NO ONE has a bank account in 20 per cent of Irish homes and charges introduced on current accounts by some banks could make the situation worse, a new study shows.
Research by the Economic and Social Research Institute (ESRI) shows 300,000 households in 2008 were excluded from basic banking services. This financial exclusion was almost three times higher than the average level in the 15 EU member states before enlargement in 2004.
People without access to bank accounts face difficulties paying bills, receiving earnings or welfare benefits and purchasing goods. They can pay more to make transactions, says the ESRI report Financial Exclusion and Over-Indebtedness in Irish Households.
The proportion of households without a bank account rose to: 52 per cent for those who were ill or disabled; 40 per cent among those with low educational qualifications; 34 per cent for those who were unemployed and 33 per cent for lone parents. Half of the households without a bank account say this is because they prefer to deal in cash. The report says this could reflect a general preference or having a low level of resources and a lack of confidence in dealing with banks.
Helen Russell, co-author of the report, said yesterday more up to date figures on financial exclusion are not available. She said the trend had reduced since the mid-1990s when half of households had no bank account. But she warned a recent decision to increase bank charges on current accounts could exacerbate the problem of financial exclusion.
She said the new minimum deposit conditions attached by Bank of Ireland to its free banking service “raised the bar for people” already at risk of exclusion. The move towards a cashless society could leave households without bank accounts at risk of increasing marginalisation, she added.
The report says a commitment to provide basic bank accounts to excluded groups was included as part of the State’s recapitalisation of the Irish banks in 2008.
“There is little evidence of progress on this commitment to date and it seems likely that increases in bank charges will exacerbate rather than reduce the problem,” it concludes.
Minister for Finance Brian Lenihan said recently “work is under way on a review of the options available to achieve greater financial inclusion – including the introduction of basic bank accounts by year end 2011”.
Bank of Ireland, which introduced tough conditions for free banking in February, said it “fully supported the advancement of financial inclusion”.
According to the report 56 per cent of Irish households had a credit card in 2008, above the European average. One in 20 Irish households were over-indebted in 2008, which meant they were in arrears on housing, rent or utility bill payments in the previous year.
One-quarter of over-indebted households were found to be “consistently poor” compared to 4 per cent among the rest of the population. Job loss, illness and drops in wages were common triggers of over-indebtedness.