Indigenous Aussies are all alone if they can’t get a loan
Indigenous people are still struggling to get a toehold in the Australian economy with financial exclusion rife, according to a recent report from the Centre for Social Impact entitled Measuring Financial Exclusion in Australia.
It should come as no surprise to those with even a passing interest in Indigenous affairs. It’s hard to keep up with all the doom and gloom performance indicators in education, health and housing. The alarm bells have been ringing for so long we’ve become ‘ho hum’ to the noise.
So financial exclusion is no different. The report shows that Indigenous Australians are doing it tough. Actually, they’re doing it the toughest.
Some facts :
- 43.1% of Aboriginal or Torres Straight Islanders (ATSI) are now financially excluded, a vast over-representation compared to 17.2% of non-ATSI Australians.
- Only 12% (compared to 38.7% for non Indigenous) of Indigenous Australians surveyed would be in a position to access $3,000 in case of an emergency.
- For Indigenous Australians, an inability to provide necessary documentation (17.9% compared to 8.7% non Indigenous) and language difficulties (5.1% compared to 2.1% non Indigenous) and distance to a bank branch (2.6% compared to 3.9% non Indigenous) prove to be key barriers to accessing mainstream finance,
- Indigenous Australians are twice as likely to face difficulties in getting credit from mainstream credit providers and they have a significantly higher reliance on community and government assistance like Centrelink advance payments (53.8% compared to 27.3% non Indigenous) as well as fringe credit (25.6% compared to 7.2% non Indigenous).
Minister for Indigenous Affairs Jenny Macklin knows it’s a problem. That’s why she has a Money Management Branch within her Department. However, while they fund nice painted Toyota land cruisers to roam around the Northern Territory, evaluations of effectiveness of the Branch’s programs are few and far between.
The problem is, the government has been slow to grasp the extent of the issue and has mistakenly assumed it only happens in remote communities - which is not the case. The report clearly shows that financial exclusion is alive and well in the big smoke. In places like northern Melbourne financial exclusion is 21.9% higher than the national average. And my mob in North West NSW is 20.8% higher.
To compound things, the government seems more focused on sticks than carrots when addressing Indigenous financial exclusion. It must be cheaper to quarantine everyone’s welfare, rather than spend money on financial education and affordable financial products.
But here’s the really dumb bit. Instead of seeking to make good policy and better regulate payday lenders or developing microfinance programs with incentives for people to save, the Government is about to create the illusion that it cares.
In the coming weeks the Minister for Financial Services Bill Shorten will sign off on the Credit Enhancements Bill that barely regulates predatory payday lending practice. Shorten has heard from users of fringe credit about all the negative impacts of high cost loans that exacerbate financial exclusion. However, he has either found it too difficult or perhaps too costly to actually fund a genuine alternative.
For example, Shorten axed from the original legislation a cap on upfront fees charged by payday lenders at 10% of the loan for amounts of less than $2,000, with monthly interest payments capped at 2%. Instead the Minister doubles the caps to 20% and 4%.
So on a $500 loan you could be slugged a $100 establishment fee (20%) and your first repayment could be $20 (4%) i.e. $120 fees and interest. Let’s say you pay the loan back with your next pay in a month’s time. That would be $620. I don’t think we’ll be seeing that on any pay day lender’s promotional material.
For Indigenous Australia it’s a double whammy. Firstly, Macklin’s financial literacy programs mostly targeted remote communities and misses the vast majority of Indigenous Australian who need it. And then there is Shorten’s ‘all sauce and no pie’ regulatory reform.
You’d have to give both Ministers a D for their efforts. The whole shemozzle is another missed opportunity from a Government that promised so much, yet has delivered so little for Indigenous Australia.
The fact is that everyone in the finance industry wants a sector that is full of responsible lenders and lending practices. It’s also important that customers learn to operate effectively in the financial system, know their limits, their rights and their responsibilities.
The findings from the Centre for Social Impact report Measuring Financial Exclusion in Australia highlights the stakes are high. Indigenous financial exclusion is as pervasive as any of the other problems that plague Indigenous Australia and it’s getting worse.
I’m sure the ‘big wigs’ in Canberra know this, but you never know…….
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