Negative perceptions ‘hindering’ community finance

The Payments Association has warned that negative perceptions and “stifling regulations” are hindering growth for the community finance organisations vital to financial inclusion.

The organisation calls on policymakers and FinTech to support consumers with “underutilised solutions”, including community finance options like credit unions, as The Debt Justice reports that a record 6.7 million UK adults are currently facing severe financial difficulty.

Tony Craddock, director general of The Payments Association described the number of people still struggling to access financial services in the UK as “staggering”.

“Community finance providers, such as credit unions and Community Development Finance Institutions, play a vital role in bridging this gap,” continued Craddock. “However, the sector faces significant barriers to growth, including negative perceptions, limited resources, and regulatory burdens.”

In a new whitepaper, the association recommends the establishment of a dedicated sandbox where community lenders and technology providers can collaborate and develop “innovative solutions”.

Additionally, it says that the government should learn from successful initiatives in other countries, such as Credit Union Service Organisations (CUSOs) in the US.

The paper also calls for a fairer regulatory framework that acknowledges the unique mission of community finance organisations, as well as business rate relief and a “kitemark system to signify trust and quality”.

Neil Harris, chair of The Payments Association’s Advisory Board, said: “Community finance organisations are doing enormously important work serving the underserved, but all too often they lack the resources and support to effectively carry out this mission at the scale that is needed. It is clear what a powerful tool for financial inclusion that community finance can be, but it needs a collective effort from government, policymakers, the finance industry, and technology providers to support this sector to thrive.”



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