Seven Debt and financial exclusion
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Stephen McKay
Abstract
This chapter discusses the concepts of debt and financial exclusion, and shows what light may be shed on these issues by the Poverty and Social Exclusion (PSE) Survey. As well as being one of the first major surveys to investigate these issues, the PSE Survey is in a unique position to consider how far both debt and financial exclusion are related to poverty, low income and social exclusion.
The issues of debt and financial exclusion are often studied in parallel in academic, government and other commentaries (for example, Drakeford and Sachdev, 2001; Church Action on Poverty, 2002; DWP, 2003). But these two topics are conceptually distinct and should not be conflated. In particular, people who make little or no use of financial services are not necessarily in arrears with their credit or other household commitments. Indeed, they may have eschewed financial products, in favour of cash, as one means of minimising their risk of arrears. The risks of being financially excluded or having arrears are both, however, increased among people who live on low incomes (Kempson and Whyley 1999a; Kempson, 2002).
There are also a number of important causal links between debt and financial exclusion. Certainly, being financially excluded can lead a person into debt, for example by having to use more expensive forms of credit (such as moneylenders) to deal with an emergency. However, some forms of debt, such as on credit cards or bank loans, presuppose a degree of financial inclusion within the mainstream of financial products. It is also possible that indebtedness later leads to exclusion.
Abstract
This chapter discusses the concepts of debt and financial exclusion, and shows what light may be shed on these issues by the Poverty and Social Exclusion (PSE) Survey. As well as being one of the first major surveys to investigate these issues, the PSE Survey is in a unique position to consider how far both debt and financial exclusion are related to poverty, low income and social exclusion.
The issues of debt and financial exclusion are often studied in parallel in academic, government and other commentaries (for example, Drakeford and Sachdev, 2001; Church Action on Poverty, 2002; DWP, 2003). But these two topics are conceptually distinct and should not be conflated. In particular, people who make little or no use of financial services are not necessarily in arrears with their credit or other household commitments. Indeed, they may have eschewed financial products, in favour of cash, as one means of minimising their risk of arrears. The risks of being financially excluded or having arrears are both, however, increased among people who live on low incomes (Kempson and Whyley 1999a; Kempson, 2002).
There are also a number of important causal links between debt and financial exclusion. Certainly, being financially excluded can lead a person into debt, for example by having to use more expensive forms of credit (such as moneylenders) to deal with an emergency. However, some forms of debt, such as on credit cards or bank loans, presuppose a degree of financial inclusion within the mainstream of financial products. It is also possible that indebtedness later leads to exclusion.
Chapters in this book
- Front Matter i
- Contents v
- List of figures vii
- List of tables x
- Acknowledgements xv
- List of acronyms xvii
- Notes on contributors xix
- Introduction 1
-
Principles
- The concept and measurement of poverty 29
- The international measurement of ‘absolute’ and ‘overall’ poverty: applying the 1995 Copenhagen definitions to Britain 71
- The necessities of life 89
- The concept and measurement of social exclusion 123
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Processes
- Does work pay? Employment, poverty and exclusion from social relations 163
- Debt and financial exclusion 191
- Social exclusion and local services 217
- Crime, ‘disorder’, insecurity and social exclusion 249
- Mental health, poverty and social exclusion 285
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People
- Children, poverty and social exclusion 315
- Youth, poverty and social exclusion 347
- Gender, poverty and social exclusion 375
- Lone mothers, poverty and social exclusion 405
- Pensioners, poverty and social exclusion 431
- Conclusion 459
- Index 471
Chapters in this book
- Front Matter i
- Contents v
- List of figures vii
- List of tables x
- Acknowledgements xv
- List of acronyms xvii
- Notes on contributors xix
- Introduction 1
-
Principles
- The concept and measurement of poverty 29
- The international measurement of ‘absolute’ and ‘overall’ poverty: applying the 1995 Copenhagen definitions to Britain 71
- The necessities of life 89
- The concept and measurement of social exclusion 123
-
Processes
- Does work pay? Employment, poverty and exclusion from social relations 163
- Debt and financial exclusion 191
- Social exclusion and local services 217
- Crime, ‘disorder’, insecurity and social exclusion 249
- Mental health, poverty and social exclusion 285
-
People
- Children, poverty and social exclusion 315
- Youth, poverty and social exclusion 347
- Gender, poverty and social exclusion 375
- Lone mothers, poverty and social exclusion 405
- Pensioners, poverty and social exclusion 431
- Conclusion 459
- Index 471
