Non-bank finance remains critical for financial inclusion

The ability to access credit provided by non-bank financial institutions (NBFIs) remains an essential service for consumers, according to the results of the International Personal Finance plc (IPF) 2016 Financial Wellbeing Survey. Against a backdrop of rising living costs driven by higher rent and utilities, ordinary consumers that are underserved by the mainstream banking sector continue to rely on the services of NBFIs when faced with unexpected costs or emergency bills.

The survey, conducted by GFK UK on behalf of IPF, polled 9,220 of IPF’s customers across eight global emerging markets with populations exceeding 280 million in total: Czech Republic, Hungary, Poland, Romania, Slovakia, Lithuania, Bulgaria and Mexico. Assessing customers’ concerns and aspirations in relation to their financial affairs, it found that over half (55%) of European respondents would find it difficult to cover an emergency bill without borrowing money, with 62% of respondents in Mexico also anticipating similar problems.

Other significant findings include:

• Use of credit services: The majority of respondents (82%) believe that NBFIs play an important role in society by giving people ready access to responsible credit. 88% say NBFIs like Provident clearly explain their charges and fees for their services;
• Use of credit services: European respondents generally have similar levels of trust in mainstream banks and NBFIS, with the exception of Bulgarians and Mexicans who have substantially more trust in NBFIs than mainstream banks;
• Economic outlook: Rising living costs remain the biggest concern for respondents across Emerging Europe, with over 36% citing it as the most concerning factor. This is especially the case for Lithuania and Romania, at 44% and 42% respectively;
• Planning for the future: Almost two thirds of respondents across Europe said they were not saving for retirement due to a lack of disposable income. Across most markets there were a high proportion of respondents without any savings, including over 50% in Bulgaria, Hungary, Romania, Lithuania and Mexico;
• Use of credit services: Unexpected expenses are the main reason Europeans would consider taking out a loan (30% of respondents), with home improvements and debt  consolidation also significant factors (28% and 27% respectively).

Also examined by the research were customers’ considerations when taking out a loan. In Europe the most commonly cited factor (named by 59%) was the ability to afford repayments. As such, 88% of customers report that they think very carefully before they borrow, while 86% never borrow more than they can repay without difficulty. This reflects IPF’s strong emphasis on providing credit responsibly to people who want to borrow small sums and repay in manageable, affordable amounts. Using its sophisticated credit risk management systems and credit bureaux, the company is committed to providing customers with loans at an affordable level.

Commenting on the survey results, Gerard Ryan, CEO of IPF, said: “It is encouraging to see our customers think very carefully before taking out a loan and this complements how we manage credit risk through robust application scoring systems, use of credit bureaux and powerful behavioural models.

“NBFIs are collectively playing a vital role in economies across Europe and beyond; providing access to finance for the underserved and those who find it difficult to borrow money from a traditional lender. It is striking that consumers recognise NBFIs play an important role in society by giving people ready access to responsible credit.”

Click here for a copy of the report.

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