Page 4: Financial inclusion
Research sponsored by the Joseph Rowntree Foundation has shown that approximately 7% of all households in the United Kingdom have no account with a financial institution; 84% of these are tenants of social housing landlords such as local councils or housing associations.
Building societies, which were originally set up to help people who might otherwise be excluded from the financial organisations, continue to address this problem. For example, they offer straightforward passbook savings accounts which show customers exactly where they stand. They also operate instant access accounts with a free cheque cashing service.
Another advantage of not having to pay dividends to shareholders is that mutuals have been able to keep branches open in areas which other institutions have abandoned because they found them unprofitable.
The Centre for Urban and Regional Development, at the University of Newcastle upon Tyne, studied patterns of branch closures and openings between 1995 and 1998. Its authors concluded: ‘There is evidence that building societies are less likely to close branches in socially deprived areas as well as evidence that building societies are opening in the same areas that converters are closing branches.’ [From the report: The Contribution of British Building Societies to Financial Inclusion]
The authors suggest a number of reasons for this:
- Building societies were established with the original intention of providing the opportunity to purchase homes to those whose needs were not being met elsewhere.
- Their organisational structure gives them the flexibility to provide a service to members rather than simply to maximise profits.
- The local identity of many societies, as illustrated by their names, may make them less likely to withdraw from communities they have historically served.