cut spending or invest. For the trainees it seemed obvious that a mobile phone bill was not a priority debt, but if the client relies on that phone to get work, perhaps it’s even more important than central heating.
In a way, microfinance and debt advice are two sides of the same coin. They are both concerned with extending economic opportunities to those who might not find a way under the status quo. Debt adviser Mustafa Mansury and the team laid out some alternatives to the 2500 percent APR payday loans. Credit unions are a good option. Though these ways of financing are still growing and often not known about or well understood.
Financial exclusion is a tricky subject for the uninitiated, and hopefully WAM UK can help get the mentoring scheme off the ground. Though after just one day it’s clear to see that the Fair Money Advice team have their work cut out for them.
Follow Christine Murray on Twitter @chrissiemurray