Tackling financial exclusion and poverty

University of Salford

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University of Salford researchers are combating financial exclusion and tackling poverty by increasing the sustainability of micro-finance institutions that provide credit or loans to the financially excluded. Their work is also supporting public authorities in developing policies that promote greater financial inclusion, and developing a Good Conduct model for the European Community.

Often the very people most in need of credit or loans are those who find it more difficult to access them. Banks and the mainstream financial sector sometimes consider them to be high-risk borrowers, particularly for long-term loans. This excludes considerable numbers of people, entrepreneurs and small businesses from vital funds.

Through Community Finance Solutions – an award winning research and development unit of the University of Salford – the researchers are increasing access to finance for excluded groups, reducing unmanageable debt and improving the quality of life.

In a project that is the first of its kind in the sub-prime finance market, they have collaborated with East Lancashire Moneyline (IPS) Ltd (ELM) to share the findings of their research. The team has established two Knowledge Transfer Partnerships with ELM to develop new microfinance tools – collaborating with colleagues from the University’s School of Computing, Science and Engineering. These include a web-based Credit Risk Assessment Tool (CRET) and a data control system for loan and savings account processing to aid in the processing of loan applications.

The research has enabled ELM to develop sustainably as a business and build the confidence to grow into new locations with a view to expanding nationally in the future. As of 2013, ELM has awarded more than 65,000 loans with a total value of more than £37 million to more than 25,000 people. This has generated total savings of £3,283,159 (the total amount deposited since inception, not the current value on deposit).

One of the unit’s leading academics is a founding member of the European Microfinance Research Network and led the editorial team which published the Handbook of Microcredit in Europe. This reviewed the experiences of 18 countries, and highlighted variations in the characteristics of MFIs and their associated practices. This identified the emergence of a new model for the delivery of microfinance in Europe, leading to Salford being commissioned to develop a model for the European Community. This – the European Code of Good Conduct for Microcredit Provision – provides a set of standards to cover issues such as governance, risk management and consumer and investor relations for the microcredit sector in the European Union.

Image credit: Shadows in the morning by Neil Moralee

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