Abstracts Category : Other

Financial exclusion: an empirical study of household access to financial services in Australia

by Sherman Chan

Financial exclusion is a lack of opportunity to access financial services. Concerns about financial exclusion are two-fold. On a social front, it contributes to the broader issue of social exclusion. From an economic view, exclusion from credit inhibits consumption smoothing and potentially contributes to widening inequality.Financial exclusion is commonly indicated by limited availability of financial outlets, low ownership of financial products and infrequent use of financial services. Instead of studying the incidence of non-participation, this thesis more closely captures the essence of financial exclusion by focusing on the ability to access financial services, and hence the capacity to deal with unforeseen financial needs.Using the General Social Survey 2010 and the Community Understanding of Poverty and Social Exclusion survey, this thesis uses the following as indicators of financial exclusion: product application rejections, reported difficulties in accessing financial institutions, and whether assistance is required for banking activities. A set of dimensions for financial exclusion in Australia is derived, capturing self-exclusion, geographical issues, ethnicity, disability and cost. Different combinations of personal attributes are identified as risk factors for different dimensions, supporting the view that financial exclusion is a multi-dimensional issue.The serviceability calculations used by Australian banks are replicated in this thesis to assess peoples capacity to repay loans and hence their eligibility for bank credit. Findings show that 15.7% of the population would be systematically credit excluded. The main contributor to serviceability-based credit exclusion is found to be insufficient surplus income after basic living expenses and housing costs. Sensitivity analysis shows that relaxation of key product conditions would only narrowly reduce the ineligibility rate.Finally, this thesis investigates the correlation between financial exclusion and financial stress, and between indebtedness and financial stress. Credit-related exclusion indicators are correlated with cash flow problems, healthcare delays, foregone education/training, and inability to raise emergency finance. Debtors with poor serviceability are also likely to experience cash flow problems, which raises questions about over-inclusion. Overall, the results suggest that a balance is required between satisfying consumer demand and prudent credit provision.Advisors/Committee Members: Bradbury, Bruce, Social Policy Research Centre, Faculty of Arts & Social Sciences, UNSW, Hill, Trish, Social Policy Research Centre, Faculty of Arts & Social Sciences, UNSW.