Access Denied Part 1

ACCESS DENIED Low-income access to credit

PART 1

Coinneach Shanks (From the archives: circa 1998)

1

CHAPTER 1: Introduction............................................................................................. 3 1.0 Introduction.......................................................................................................... 3 1.1 Social justice ........................................................................................................ 3 1.2 Rights, fairness and justice .................................................................................. 4 1.3 What is “affordable”? .......................................................................................... 5 CHAPTER 2: History and development of the project. ..................................................... 6 2.0 Introduction.......................................................................................................... 6 2.1 The study approach .............................................................................................. 6 2.1 Outline structure of the study............................................................................... 8 3.0 Introduction........................................................................................................ 10 3.1 Credit Unions..................................................................................................... 10 3.2 Poverty ............................................................................................................... 11 3.3 The economic background................................................................................. 13 CHAPTER 4: The survey - Low income and lifestyle ...................................................... 15 4.0 Introduction and Focus ...................................................................................... 15 4.1 Characteristics of respondents ........................................................................... 16 4.2 Financial characteristics of survey respondents................................................. 17 4.3 Housing, satisfaction and mobility. ................................................................... 18 4.4 Consumption patterns: Household and personal transport ................................ 19 4.5 Health................................................................................................................. 19 4.6 Diet..................................................................................................................... 20 4.7 Education ........................................................................................................... 21 4.8 Clothing ............................................................................................................. 21 4.9 Leisure activities. ............................................................................................... 22 4.10 Critical observations .......................................................................................... 23 CHAPTER 5: Low income credit and finance .................................................................. 25 5.0 Introduction and Focus ...................................................................................... 25 5.1 Income and expenditure..................................................................................... 26 5.2 Knowledge of the system................................................................................... 28 5.3 Experience of the system ................................................................................... 28 5.4 The borrowing scenario: what, who and where? ............................................... 30 5.5 Who? Seeking advice from individuals and agencies........................................ 31 5.6 Policy. personal indebtedness and the state. ...................................................... 32 5.7 Opinion and world view .................................................................................... 34 5.8 The Credit Union ............................................................................................... 35 5.9 Local economic trading...................................................................................... 36 5.10 Critical observations .......................................................................................... 36

2

CHAPTER 1:

INTRODUCTION

We are seeking, in short, a specification of a just distribution, justly arrived at ... David Harvey. Social Justice and the City

1.0

Introduction

In the midst of the Celtic Tiger economy there continues to exist a hard and seemingly constant core of low-income families who are at risk of indebtedness. This publication examines the position of those who struggle for survival on benefit or low pay. As we draw closer to the year 2000, polarisation between economic groups continues to intensify. The widening gap between rich and poor represents a dynamic that distorts social relationships, peripheralises whole communities and excludes a substantial section of the population from the range of taken-for-granted opportunities. This publication addresses the financial situation of those citizens - for whom access to affordable credit is denied. So here we attempt to locate this sector and subject it to scrutiny. In this way we can identify affordable credit options that would ameliorate the constant economic struggle that effects those on low income. It is recognised that the Money Advice movement has raised the profile of the problem and that the Consumer Credit Act has addressed the legalities of loan sharking - the seemingly inevitable result of a large pool of potential clients living on or below subsistence level. However, the last two years has not seen a decline in the problem. An unpleasant picture emerges. Rent and utility arrears continue to rise and corporations now take a tougher line on evictions. Housing estates appear increasingly run-down and the inner city areas are marked by the fear of crime and increasing drug use. Many citizens go from one FAS course to another in an attempt to penetrate the labour market and resist isolation. In those rural areas warped by tourist-based economies, many citizens are forced to borrow through the winter and pay back through the summer, vacating their houses to make room for income-generating visitors.

1.1

Social justice

Within this troubled scenario, the study seeks to establish a social justice perspective. “Justice and fairness” in relation to income are vexed questions; in relation to lending even more so. Have citizens a fundamental right to credit? If they do, what shape should credit options take? If special low-income options are available, what system would guarantee “affordability”? The study therefore attempts to gauge the opinions of individuals on low income - both employed and unemployed - to establish what credit options would be both practical and acceptable. It is an a priori assumption for this study that new measures have to be sustainable. So this study looks closely at lifestyle. This is not an attempt to establish what social and economic arrangements represent subsistence or relative poverty. It is an attempt however to study the manner in which poor people live. And it should locate positions with which the reader can compare. Yet lived experience is seldom uniform. Many low-income families live within their means whilst others in a seemingly similar position are unable to contend with 3

difficulties. Money Advice and Budgeting Services workers observe this phenomenon every day. Social explanations emerge and become “fact”. There is a commonly held view that there is always a core of people unable to cope, who always default on loans. They always slip back no matter how much assistance is available. This is usually expressed as a percentage - 10% is a popular figure. The study will examine this question in an attempt to identify truth and mythology, fact and fiction, appearance and reality.

1.2

Rights, fairness and justice

The right to low income credit throws up the question of what “rights” mean in contemporary society. And the question of citizenship - a concept used constantly in the literature of European programmes - is not without controversy. In a vigorous analysis of citizenship and associated promises, Rees rightly connects the emergence of the concept of citizenship as being very closely connected with those on welfare benefits, identifying the concept of “social citizenship” which in turn he takes to be the access to and utilisation of a range of public services. He observes that political rights were a precursor to the establishment of social citizenship which itself culminated in the achievement of social rights. However he is keen to separate citizenship from rights. Citizenship is a shared status whereas rights provide for promotion of individual and group interests. Rights provide the key - and turning that key provides access to the building. Promoting access to affordable credit for low-income people offers that key to emergency funds, which is taken for granted by most citizens. We must emphasise that this is not at all an act of benevolence or kindness. We seek social justice for those on low income and hold that justice yields strict duties. We do not refer to acts of kindness that are a matter of individual conscience and choice.1 Essentially, we recoil from benevolence and stress that this should never provide the basis for the way the state supports its citizens. Fundamentally, we regard low-income families as justly making claims on the product of society, itself generated through social and economic co-operation from which they should not be excluded. For credit access however, we do acknowledge the position of traditional banking. This sector might argue that lending to those who may not be able to afford to repay at normal rates in essence diminishes the fruits of this cooperation. If social justice can be seen as the outcome of a society bound by its ethics, we may have to recognise that justice is compromised by sectional interests which have their own distinct ethics and a different idea of what justice and fairness means. The idea of fairness throws up the problem in a stronger light. Is it possible to enforce fairness in an unfair society? Is it possible to enforce justice in an unjust system? The very idea of social justice is regarded by many as political - in some parts of the world, people have paid with their lives through espousing it. And in a society whose cornerstone is private property can we force any individual or agency to lend or to transfer its property to another? These questions may not be resolved by this enquiry. But the issues are unlikely to go away - and so the formulation of problem and solution must be measured against this background. Neither do we accept the notion that research is value free. This project focuses on those with low incomes and seeks to identify with their problems, empathise with their position and to put forward solutions that will meet their needs. It is crucial that 1

Plant, Raymond, 1974, Community and Ideology: An essay in applied ideology, RKP, London

4

we also establish the low-income population’s capacity to respond to policy initiatives. In this way we can avoid top-down measures that fail to hit the mark, or are otherwise unsustainable. Before examination of affordability and credit, it is useful to set out the Commission of Social Justice2 hierarchy reported in The Justice Gap. We hope to test the information that has been collated against those basic tenets and to suggest mechanisms that will ensure that unjust inequalities are eliminated. • • • •

The foundation of a free society is the equal worth of all citizens Everyone is entitled, as a right of citizenship to be able to meet their basic needs The right to self-respect and personal autonomy demands the widest possible spread of opportunities. Not all inequalities are unjust, but unjust inequalities should be reduced and where possible eliminated

The information contained within this study demonstrates that we are falling far short of transforming these principles into reality for those on low income in Ireland. As this publication will clearly show, those on low income in Ireland are far from being able to meet their basic needs. Indeed, the survey of low-income citizens will demonstrate that this is a group whose self-respect is under constant attack. And it continues to be an irony that many low-income citizens preserve their self worth through actively seeking social justice for others. So in this publication we hope to advance some way towards the reduction of the marginalisation of ordinary people by ensuring access to the range of financial services that are generally taken for granted in this society. In this way, we hope to reduce the continual tension of living on a financial knife-edge and thus widen scope and opportunity for ordinary people.

1.3

What is “affordable”?

The concept of affordability is used throughout this study. It flows from the idea of social justice referred to above and stands here as a non-relativist version of “fairness”. In a situation where interest rates vary enormously this definition appears a little loose. It is therefore one of the aims of this study to more rigorously define what we mean by affordable. However, we know that the licensed moneylenders' rate is restricted to 39% flat rate3. Banks vary both depending on the type of loan and the institution but do not offer what this publication regards as an affordable rate. The credit union offers substantially lower rates with insurance protection included. Some EU states (like the UK) offer interest free loans to citizens on certain benefit levels. For the purposes of the study a preliminary definition may be adopted as “that which a citizen on benefit or low income can adequately afford to pay back within his/her income.”

2

Commission of Social Justice The Justice Gap, 1994 Credit Companies affiliated to the Consumer Credit Association are restricted to 39% flat rate (to which collection charges be added, however) . 3

5

CHAPTER 2: HISTORY AND DEVELOPMENT OF THE PROJECT. Classless society, social justice - no one believes in them any more. We are in the age of micro-narratives, the art of the fragment ... Paul Virilio. The Face no 61

2.0

Introduction

When the Credit and Debt Policy group approached the problem of credit availability, this represented a step away from the centrality of the Money Advice and Budgeting Service (MABS) movement. MABS vary across the country but tend from necessity to be dominated by a client-centred account. Those who have initiated education programmes both in the communities and in schools, find themselves - as with all client based services faced with rapidly lengthening queue. This begins to form a caseload, in turn bringing a tendency to concentrate only on those individuals who are in emergency situation. Again as with advice-based organisations, policy and strategic development suffer. As queues lengthen, cases are prioritised according to intensity. It then becomes more difficult to deal with preventative areas. Looking beyond the immediate crises becomes a luxury that hardpressed counselling and advice staff can ill afford. So the Group was eager to examine how this situation can be changed. How could the experience of money advice workers and other practitioners be distilled and routed towards prevention - both to prevent the lengthening of the queue and to create the conditions necessary for a general reduction in low income indebtedness?

2.1

The study approach

Building on findings of previous research the Group recognised that low-income access to credit options was limited and that this represented a significant element in increasing indebtedness. It has been shown for example (Shanks. Limerick4) that where there is no slack in an individual’s finances, that a single problem could pitch people into an indebtedness process - ill health, pregnancy, confirmation, communion, funeral expenses, etc. Here, manipulation of a range of credit options can become a way of life and a defining element in that person’s existence. This represented a fragment of the overall picture. The study ended by moving from depth qualitative analysis into broader areas, developing theories which had wider implications for those affected by marginalisation. The Credit and Debt Policy Group had also advanced the proposition that the availability of a range of affordable credit options would ameliorate the position of many households and bridge a gap that many find difficult to cross. It wished to see a fairer system of credit designed specifically for disadvantaged social groups; a system where people were not excluded for being unemployed or for being benefit dependent, for example. In this, the social justice perspective referred to in the previous chapter influenced the group. It appeared unjust that so many households were excluded from the banking system (the aptly termed “unbanked”) merely because of low income, whilst others were constantly offered a range of credit options that would help them spread costs of unexpected expenditure.

4

Shanks, K. Living in Debt in Limerick. ibid.

6

There are two polar opposites. Those with a wage, bank account, and mortgage, are continually pressured to borrow for a wide range of luxury goods. “Why wait?” is the familiar message of the bank advertising. Even those with only a current account at least have the luxury of going that little bit overdrawn. Often, the worst thing that can happen if an account gets “out of hand” is that the bank will offer to convert the overdraft to a loan. This results in a cheaper rate of interest compared to an overdraft. At the other end of the spectrum, low-income households - particularly those located in disadvantaged areas - have no bank account and are forced to seek emergency funds from wherever possible. For those households the only sources of borrowing are as follows. • • • •

The local credit union, where savings are necessary to mobilise borrowing A range of legal and illegal moneylenders who ask fewer questions and deliver funds immediately. Family and friends who may “tide expenses over” from one week to the next. Shopping catalogues, where higher prices mask interest free conditions.

The group therefore sought to take a multi-dimensional case study approach that would look at a number of localities with differing characteristics and examine available credit options for low-income household in those areas. A series of policy interviews would give this context and an examination of European and international strategies would allow for an assessment of both good practice and potential pitfalls. It was decided at a later stage to supplement this with an interview survey that related to the case study areas. A questionnaire was therefore developed which would address both household borrowing and current lifestyle of interviewees. Lifestyle was a critical component in the construction of the questionnaire in that it would allow for grounding of information. It would additionally assist in determining important elements in the process that leads to indebtedness marginalisation and isolation. But the most important part of the questionnaire was an attempt to gauge the acceptability of alternatives to current credit. Thus the household survey emerges as the central part of the research project. It allows for the low-income families to speak for themselves, to comment on their current lifestyle and to express opinions on alternative credit options. It should be noted that household data collection constituted a direct incursion into sensitive areas of the lives of individuals. There were very few areas that the questionnaire did not examine. Additionally the questionnaire itself constituted a deep financial probe that demanded thoroughness and sensitivity from interviewers. Specific questions provided a check on data consistency. The final shape of the project is as follows: • • • •

A 100-interview survey of low-income families - 25 in each case study area. Unstructured material from interviews was also subjected to a key issue analysis. An examination of Money Advice and Credit Union experience in relation to low income borrowing in each case study area. An examination of European and relevant international experience Key informant interviews at the policy level with league of Credit Union, Banks, Department of Social welfare, Consumer affairs. 7

The interview survey should not however be seen as representative of the general position. It specifically addresses low-income families in the case study areas. Here, we see the case study as being indicative of the situation for that group - rather than representative of all low-income groups across the country. It forms the basic skeleton on which most of the information “hangs” and its strength lies in its connection to the multi-dimensionality of the research. In this way we emerge from the study with a clear idea of what lack of credit access means for whole communities in Ireland. Thus it was envisaged that policy recommendations would address a system where marginalisation was taking place. They would attempt to engage with the dynamic of marginalisation and offer measures that would reduce further economic drift of households into indebtedness.

2.1

Outline structure of the study

1. The study begins by looking at the position of those without bank accounts and who have difficulty in making ends meet. It goes on to examine the range of credit options currently for low income groups elsewhere. In particular it looks where the nation state intervenes to offer low-income credit to citizens. The study pays particular attention to those initiatives where social lending attempts to address the problems at the community level by boosting local employment through provision of housing and other facilities. Additionally it examines those cases where social investment encourages small business development in an attempt to keep money circulating in the local economy. 2. We continue by outlining the key findings of the interview survey, firstly by examining the way in which low income people live. This chapter looks at the way in which low income and indebtedness restricts mobility, prevents home improvement. It looks at the difficulties in areas where universal benefits exist - the areas of health and education. Finally it looks at leisure opportunities and restrictions on personal development and socialising. 3. The second part of survey information deals with household income and expenditure, attempting to see where shortfall lies. It looks at credit commitments and traces disposable income (if any). It locates those with bank accounts or those who held such accounts and attempts to establish the experience of “banked and unbanked ”low income residents in our case study areas. It also tries to place a figure on the income that families feel they need to survive. This section attempts to ascertain what credit arrangements would be either useful or acceptable to households. It looks at attitudes to money, unemployment and poverty, measuring against commonly held points of view and tries to assess what reasons might prevent citizens from using their local Credit Union. 4. We go on to look at the case study areas themselves. These localities are examined on their own terms. Interviews with Money Advice and with local Credit Unions provide a Money Advice and Credit Union point-of-view of the current situation, local difficulties and perspectives. We have used not only policy reports that focus on particular areas, but press coverage of policy statements and on the areas themselves. It is intended that this should give the reader a flavour of the area. In certain cases it would reveal the process of stigmatisation with which communities live. The case study areas are as follows:

8

Letterfrack (NW Connemara): Rural village cluster Moyross (Limerick) Urban provincial- peripheral estate The Lough/Togher (Cork) Urban inner city Inner-north Dublin (Markets area) Urban inner city Outer Dublin - Ballymun - Urban peripheral estate

5. An analysis of case study information compares and contrasts operational practice of money advice and credit unions. It attempts to locate best practice in social lending in terms of access, availability. environment, etc 6. This chapter looks at social lending in Ireland and Europe, focusing primarily on credit unions and credit banks. In an exploration of the origins and principles of social lending, the study locates problems and pitfalls of low-income loan provision. Ireland, Netherlands, Germany and France are featured in this chapter. Additionally, this section looks at community development credit unions in the United States that offer an alternative to traditional credit union operation. 7. Here, the study goes on to examine key examples of international practice in alternative banking. It outlines the experience and outcomes of successful initiatives that cut against the grain of mainstream economics and features US, Spanish and Irish examples. 8. The study tracks the experience of the social fund of the UK and examines the underlying principles, which undermined the effectiveness of its operations. It ends by assessing the implications of introducing welfare loans in Ireland. 9. The study looks at policy perspectives in four key agencies with impact on credit systems in Ireland. • • • •

Dept of Social Welfare League of Credit Unions Dept of Consumer Affairs Irish Banks’ Information Service

10. The final chapter consolidates the material to offer a rounded account of the overall position. This chapter will deal closely with the sustainability of suggested alternatives for low-income credit. It concludes with perspectives, policy options and recommendations concerning credit availability. It will suggest various means of redressing the balance for marginalised families by suggesting different arrangement for obtaining and repaying borrowed sums of money. It will closely examine the centrality of the Credit Union system and identify possibilities for Credit Union development designed not only to assist lowincome families but also improve the communities in which they live. Finally, it will attempt to engage with the concept of community value as distinct from money and capital.

9

CHAPTER 3: BACKGROUND TO THE STUDY The background reveals the true being and state of being of the man or thing.. Juan Ramуn Jimйnez.

3.0

Introduction

The scope of this chapter is wide, in an attempt to bring several distinct areas together as a totality. Thus here we aim to be holistic in approach. Just as it is unlikely that a single measure will remedy a complex system, there is little point in examining credit without considering economic background, predisposition to credit as a prime dynamic within western capitalist economies and cultural factors such as inter-generational unemployment. It could now be said that citizens are coerced into maintaining high levels of credit; further, that the economic system depends on this kind of money circulation. For some activities it is now fairly difficult to operate without a credit card. Developments in this area may ultimately disenfranchise whole sections of communities, not only excluding those outside the system but also rendering them extremely visible through their lack. Thus the gap between the have and the have-nots may in the end be represented by (non) possession of plastic card. We may be forced to acknowledge that processes beyond the control of the individuals represented in these pages, produce unemployment and poverty. Marginalisation and social exclusion are the inevitable consequence of these processes for those engaged in the difficult task of eking out a daily existence for themselves and their families. It is also an a priori of this study that the poor are forced to seek credit from a wide range of sources. Lack of capital forces low-income citizens to seek out and use credit as a way of life. In so doing they have to rely - not on the banks from which they are generally excluded - but on family and friends, local shops and moneylenders. Additionally they are forced to rely on special associations such as the Credit Union which itself represents a type of cash pooling. It is also recognises that those complex mechanisms of managing credit emerge and that these are based on expediency and immediacy rather than long-term sustainability.

3.1

Credit Unions

Credit Unions take centre stage in this chapter and others. Quite simply, for many communities the Credit Union represents the only institution where saving and borrowing can occur in a bank-like manner. Yet as this study shows, the Credit Union is at the same time much more and much less than a bank. The Credit Union is an institution that will use a set of social criteria in agreeing a loan. Its local offices provide community information and services. At the same time, it does not and may not offer the full range of banking services available from a traditional bank. It has been described as the poor people’s bank and although there is an element of truth here, it fails to adequately describe the nature of the Credit Union movement. The Credit Union aims to be non-exclusive. Anyone may join as long as they fulfil qualifications based on locality or industry (The Common Bond). There are therefore many 10

well-off members of the Credit Union. To that extent the Credit Union socialises savings, making them available to a wide range of income groups. We could perhaps regard it as a "redistributor" of credit opportunities. Nevertheless the Credit Union has proved unsuccessful in combating the criticism that it fails to adequately invest in social projects. As we will see from our analysis of community development investment elsewhere, Credit Unions can and do promote socially valuable, ethical investment which has a real effect on localities.

3.2

Poverty

The study demands some orientation to poverty itself. It is a concept that continues to create controversy, particularly in terms of welfare benefit levels and the debate seems endless. Setting of poverty lines may be a necessary part of defining the problem. Yet our main concern here is not to over-extend that debate but to make it manageable. We note the tendency to identify poverty with places - estates, localities even cities and countries. Where the local state resorts to allocating individuals to certain estates on the basis of social characteristics (say criminality), this can find its own distorted reality in the emergence of so-called “sink” or “dump” estates. At state level, this can be a determining factor in red-lining, the process by which people living in certain localities are denied resources available to others; refusal of credit facilities in particular. The Credit Union being locality or industry-based attempts to avoid this problem. Yet there is an indication that increasing delinquent accounts have exerted pressure on Credit Unions to such an extent that they regard certain areas with suspicion. The concepts of marginalisation or social exclusion may offer more useful tools. Yet it is likely that these suffer the same reduction. This is the reason for selection of a range of case studies based on characteristics of several places. The idea of social exclusion is said to be more dynamic yet the response is still directed at areas of social disadvantage5. However it does allow us to focus on individuals, families and their circumstances where “place” is an important element within a complex array of factors. So here we look at lowincome households in differing localities and communities. This is an approach that recognises that those receiving low wages may be at a disadvantage compared to those on benefit. This “poverty trap” has been well documented elsewhere - the wage rise that excludes the individual from some benefits coupled with a move to a different tax threshold can mean a family is worse-off. This provides a disincentive to many to actively seek employment. Those who opt to maintain on benefit are often regarded as scroungers, a characterisation which fails to acknowledge the logic of income maximisation for a household. This characterisation remains however and certainly a proportion of interviewees in this study was not immune from this particular “take” on society. The National Anti Poverty Strategy (NAPS)6 describes disadvantage as affecting every area of Ireland. It mentions in particular “the concentration of poverty in decaying inner city 5

Combating social exclusion in Ireland: A midway report. 1990-94. The concept of disadvantaged communities again resolves poverty as a place. To a certain extent this ignores the combination of local, national and global factors that give rise to poverty or disadvantage. Exclusion here tends to be resolved as national policy in education or employment. 6 Combat Poverty Agency, National Anti Poverty Strategy, 1997.

11

areas, large public housing estates on the periphery of cities and towns and in underdeveloped rural areas. In these areas, people suffer cumulative disadvantage.” The NAPS defines poverty in the following manner: People are living in poverty if their income and resources (material, cultural and social) are so inadequate as to preclude them from having a standard of living that is regarded as acceptable by Irish society generally.

The continuing existence of poverty is a matter of widening concern. In an address to the Simon Community’s 20th national conference7, the Governor of Mountjoy Prison made an unexpected contribution that focussed on the causes of crime. Citing the work of Paul O’Mahoney8, John Lonergan claims that fundamental inequities in the distribution of economic resources create the majority of the prison population. More than half of Mountjoy Prison’s population originates in “pockets” of 6 postal districts in Dublin, an astonishing figure given that Mountjoy serves as a committal prison for 19 counties other than Dublin. A total of 80% of the prison population left school before the age of 16 and nearly nine tenths were unemployed immediately prior to committal. In an appeal for state intervention to eliminate disadvantaged localities and to address the needs of those on low income, Lonergan describes the poor as the last, the least and the lost as far as the Irish economy is concerned. 9 In asking for a long-term strategy to reduce the gap between the rich and the poor, he touches on many issues at the heart of this study. Hugh Frazer has drawn attention to these factors in a paper for the National and Economic Development Forum10, whilst focussing on income. Believing that the existing system for calculating welfare benefit levels has proved inadequate, he examines current income maintenance. There is an urgent need to intensify actions to combat poverty and to develop a more comprehensive, integrated and sustained anti poverty programme to address this fundamental challenge to Irish society. However, in spite of a range of improvements in recent years, current income maintenance strategies are not making a sufficient contribution.

Frazer’s point coincides with the thrust of this study. Whilst current strategies can assist in alleviating hardship, they do not lift people out of poverty. Often they act to do just the opposite by trapping people into inadequate lifestyles. They provide an inadequate income on condition they do nothing. At the same time social and economic change makes “doing nothing” quite difficult. Indeed, the possibility of doing anything is restricted - education, looking for a job or moving to another area is denied by inadequate income. The increasing speed of speed of technological change also means that in relative terms, the poor become further isolated. The old judgemental view that the poor should not even think about owning a television set has changed11. But now increasing ownership and use 7

Lonergan, J., Poverty and Crime in Irish Society. Simon Newsletter, November, 1997 O’Mahoney P., Mountjoy Prisoners: a Sociological and Criminological profile, 1997 9 Mr Lonergan states: It is ironic that we in Ireland like to talk about what caring people we are, what generous people we are. I cannot find as much compassion as would lick a stamp. 10 Frazer, H., Poverty and income maintenance strategies: An introductory paper for the National Economic and Social Forum 11 Although diminished, the notion that “luxuries” should not be countenanced continues to have credence. Anecdotal evidence gathered in this study suggests that some grant-giving committees continue to hold to this view. 8

12

of personal computers is further marginalising those who are in no position to buy them. At the same time, technological requirements for employment lead to further exclusion. Lack of skill training restricts those on low income to a shrinking pool of employment opportunities - ensuring that the poor remain poor. Psychological considerations must also be considered. By doing nothing, nothing can result and the social stress of this position renders whole communities atomised and impotent. The Minister of Social Welfare12 has stated that although the primary responsibility of the department is the provision of cash payments to those in need in an effective manner, that the system must evolve in such a way as to facilitate full participation by recipients in economic and social life. The results of this study suggest that evolution is a distant prospect indeed. This leads us to consider the manner of programme implementation. Raising the income of the poor does not necessarily provide a solution unless it is delivered in such a way that communities can “capture and hold” any resulting advantage. This study therefore aims to present a multi dimensional picture of low-income communities in the hope of producing a multi dimensional solution. We otherwise run the risk of suggesting that widening credit options for low-income citizens can change rather than merely alleviate their situation. In the chapters that follow, the study attempts to determine the context of money advice and credit unions against the background of social and economic change in low-income localities. It goes on to examine options in the knowledge that changes in income and tax thresholds will not alone suffice to redress social imbalances. To reverse the degeneration of many low-income communities requires a fundamentally different and inclusive approach; one which also demands a consideration of the economic potential of such areas.

3.3

The economic background

It is instructive to briefly examine the current state of the economy since naturally this has an impact on monies available for lending. Money and credit growth have been a matter of concern to the Central Bank13 for some time. The bank feels that the pattern of credit growth has been largely demand driven, without funding constraint and that this is likely to continue for the foreseeable future. Despite the bank’s view that willingness to incur debt may be governed by ability to meet payments, it does note that overall indebtedness is increasing in relation to income. Although the bad debt experience of Irish credit institutions has recently been favourable, a fall-off in economic growth would make for deterioration in credit quality and tightening of credit standards. The necessity of price stability as a European requirement will bring tighter monetary conditions that could in turn limit the ability of government and lending institutions to respond to low-income citizens. Unemployment too, presents a problematic area. Although the rate of unemployment has been dropping, net inward migration has been slowing the rate of decrease. And although unemployment is expected to drop, prospects of an immediate reduction seem likely to be curtailed. However a recent Labour Force Survey shows that employment itself has risen by 46,000 or 3.7%. The services sector has been the main engine of employment growth 12

13

Minister of social welfare, Poverty and Income Maintenance. Position paper for NESE, 17th January 1997. Central Bank of Ireland Earrach. Spring. 1997

13

representing a growth in female employment and full time jobs. Conversely, predominantly female part-time employment has dropped - a problem area for the low-income lone parents represented in the study. Additionally and importantly, the Central Bank states that there has been little change in numbers of Long Term Unemployed (LTU) - a social group that is heavily represented here. The persistence of long-term unemployment at a time of record employment growth, underlines the degree of structural problems that still exist in the labour market. Claimants on the live register fell to an all time low in Jan 1997. The Unemployment Rate is likely to fall by 11.5%. Labour Force Survey

Nevertheless, consumer spending grew strongly in 1996 representing a significant growth in disposable income and retail spending is continuing to rise. Perhaps paradoxically considering this study, as money supply grew in 1996, there was a general increase in monies held in current accounts and deposit balances. Small savings contributed Ј59 million to the Irish Pound in the last quarter of 1996, whilst saving certificates grew by Ј33 million. Bonds grew by Ј49 million. Given the thrust of this study it is perhaps surprising that for the whole of last year, small savings contributed Ј322 million - an increase of 25 million over the previous year. However, it is clear that this sum may depend on part on the high proportion of the population saving through Credit Union membership

14

CHAPTER 4: THE SURVEY - LOW INCOME AND LIFESTYLE Life is little more than a loan shark. It exacts a very high rate of interest for the few pleasures it concedes. Luigi Pirandello. The Pleasure of Honesty

4.0

Introduction and Focus

Whereas previous studies have concentrated on those with severe indebtedness problems, we now broaden the focus to a larger group - whose members might or might not be in employment. Our guideline here was low income, whether benefit or low wage determined. Unemployment however remains a vital factor. As Living in Debt in Limerick14 revealed, those suffering from debt problems tend to suffer increasing isolation. As indebted people burrow into their home, they build a wall against a hostile outside world. Unemployment intensifies this process - or at least provides the conditions necessary for people to hide in a self-imposed darkness. This is why recent EU anti-unemployment measures have directed their attention to problems described as “upstream of unemployment”. It recognises that pre-existing conditions will prevent people from finding and sustaining employment. So the aim of this study is compatible with an “upstream provision” approach - examining an extended range of affordable credit options that offers those on low income some room for manoeuvre. For example, obtaining work can mean incurring extra short-run expenses for which there is no economic provision in the household. Thus the stress of living continually without “economic slack” can actively militate against ever seeking employment. We are also forced to recognise an issue that has important implications for the conduct of the study. The problem of exclusion, isolation or marginalisation impacts on any survey of those living on low income, in that possible respondents are hidden. We could not merely sample those referred to a Money Advice and Budgeting Service for example. In fact, we wanted to avoid an exclusive use of money advice services for several reasons. Working within advice services tends to present a distorting lens through which people are viewed as “clients” or “cases”. For those who work exclusively with such a group it is easy to begin to think that those referred reflect the whole picture. In any case, those presenting at Money Advice and Budgeting Services constitute those who either through selfrecognition or identification by an agency are in crisis. Extending this social work analogy, we wanted also to look at those at risk. However, crisis at least levers people into visibility whilst those at risk are more difficult to pinpoint. This made the task of selecting interviewees more difficult than is normally the case. In this study we set out to build a profile of those who might be in need of credit, bridging social groups distinguished by employment or unemployment. Without the luxury of using advice agency referrals, a suitable structure of interviewees therefore took longer to establish. The first part of the survey questionnaire dealt with “life style”. We wanted to establish a more rounded picture of living with low income. Did it for example, bind people into a life of restriction, of hand-me-downs and bargain basements - of generally the second best? In seeking for social justice we wanted to identify missing elements that are otherwise 14

Shanks, K. Living in Debt in Limerick. PAUL Partnership, Limerick

15

expected or in place for most families. This is not merely a case of comparing two points on a scale. It is recognition that those on low income have a predetermined expectation of what general consumption patterns are being followed. Thus they are not merely excluded, but live continually with the feeling of exclusion. So we were anxious firstly about “stuckness” - the state of restriction, which limits movement in residence, employment, or education. People who continually borrow without the income to repay on time, sink into career debt. Their life is determined by coping or managing rather than by transformation. They eke out an existence of making-do. Constant financial pressure leads to incapacity to develop or to consider new options. Hence this chapter deals with housing, consumer durables, health and diet and leisure activities. We want to paint a picture of a group - a picture with which we can all identify and compare. The following chapter will go on to identify income and expenditure and the capacity to use new credit new options. It will attempt to ground that within an emerging worldview - the worldview of the person on low income. In doing this we wish again to address a myth that continues to prevail: the myth of the feckless scrounger who has no intention of working, who waits hand outstretched for the next benefit about whom nothing can ever be done. We will however present the opposite. The low-income person who might be indebted or at least live with that prospect, but wants nothing more than to get straight and to be part of the mainstream society she knows or thinks exists.

4.1

Characteristics of respondents

A major task of the survey was to achieve a blend between individual responses and family information, believing that it is the family unit that is affected by low income rather than a single family member. Consequently we would have preferred to interview most people in their homes but logistics led us to interview most respondents in community facilities. The Limerick study15 also led us to believe that in general, women take the lead in household finances. So it was to be expected that the number of female respondents would outnumber male contributors. In this study, women comprise nearly four fifths of informants at 78% of the total interviewed. The survey achieved a broad age spread. Those under 25 years of age constituted 14% of respondents whilst 40% of respondents were between 26 and 35 years old. There were 29% between 36 and 45 years. There were 12% between 46 and 55 years. There were 17% who were 56 or over, guaranteeing us information on those who were reaching or were of retirement age. We also wanted to ensure a range of those with different domestic arrangements. In fact, a total of 30% of the group were married, nearly two fifths of respondents were single and more than one fifth were separated. Regardless of marital status, nearly half of all respondents (43%) were living as lone parent families. More than two thirds of respondents had child care responsibility of some sort - either directly or as part of family and extended family relationships. Large families however were not in evidence. Only one third had four or more children and 15% of respondents had no children.

15

Shanks, K. Living in Debt in Limerick. PAUL Partnership, Limerick

16

Only 10 % of our respondents were employed full time. A further 10% were employed part-time. Employment status presented us with the choice of separating FAS and Community Employment schemes from permanent or semi-permanent employment. This is not so simple as it first appears. Despite their limited duration, participants quite rightly regard these schemes as employment and any extra money they receive as wages. As one such respondent pointed out: Loans are only possible to get if you have a job ... I have work on a scheme but I am going to be jobless at the end of the year.

For many citizens, regular participation in FAS and Community Enterprise schemes is a vital part of economic survival. So the total of 42% of respondents who were working on employment schemes is quite striking. There was some regional variation, however. Three quarters of Inner Dublin North respondents were participating in such schemes compared to one quarter in Connemara. Evidence had suggested that this might be more typical of Connemara. However the date of interview may have influenced results in that FAS schemes had not yet started when Connemara respondents were interviewed. As one interviewer commented. “People up here are just hanging on waiting for FAS courses to start.”

4.2

Financial characteristics of survey respondents.

Since the aim of the study was to locate a range of families typical of low-income groups it was interesting that more than two thirds (70%) of respondents were members of the Credit Union. Ireland is distinguished in that it has the second highest per capita membership in the world16 so this high membership figure remains surprising. A view exists that Credit Union membership is distrusted in certain quarters for reasons that will later be explored. Yet here we have a picture where the Credit Union is the low-income bank - only one third of our respondents had a bank account in the traditional sector. A range of basic attitudes also existed concerning credit. Whilst more than two thirds of respondents had existing credit at the time of interview (with commitments of between Ј11 and Ј40 per week), nearly one third said that they did not agree with credit - on principle. This core of respondents took great pride in not getting into debt. I don’t consider myself very good with money but I make sure things are paid. And my parents were exactly the same.

However a total of 40% felt that whether they agreed with it or not, they didn’t have much choice but to use credit of some kind. Experience of general borrowing was therefore considerable and utilisation of money lending facilities - whether legal or illegal - was common. More than one third of all respondents had borrowed from a moneylender at some time and more than a quarter had current credit facilities with a local trader.

16

The Dominican Republic has proportionally the largest membership in the world. It is however compulsory for all citizens.

17

4.3

Housing, satisfaction and mobility.

The typical respondent was living in a “standard” family house. More than two thirds of respondents (68%) were living in a house with around one quarter in a flat or maisonette. Nearly two thirds of respondents were living in houses with 5 rooms or more. A few lived in mobile homes or temporary accommodation - all of these in Connemara. One third of respondents were owner-occupiers with more than half (54%) in Corporation-rented accommodation. A further 11% were living in privately rented accommodation. Given the spatial characteristics of our case study areas it was expected that flat-dwellers would be restricted to the Dublin case studies. More than half of Dublin respondents lived in flats. Only one third felt that their housing was fine for their requirements. A total of 11% felt they were overcrowded and a quarter said they would like something else When asked if their current housing was improvable, nearly two fifths (19%) said they like to have more space and nearly half of all respondents (46%) said that they would consider taking a borrowing to improve - i.e. to extend their living accommodation. It would be fair to observe that most respondents felt a bit cramped. There appeared to be a general dissatisfaction with housing standards. Those in Ballymun, for example, commented on design problems that raised their living costs. Where back boilers were situated in a room other than the main living area, this required maintaining two coal fires on a daily basis. Most respondents were happy with their area - i.e. the locality in which they lived - with two thirds saying they were either satisfied or fairly satisfied. More than a fifth were unhappy with 11% saying they just didn’t like the area and a further 11% saying they “hated it”. We wanted to ground that information so we sought reasons for liking or disliking localities. Asked about the worst thing in their area, crime and drugs comprised the largest single category at 30% of total respondents. “Other people” however comprised a large category with 18% referring to gangs or those neighbours whom they considered “rough”. One tenth of respondents could find nothing bad to say about their area. When asked to name what was best about the locality, around one quarter referred to the quiet nature of their area or environment and a further fifth liked their location. This was not always Connemara but often outer suburbs. Here, proximity and access to the countryside played a part. When asked if they would like to move however, there is a clear split in respondent opinion. Nearly half (43%) would like to move away - mostly to a different locality in the same town but often to a quite different environment.. I would like to move away to somewhere by the sea - away from the flats and the built-in areas. It would be a lot healthier..

Others would prefer to be near family and several wanted to move abroad, feeling that opportunities were limited and that some other countries presented wider options. I would like to emigrate to a different country to give the children a better start. The would be better opportunity and a better environment.

We posed the question more specifically - i.e. what would you do if you had to move - or were in a position where moving was a necessity? This could be something as crucial as taking a new job in a different city, for example. But nearly half of respondents (45%) were 18

quite adamant - they felt they hadn’t a hope of being able to move or that they just couldn’t afford it. As a female respondent commented. I can’t afford moving at the minute. I’d like a mortgage but anyway ... The Credit Union don’t give mortgages..

Only one quarter (23%) said that they would try to borrow to facilitate a move. This is a clear indication of the restrictions of living on a low income. There are no savings available to smooth the path of a necessary change and the very limited scope for credit could militate against social improvement. Again in Ballymun, a young heroin addict wished to move away from a social network based on drug culture but was forced to remain because of rent arrears. She was stuck. Her limited creditworthiness limited her options and ensured that her problems would continue.

4.4

Consumption patterns: Household and personal transport

It was expected that interviewees as a group would have low car ownership and apart from Connemara this turned out to be the case. However, nearly one third of informants (32%) had bought a car or motorbike at some stage. Only a third of those respondents had paid cash. A further third (9% of all respondents) borrowed from the Credit Union. Loans from bank or building society or those arranged through the trade outlet accounted for most of the remainder. As always, family and friends were represented with 5% of respondents borrowing informally. More than half of all respondents had borrowed to purchase a television, the majority arranging this through retail establishments, usually the ESB. This was similar concerning washing machines with 28% of respondents arranging credit through retail outlets. Credit Union use for such borrowing was present but low running at 4% to 5% of respondents. This is in all likelihood due to the ease of making repayments through the regular ESB billing system. The ESB is held to have a positive or at least flexible attitude to this kind of low-income borrowing. There was an additional scattering of borrowing for larger items like new kitchens or new windows - usually financed through the Credit Union, but in low numbers (5% of all respondents). Nearly two thirds of respondents said that they needed things - things that they felt they could not, or should not be without in the house. Although this was on occasions something as substantial as central heating, it was more often small items like a bedside lamp.

4.5

Health

There were health difficulties in more than half of respondents’ households. These were problems typical of low income and indebted households. Respiratory problems were present in 18% of households and anxiety or depression in 10%. A further 6% had skin problems like eczema. A total of 40% were going to the doctors or hospital on a regular basis and a further 20% on an occasional basis. More than one third of respondents were taking medication, one third of which were antidepressants. The majority of respondents however (78%) had a medical card and many interviewees took the opportunity to comment that it was the most valuable benefit they possessed. Those having to pay for medication (20%) were meeting with financial pressure, although only one respondent said that it stopped them going to the doctor. A total of 14 % of all respondents specifically mentioned an adverse effect on household budgeting due to medical costs. Only one person 19

had VHI membership that he found a severe financial strain. One third of respondents had at some time been forced to borrow money for medication, nearly all from family, neighbours or friends. But when respondents were asked if they would borrow for medication in the future, more than two thirds said that they would if it was necessary. Similarly, family and friends dominated the category of possible creditors. However, more than half of all respondents mentioned the Credit Union as a possible source of finance.

4.6

Diet

Diet was considered to be of crucial importance for this part of the project. Several money advisers had mentioned attempts to overcome indebtedness problems through cutting back - at the same time compromising the family diet. So the survey examined the eating patterns for each of the 100 respondents’ families. The vast majority (81%) felt they had a healthy diet. A total of 18% felt that they did not because the food was too expensive or that they did not have the time or the skills for the complex cooking that low budgets demanded. Most respondents indicated that they ate meat or poultry nearly every day - excluding meat products like sausages and burgers. The latter were consumed daily by only 4% of respondents. Nearly two thirds were eating vegetables every day. However more than a fifth never ate salad and 10% never had fruit. Several key informants expressed the view that many low-income people unnecessarily consumed take-away food - which they deemed to be both an unnecessary expense and a potentially unhealthy alternative. Slightly over half did consume convenience food once or twice during the week. But even given the need for those carrying out the cooking in the house to have a break, 40% of respondents never bought this kind of food. Although the patterns of food consumption did not give cause for alarm, respondents felt generally that if they could, they would have change the way they ate. Nearly two thirds (61%) of all respondents would introduce variation in their diet if they could afford to spend more. Previous research indicates that those on low income borrowed towards the end of the week, paying back to relatives and friends at the beginning of the next17. This survey tends to substantiate this. More than half had at some time borrowed to buy food from family, friends or neighbours - although 10% used “tick” at the local shop. There was a general spread of Credit Union, Provident cheque and money lending borrowing for food. Most indicative however is the number of respondents who envisaged they might at some time need to borrow. Three quarters of respondents who had never borrowed for food said that they would if it became necessary. People did not however appear to be restricted to local shops as heavily as has been envisaged. Certainly most would take advantage of cheaper prices in large supermarkets if it were possible. Those who did use local shops exclusively felt that this was fine or “OK for what it was”, although it was more generally more expensive. Local shops are more likely to offer credit, whether they will defer payments from week to week or offer to place items on a “slate”. We must remember that apart from Connemara and Moyross, Limerick, most case study areas offered reasonable access to supermarket chains. This will be examined a little further in the case studies themselves.

17

We are referring to “fiscal” weeks here. “Pay-day” is generally Thursday or Friday..

20

4.7

Education

Evidence had suggested that education costs presented enormous problems for those on low income. Difficulties in providing for book acquisition (despite availability of small grants) and for the everyday expenses of material provision for craft classes, school trips and functions - even school photographs - can cause anxiety to the low income family whose budget is stretched to the limit. Of those with children at school, 82% had difficulty meeting education expenses. Books and stationary for school children constituted the greatest difficulty, followed closely by school uniform expenses. A total of 72% had been asked by their children for school expenses that they could not give them. More than three quarters in this category had had to give up something to finance school expenses, mainly social activities. It is important to note that more than half (53%) financed school expenses by not paying other bills or not buying food and clothing. More than one third gave up any leisure activity they might have. As we will see from the section on leisure - there was not much leeway to be gained from this strategy. There are too many school expenses. Five pound for a book! It shouldn’t be allowed. Then the kids want all the “in” things (and can’t have them). The kids get fed up and then I get fed up.

It was inability to meet education expenses for children that caused the most anxiety. More than a third of those with school age children felt anger, annoyance or frustration. However the largest category here represents a passive response induced by an inability to resolve the problem. Nearly half felt feelings of guilt, inadequacy or embarrassment. “It makes me feel small.”, was a common reaction. The most poignant response came from three mothers who said “Well. We just have to accept it, don’t we?” It is therefore unsurprising that nearly half of this group had borrowed to meet school expenses at some time, predominantly from family or friends. Of those who had not borrowed, 82% would borrow if necessary - including use of moneylenders. “... I would never let my kids think I was short of money!” stated a female respondent.

4.8

Clothing

The old adage that the poor pay twice is no more evident than in relation to clothing. Here, spending a little more for clothes or shoes is more likely to guarantee a more durable item that has a longer life span. Those who cannot afford the appropriate quality are restricted to poorer quality clothes that wear out quickly and have to be replaced. Asked to say where they shopped for clothes, most respondents were using budget chain stores and found it generally adequate. Nearly one fifth stuck to charity or second hand shops. Few were able to say that they shopped “anywhere” and mentioned looking around the range of High Street shops. Only 7% were accessing this wider range. More than 10% of respondents said that they would prefer more choice and a similar number criticised the quality of the clothing they could afford to purchase. A striking 54% - more than half of all respondents felt that their clothing for winter and summer was inadequate. In particular adult coats and jackets constituted the most difficulty, followed closely by shoes and boots. A total of 17% of all respondents felt that they had inadequate provision in all categories generally. A respondent observes 21

I can’t afford clothes, Frankly, I am only able to buy clothes by not paying the bills for weeks and weeks.

It’s a bleak picture of restriction and lack of choice. It is also indicative of a factor that has enormous visibility. If people are in any way measured by what they wear, this must be one of most obvious determinants of a person’s worth. Conversely, can one feel at one’s best in a presentation to the world dressed in budget clothing that rapidly deteriorates? It is important to recognise the implications for the “self worth” of citizens - and by extension, the damage to presentation of self in a world in which consumption patterns and appearance are ever more important.

4.9

Leisure activities.

This section is perhaps the most revealing in terms of the isolation or restriction of lowincome families. In the six months before interview, 58 % had never been to the cinema, theatre, dance or disco. More than two thirds had never been to a sporting event or leisure centre and nearly three quarters had never been to a social event. Importantly, more than one third of all respondents (37%) said that they seldom or never visited the pub. Again we have to take into account a moral argument that says people should forsake alcohol consumption in favour of priority spending. But we also have to recognise that the pub is a key cultural location in leisure activity. It is not merely drinking that takes place in pubs but socialising, discussion and collective consumption of music and live sporting events. It is also a focus for younger adults meeting - often in groups - as a precursor to male-female relationships. This lack in people’s lives is singularly exclusive and should be addressed seriously. The fraught question of leisure remains. Whilst respondents legitimise borrowing for children it is far from easy to admit borrowing for anything that might be conceived of as being for fun. However, a small proportion had indeed borrowed for leisure - a little over one quarter of all respondents - but they had borrowed almost exclusively from family and friends. A further 14% would consider doing so. Again, although borrowing for leisure suggests “lack of priority” we must unless we acknowledge the feelings of those who want to have a “normal” existence and concede the loss of opportunity that restriction on social and leisure activities necessarily involves. When nearly half (48%) of respondents seldom or never have a social evening with friends, what space is there for the social exploration of information, news, and politics? This serious limitation also serves to isolate the family in a self-contained world. Here, television not only places the family at the mercy of constant consumer messages but becomes the sole arbiter of information unleavened by broader discussion. The quantity and quality of information exchange deteriorates in an insidious process that deprives citizens of everyday participation in democratic life. Finally, the need for a break is generally acknowledged to provide for stress reduction. Yet almost half of respondents (44%) never have a holiday for the simple reason that they cannot afford to go. Of those that had gone on holiday, around half had financed it through savings. A third had financed their holiday through borrowing or a combination of saving and borrowing. A total of 18% of this group had received their holiday as a gift from a relation or friend.

22

The last time I was on holiday was 15 years ago when I had a job. It was a fortnight in Ballybunion. I think it’s really too expensive to borrow for holidays which aren’t really essential.

Yet most people consider holidays essential enough and their lack represents another factor in isolation. Those who never go anywhere else are restricted to their own “cabbage patch” again restricting first hand appreciation of difference. I refer to the research carried out in Limerick. There, an indebted respondent stated that he had taken a taxi to a Dublin hospital. Quite simply, there are those whose practical experience of travelling is quite limited and for whom a simple journey can appear complex and frightening. At the risk of a truism we could observe that never going on holiday means always staying at home!

4.10 Critical observations Those on low income eke out an existence of restriction with limited opportunities - and an even more limited capacity to take them if offered. Moving around - housing mobility - is the first to suffer. If those on benefit can become house owners - perhaps through “Right to Buy” Corporation mortgages - they are seldom able to participate in the “sell up and move” option open to others. Their concept of moving rarely embodies the “trading up” option associated with middle-income groups. A desired change was often articulated as a change to another (not dissimilar) housing estate. It may be that numbers of respondents wishing to move to a locality close to relations are signifying an appeal to the conditions of a previous (and in retrospect, better or more secure) family life. Dependent children featured in the vast majority of cases studied (82%). In 40% of cases the responsibility for children was (actively) shared - not always between partners but typically between mothers, daughter and sisters. Additionally, the survey found that more than two thirds of respondents had childcare responsibilities18 of some kind - again not always in the respondent’s own home. Other studies had suggested that children were likely to be a central issue to the study. Results confirm that this remains the case. This survey reflects a mode of life where altruistic self-denial for the sake of the children is not merely characteristic, but paramount. This may explain why education and food represent areas of non-compromise for Irish families. Children appear less likely to suffer from individual deprivation through spending curtailment and more as consequence of the knock-on spending and general debt accumulation that hits the overall sustainability of family finance. Food bills are likely to be the largest item of family spending and to some extent the cost is predictable. But hidden education costs - the cost of maintaining a child’s everyday existence in the social arena of the school - is spasmodic. A sudden cost such as a school trip or special event can be sprung on a family at any time. An inability to comply with children’s requests then produces disappointment for the child and anger, frustration and guilt for its parents. Isolation is the inevitable result of a lack of disposable income. Low-income citizens are more likely to be “stuck indoors”, limiting their social activities to the celebrative aspects of life. It is one of the reasons why excess spending takes place during communion, confirmation and Christmas. For those on low income these moments seem unavoidable and as such, they represent an opportunity to relax for an instant. People give themselves 18

This includes child care responsibilities discharged outside the home

23

permission to borrow for these single occasions. We know the cumulative consequence can pitch people into the indebtedness process, particularly where there are large families. Yet to restrict this would be invading that single moment where one is “obliged” to buy a new dress or suit. An examination of holiday patterns for respondents sharpens the picture even more. Many respondents laugh wryly when asked about holidays. They rack their brains to remember - or question exactly what the interviewer means by “a holiday”. This is a world where a weekend visit to relations is often the only vacation respondents can remember and a cheap flight to London for a family member’s communion remains a conversation piece for some considerable time. It is hardly surprising that low-income respondents mention anti-depressants or exhibit respiratory problems. Not only are low-income citizens suffering from a continually stressful financial squeeze, but they also have a very little chance of complaining - off loading their legitimate complaints. With no one to gripe to, the family - usually the mother - must bear the brunt and suffer the mental health difficulties that this implies. The picture that is emerging is of a part of the population, which struggles to survive and seldom has the opportunity to get much enjoyment out of life. In consequence, expectations appear low. However, as demonstrated in previous studies, the isolation, which can accompany low income and indebtedness, may in some cases be ameliorated by voluntary work. Studies elsewhere have commented that this reduces isolation in a similar manner as FAS or CE courses. In this study a total of 37 % of respondents stated that they carried out voluntary work of some kind - a high incidence despite the cultural predisposition to organise within communities19. Additionally, in 10% of cases there were others in the household carrying out voluntary activities. The following chapter will look specifically at financial considerations; at earnings, benefits and current credit commitments to determine more exactly the economic shape of this group. It will then go on to look at what respondents think about their position about others and seek their opinion on changes or innovation in the credit system.

19

Tallaght study. WRC (EFILWC) - voluntary groups the highest in seven-country study.

24

CHAPTER 5: LOW INCOME CREDIT AND FINANCE Money is power, freedom, a cushion, the root of all evil, the sum of all blessings Carl Sandburg

5.0

Introduction and Focus

This chapter deals with the survey of low-income families and here we look in detail at income and expenditure, at banking behaviour and borrowing requirements. Moreover, we examine the acceptability of new forms of credit. Additionally a significant section is devoted to dealing with questions that examined certain conceptions and misconceptions about employment, how credit is viewed, borrowing and the nature of the Credit Unions. In this way we hoped to confront the convenient myths that affect all of us. “People who get into debt have only themselves to blame.”. The purpose of the survey was to determine the experiences and views of those on low income rather than those who had become over-indebted. This obliged us to offer all respondents the courtesy of determining whether they agreed or disagreed with credit - in principle. It brought a quandary however - since our questions were mostly about credit and borrowing. So we could only continually demand of respondents who disagreed with credit “What if things go wrong?” In so doing we had a natural concern that we would alarm those participating in the survey. We were, after all, asking respondents to envisage the ramifications of unpleasant events - disability, death of a spouse and so on - and were concerned that this would create anxiety. However, in asking respondents to deal with the future we also knew that we were alerting them to possibilities in a way that would force an examination of finances. We decided that directness was the most honest manner in which to proceed. Questions on income are pitched at the family level rather than at individuals. In some cases this proved quite a complex task. Where relatives lived together as a family and where young people were house-sharing with collective consumption patterns, information was partially complete. As with debt counselling, it takes some time to establish the income and expenditure of individuals. Information therefore falls within the limit of that which is possible in a one-hour interview that covered substantial ground. We also have to expect that individuals will not be completely frank. It is a commonly held principle in money advice that often, people will hold a little information back. This can be for strategic reasons, so that some income is not included in the calculations that will determine repayment commitments. So the figures that follow must be treated with a little caution - in that respondents may be cutting themselves a bit of slack. Questions on required income also demand a cautious approach. This is in essence a problem of questionnaire surveys, where respondents do not wish to appear extreme. Their answers may be a negotiation between what they really think and what they think the interviewer thinks. We expected for example that people would estimate that they needed a third beyond their actual income - a “moderate” response. The wide range of responses exceeded our expectations. Nevertheless, it is difficult for individuals to make abstract judgements. The same applies to questions about possible and different future arrangements for credit. 25

5.1

Income and expenditure

Here we examine household income rather than the individual’s income. Given the remit of the study, it is unsurprising that over three quarters (78%) of all respondents had some or all income derived from benefit. Two thirds were receiving income of under Ј200 per week and nearly half of respondents (45%) had income of less than Ј150 a week. A solid group of 55% of respondents received benefit of between Ј60 to Ј180 per week. Nearly three quarters of respondents felt that their income did not give them enough on which to live. More than a quarter (28%) of respondents felt they needed between 30 - 60% more than their present income. A further 28% felt that they needed between 60-150% more income. A total of 10% said that they need an additional 100-150%. These were much higher figures than we expected and as such could be interpreted as general a sign of dissatisfaction with both wage and benefit levels. Expenditure varies given family size and we therefore decided to take a slightly different approach and focused on the balance and pattern of income and expenditure. Were people continually spending more than their income as the Limerick study revealed? So we looked at each case’s income and subtracted outgoings. Only a small number (3) of people had an exact balance where they spent the same sum as they received. We might assume that those people made an effort to ensure that their figures tallied. Nearly half of respondents (45%) however, were spending more than their income. A total of 18% of all respondents represented cases where expenditure exceeded income by more than Ј20 per week. And some 8 respondents were exceeding their income by Ј60 weekly. We observe therefore that within our survey there exist many respondents who are running into deep financial water. Recalculating the figures at the monthly level will give salaried groups a chance to compare with their own family finances. We are looking at a minimum of Ј100 per month financial slippage for nearly a fifth of respondents - respondents who have little prospect of netting additional income. The following constitutes selected data from expenditure questions since illustrative tables will flesh out the overall picture. Respondents were asked about all household outgoings but here we concentrate on the key items of food, rent, fuel and entertainment. The figures for food expenditure reveal that this is the single largest item for most households. Almost half of respondents (49%) were paying between Ј50 and Ј100 for weekly food shopping. The second highest costs were housing-related and here we are not distinguishing between rent and mortgage, concentrating on the weekly outgoing. This is partly because respondents do not always make this distinction themselves. It may be attributed to the decision to buy being a pragmatic economic choice rather than the committed sequential house buying of middle range income groups. The vast majority of respondents (87%) were paying less than Ј30 per week for housing and nearly half were paying Ј10 or less. Fuel bills were a comparatively high proportion weekly expenditure. More than half of respondents (60%) were paying more than Ј10 per week. By far the largest group were paying between Ј10 and Ј20 per week on fuel. A quarter stated that they never spent money on clothes. We have to recognise however that clothes' expenditure is generally episodic. That is, there are few of us who make clothing purchases evenly over any single period. It is one of the areas of emergency that has been highlighted in previous research, particularly where children’s shoes are 26

concerned and can be responsible for significant money lending debts. More than a quarter of respondents estimated that they were likely to spend over Ј10 per week on clothes, whilst exactly half estimated less than Ј10. The single largest group mentioned very small sums up to Ј5. It suggests a picture of unbudgeted emergency spending on a “need to replace” basis rather than any kind of clothes shopping based on choice. There is little pleasure in this picture. I buy clothes only when I really need them. When I do that I have to make sure I have enough staple food in the house for that week to keep me going.

The vexed question of entertainment was raised in the previous chapter. Entertainment here would naturally include any money expenditure associated with alcoholic drinks but exclude tobacco-related spending. Exactly a fifth of respondents said they spent nothing on entertainment. Over one third - the largest single group - spent between Ј5 and Ј10 per week. Although there were some whose spending could be seen as high - there were three respondents spending more than Ј50 a week - the majority (60%) spent Ј10 or less weekly on leisure pursuits. Since drinking, socialising, music and entertainment are combined to a considerable extent, we would expect that most of this expenditure is related to an expensive product whose price enjoys considerable elasticity. The figures here might invite criticism. But taking culturally acceptable standards into account the picture remains that of a low-income group that curtails most spending. However the following must be acknowledged. Pressure and stress can lead to alcohol abuse. Alcohol abuse leads to money problems and increased pressure and stress. This vicious circle claims many victims and as we have seen elsewhere can become part of a complex web of indebtedness. One respondent in this survey lost her business through precisely this cycle. Now she remains heavily indebted with little hope of escape. Expenditure patterns included a broad variety of current loan commitments, with almost three quarters of respondents having borrowings of some kind. The Credit Union easily topped the list of creditors. One third of all respondents who had credit commitments had loans with the Credit Union (excluding the single case who was using a Special Account). This was closely followed by the ESB with nearly one quarter of those who used credit. Legal moneylenders - say Ray Murray or Capital Loans - were present in a fifth of cases (21%) as were HP companies. Traditional banks make an appearance with 13% of all those using credit. There was evidence of loans from family and friends - that is those that were being paid back on a regular basis - a total of 8% of those using credit had this type of informal arrangement. Illegal moneylenders - those who were specifically designated as loan sharks - accounted for only 4% of cases. A residue of creditors included shopping catalogues (1%) and Provident cheques (3%). So clearly we are looking at a pattern of multi-borrowing distinct from those of the indebted families studied previously. This is a group that consistently uses the Credit Union as a first port of call, obtaining electrical goods from the ESB and supplementing this with borrowing from family or from legal moneylenders. The loan shark figure could possibly be a little higher than that which emerged. Since the pattern of loan shark credit and collection procedures varies enormously and since clients are secured through personal recommendation, it is often difficult for the borrower to determine the exact status of moneylenders.

27

5.2

Knowledge of the system

Given the information from the range of available research, we were eager to test people’s knowledge of available credit options. At this point in the interview we went through a staged process of prompted and unprompted requests for knowledge of credit options. So here we cleave a middle course between what people really know (or at least that which swiftly springs to mind) and what they feel they know when reminded of what exists. So when asked to state (unprompted) what alternative credit was available, we accepted that all respondents were likely to know about the Credit Union, given the membership level indicated by the survey. It may be of interest that respondents mentioned loan sharks (20%) more often than moneylenders (18%) and taken together they represent more than the 37% of respondents who mentioned the banks. However 13% also mentioned the Building Societies as a possible source for loans, so the traditional banking sector taken together was the largest single source known to respondents. This tied in with the prompted questions where respondents were given the name of the credit source and asked how much they knew about that. But here it is necessary to note that we were asking how much knowledge they had. More than half of respondents (55%) knew little or nothing about bank loans and more than three quarters said they knew little or nothing (78%) about building society loans. In contradistinction, 87% knew or a lot or at least something about Credit Union loans. Surprisingly, 62% said that they knew nothing about retail credit - since this group almost certainly had taken out such credit arrangements with the ESB. We can only assume that since it appears as part of the regular electricity bill, it is not consistently regarded as credit. In view of the consistent barrage by companies offering credit through press advertisements, a surprising total of 84% of respondents said that they knew nothing about loans advertised in newspapers. This may represent that respondents feel threatened by advertisements or that the loans that they offer are outside their requirements. Conversely, that more than half of respondents (54%) knew about loans from moneylenders reflects an intimacy with this form of credit and some cultural experience of this sector. Knowledge about loans and consumer protection was very limited. A total of 73% knew nothing about the “cooling off” period following agreements. Nearly two thirds (65%) knew nothing about the term “APR”. Nearly half (44%) knew nothing about differing interest rates. One quarter knew nothing about the difference between credit and hire purchase. Knowledge about the Consumer Credit Act was the sketchiest of all. Here a total of 81% said they knew nothing. Although this lack of knowledge seems overwhelming (in terms of its implications for consumer protection) it points up conditions born of emergency need for fast cash. In this case, the sum involved is more important than the conditions of the loan. That illegal top-up borrowing seems to be continuing stems from exactly this factor. Money in the hand is more important than the repayment involved and thus immediate need triumphs over rationality.

5.3

Experience of the system

Whereas 70% of respondents were members of the Credit Union, around a third (37%) had a bank account or a building society account - although only 10% of that number had a 28

cheque guarantee card. In fact, a total of 16% had successfully applied to a bank at some time but had since discontinued their accounts20. The 45% of respondents who had never applied for bank accounts gave some interesting reasons that perhaps need interpretation. More than one fifth of this group stated that they did not apply because they thought they would be refused - that is they wrote themselves off before they started. Similarly, more than half said that there did not seem to be any point in applying. Some 16% thought that banks “weren’t for people like them”. A tenth of this group felt that banks were too expensive and would merely cost them extra money. Finally, one respondent said that the Credit Union was “easier” than the bank and another was afraid of becoming overdrawn. There appears to be a substantial feeling amongst respondents that banks are a bit threatening21 and in any case not a worthwhile option for them. This causes them to shy away from the system. So was there such a danger from banks? We asked those with bank accounts what happened when they went overdrawn without permission. This affected 12% of all respondents or a third of the “banked group”. In general, respondents who went overdrawn (7%), received a letter after which they brought their account into order. One respondent mentioned having to pay the interest on the overdraft and in the remainder of cases “nothing much” had happened. Some 31% had experience of a bank loan with nearly half of that number having difficulty in meeting repayments. Loans from building societies were less in evidence although around a half of those in this category had difficulty also. Importantly, two thirds (66%) had taken advantage of a loan or credit from the Credit Union. But exactly half of those also had difficulty in paying back. More than a third had bought items on credit from a shopping catalogue, a half of whom regarded it as much too expensive or poor value. Again, a half of those who shopped through a catalogue had problems with meeting the payments. Yet it was moneylenders who appeared proportionally to have been given the roughest deal by their creditors. More than one third (37%) of respondents had borrowed from a moneylender at some time. But the majority (64%) of those who had borrowed from this source had met with difficulties in repayment, constituting 24 % of all those interviewed. Again this could be due to higher interest rates or to unorthodox vetting practices. Alternatively they could perhaps be “held back” longer than other creditors, or would find it profitable to be held back - merely rescheduling interest and charges at the same time as repayments. We wanted to explain the persistence of moneylending. Although we examined borrowing patterns in the previous chapter we needed to look in a little more depth at general borrowing. In particular we wanted to see what kinds of history respondents had with loans. Moneylending followed the usual pattern well described elsewhere. Of those who had used moneylenders, 83% found them through recommendation of family, friends or neighbours. Those who didn’t use them were clear enough about their reasons. Nearly two thirds of all those who refused to deal with moneylenders said that they just did not agree 20

Three respondents were refused an account for reasons that we were unable to ascertain. The credit card system also appears threatening to respondents. Only 5 respondents had applied with one refusal. A total of two respondents just couldn’t cope and they joined two others who “let their card expire”. Another had “left the country”. Respondents were very cautious about credit cards, firstly because they knew they didn’t have the income (37%) and similarly, around 15% felt that they would be refused anyway. Just under a quarter said they didn’t believe in them.

21

29

with them. More specifically, they felt they charged too much interest (41%) and were too expensive (30%). They did not like their methods (37%) and anyway they were afraid of getting into trouble with them (40%). A further 10% said that they did not like them calling at the house. This is very interesting because moneylenders promote exactly that as a part of their service - for which there is an extra charge. A total of 40% of those who do use moneylenders do so because they find that calling at the house offers convenience. But the reasons for using moneylenders specifically identify their continuing success. A total of 86% of those using this kind of credit did so because it was fast. So speed of agreement with a willingness to accept the short notice that matches household emergency need, acts to solidify the moneylender as an organic part of low-income communities. More than half of moneylending clients (54%) represented in this survey felt that they are always there for them in an emergency. As we will see, that is also the way that many respondents view the Credit Union.

5.4

The borrowing scenario: what, who and where?

As previously cited, nearly a third (30%) stated that they did not agree with credit. Almost the same number 29%) said that they did. By far the largest category was where respondents considered that there was no choice these days. Our questionnaire posed various questions designed to elicit (even for those fundamentally opposed to credit) the likely circumstances that would force them to seek credit finance. We offered a broad variety of occurrences that broadly matched findings from previous research. This is the what if..? scenario that we identified at the beginning of this chapter, designed to determine in what circumstances respondents feel that they would have to borrow? Without any prompting by the interviewers, more than half specified ill health and more than a quarter the prospect of expenses relating to funerals. When interviewees were prompted about possibilities, the prospect of ill health in the family remained the key category for the vast majority of respondents with 70% saying that they would try to borrow and a further 19% saying “maybe”. A death of a family member runs this a close second with 70% saying they would borrow and 14% saying “maybe”. Nearly two thirds (62%) would definitely try to borrow if faced with the threat of eviction. More than half of all respondent would consider borrowing for home conversions or adaptations required by sustaining a disability - total of 58% said that they would borrow and a further 25% would consider borrowing. The prospect of unexpectedly large bills was bleak enough to for nearly three quarters of respondents to seek - or at least consider seeking credit. And similarly, the possibility of an electricity cut-off would precipitate borrowing for 58% of respondents. More than half of respondents would consider borrowing if faced with the loss of a job (52%). Children in respondents’ families were considered extremely important (and this confirms the findings of the first survey chapter). Nearly half of respondents said they would definitely use credit for education expenses and another 16% said that they might. As a respondent commented on spending for children’s activities I would only borrow for the kids. I want them to get involved in things and not be hanging around on the street all the time.

30

The breakdown of an essential home utility such as a washing machine would solved by credit in more than half of all cases (52%) and a further 19% said that they might use credit.. Around half of respondents would use or consider credit if they became separated from their spouse or partner (43%), if they had an unexpected pregnancy (49%), had to attend a wedding of a family member or close friend (49%) or were faced with communion or confirmation expenses (51%). As this analysis shows, the abstract questions posed as possibilities did penetrate the numbers of those who said that they did not agree with credit on principle. The categories that produced this seeming volte face were death or disability in the family, home adaptation due to a disability or eviction. However, a small core of around 15 cases remains consistent throughout. It appears they would never borrow - no matter the circumstances.

5.5

Who? Seeking advice from individuals and agencies

We asked respondents to whom they would they go for financial advice if they had money problems - and where they would try to raise money in an emergency? We wanted to know where people would primarily seek assistance. Where would they start? Unprompted, it was the family that offered the first line of enquiry for the largest category of respondents. Nearly a half (42%) said that they would approach their family first. Nearly a quarter of all respondents - the second largest category - said they would go first to the Credit Union for assistance if they had money problems. Here, the Credit Union appears as a source of money advice and is a first choice for nearly a quarter (24%) of respondents compared to the 8% who mentioned a Money Advice and Budgeting Service. However, given the large credit union membership of our respondents, the choice of Credit Union reflects an inclination to seek advice at that point that also offers a possible source of money supply. A small number of those would seek assistance from a Money Advice and Budgeting Service as their first choice. Yet this pales into insignificance compared to those sources that offer direct cash help. Interestingly, 10% said they just would not know where to start. So whilst MABS offers a direct route into a system that will help in a variety of ways, all other options offer the possibility of immediate funds. This may be a result of a small number of money advice offices which together currently represent a new service. Clients presenting to money advice are likely to be at the “casualty” stage. Having already exhausted a range of options, people reach such difficulty that Money Advice primarily presents a remedial or “rescue” possibility. A range of options helped to clarify this picture. We wanted to know what individuals (rather than agencies) might be approached. Asked directly whether they would approach the family, over two thirds (71%) of respondents said they would ask family members. Slightly less than two thirds (63%) would ask advice from friends, but there was an evident disparity between neighbours as distinct from friends. Neighbours were deemed a possible source of advice by only 37% of respondents. Work colleagues and community workers proved a more likely prospect than neighbours. A total of 42% would ask a workmate or someone active in the community. Teachers, priests and local councillors did not however appear to offer a likely source of advice for most respondents. A range of agencies was then posed to respondents as possible sources of support or advice. When these specific agencies were posed as a separate category, the results look 31

very different. Here, the Money Advice and Budgeting Service is recognised as a key agency for those in financial difficulty. Prompted, two thirds of respondents (66%) would use a Money Advice Centre in the event of money problems. More than half would use a Citizens Advice Centre or Welfare Rights Service (59%), Health Board (57%) or Social Welfare (53%). A total of 40% would go to an Unemployed Workers’ Centre. Other possible sources of advice - libraries or trade unions were mentioned in 15% of cases. The Church was considered the most unlikely option with only 11% saying that would use this source of advice. It must be emphasised here that the emergence of the Money Advice and Budgeting Service as a key agency is a crucial finding, given that this service is not locally available for the 40 cases represented by two of our case study areas22. It also appears that independent agencies are slightly more popular as starting-point support agencies for lowincome families in financial difficulties..

5.6

Policy. personal indebtedness and the state.

In this section we wanted to determine what kind of credit arrangements would be acceptable for those on low income. We were aware from previous studies that even those who were deeply indebted wanted to find some way in which they could discharge their financial responsibilities. Whilst most people acknowledge the difficulty of paying off accumulated debts with no prospect of additional income, they would prefer to do so. Uncomfortable with proposals to write off old loans, they would like to “save face” and make amends. So here we began to examine, however abstractly, the way in which respondents felt about various hypothesised options - future arrangements that could be put in place. As we remarked at an earlier stage in this chapter, it is difficult to deal with nonconcrete proposals - with something that does not yet exist. The following attempts to engage with sustainability of proposals - would proposals find approval from citizens who had the opportunity of taking part in a new system? We also foregrounded the idea of affordability whilst recognising that we did not know whether respondents would recognise this particular abstraction. Interviewers pitched this as “at a rate that you feel you could afford” and asked whether respondents felt that the government should make affordable loans available to citizens. The result was quite clear. A massive 88% of respondents said that the government should make affordable loans available directly to citizens. Those who disagreed said that it would be too easy. They pointed out that people would not be able to repay (3%), that it would be abused (1 respondent) or that they did not trust the government and it did not care (5%). A few respondents added that they did not think it was the government’s job to give loans and expressed a level of doubt about the government's capacity for running such a system. One respondent was particularly sceptical. If the Government was to supply loans there would be too many forms to fill in and there would be delays.

There was division concerning who might properly be the recipients of such loans. Nearly one quarter (23%) said that it should apply to everyone, whereas more than two thirds 22

Whilst Letterfrack in Connemara and Inner North Dublin have a range of general advice services, there is no local Money Advice and Budgeting Service.

32

(35%) felt it should be for anyone in difficulty. Roughly a quarter of respondents (23%) said that it should apply only to those on social welfare. “Affordability” became more defined when respondents were asked about the terms or conditions of such loans. Nearly two thirds of respondents felt that they should be interest free and more than half of respondents (56%) felt that there should be means testing for eligibility. The definition of “everyone” could perhaps be reformulated to “people like me” given the high numbers of respondents in receipt of social welfare. Yet there seemed to be an appreciation that anyone could get into debt difficulties and should be able to access an emergency system. The survey examined whether respondents agreed with the idea of putting up security. This system is typical of the Caisses Credit Municipal23 whose operations are a combination of traditional banking and a pawn-broking system. These Credit Banks are very tough concerning repayments and may insist on some kind of security - like a car or a wedding ring24. Nearly a third said 32% said they would not be happy to do that. However around a third (35%) said they would if their personal conditions made it necessary - or that it would be perfectly OK. The most startling category however comprises those who said that didn’t have anything for security. Loan availability which is dependent on collateral whether lodged (like a pawnbroker) or available to be “possessed” in event of default would further marginalise a group who just didn’t own anything valuable enough to buy their way into the loan system. Previous studies had raised the question of accumulated debts that borrowers had no chance of repaying and were mindful of many European Credit Bank regulations which bar the raising loans to pay off old debts. So we asked whether respondents felt that that the Government should have the power to write off old debts that could not be repaid. The vast majority were in favour (70%) but were in disagreement about what kinds of debts these should be. Only about one fifth of those responding favourably felt that it should be universally applied. Half of those respondents who felt there should be such a system, stated that it should be for emergency debts only (35%). Around a quarter (24%) thought that it should apply only to selected debts25. We were particularly eager to establish whether there would be any support for a Government Credit Bank, but recognised that most respondents would be unfamiliar with European experience of banks with a social ethic which catered for low-income loans. However, since we had already discussed the idea of a more direct role for government, the question was posed directly (interviewers were briefed to give a short explanation). Although the numbers (13%) saying that they “didn’t know” was anticipated, it is revealing that more than two thirds (67%) thought that it was a good idea. Of those who were in favour of such a bank, six respondents felt that its services should be available to everyone. A total of 13% of respondents acknowledged that they did not really know. Yet an additional total of 17% of respondents was sufficiently interested in the idea to say that said that they would like to know more.

23

The principles of the Paris Credit Bank system are explained in the chapter dealing with the European experience. 24 The bank is sometimes known affectionately as ma tante (auntie). A popular story tells how an old lady would pawn her mattress every morning and buy potatoes wholesale. After selling them all day she would redeem her mattress with the profits. 25 It was unclear what respondents exactly meant by “selected debts” but 2 respondents mentioned state debts - housing, electricity and so on. Naturally it would be easier for the state to write off its own debts than those of other organisations for which “new money” would have to be made available.

33

5.7

Opinion and world view

We drew attention at the beginning of this chapter to the question of how the respondents see the world. We consider this vitally important not merely because of current mythology about the poor but because it grounds the research - linking replies to the general outlook of respondents. The previous study, Living in Debt in Limerick, referred to effects of isolation on the political views of indebted people - a tendency to refer to certain social groups as less deserving. A tendency to typify lone parents as immoral for example distanced the “respectable” indebted person (themselves) from “rougher” neighbours who manipulated the welfare system to their benefit. This had the effect of producing community conflict within the neighbourhood. Indeed in this survey, 41% of respondents agreed with the proposition “neighbours look down on you if you haven’t much money”. It is also interesting that 70% disagreed with the view that “some people seem to like living in debt” since that view had emerged from a proportion of indebted people interviewed in a previous study. On the other hand a fifth of respondents agreed that this was the case - so this remains a credible view for a substantial proportion of interviewees! We also wanted to test the knowledge of those on low income - whether they knew how Credit Unions worked for example. So we posed to respondents a variety of statements and asked the extent of their agreement or disagreement with the propositions. Respondents did see work as offering a more pleasant life prospect. A total of 88% agreed that “life would be more pleasant if you have a job”. This seems to cut against the grain of the “popular” view that “it's not worth having a job because one is worse off.” When this was tested some 30% agreed with the proposition that it’s not worth having a job, whilst 39% disagreed. Nearly one percent was unable to say either way. There was substantial disagreement (58%) with the proposition that “It’s always possible to save a bit of money”. This may be surprising in view of the high Credit Union membership in this survey. The Credit Union very much promotes this point of view, not merely in its general membership approach but also as part of its role in running Special Accounts for over- indebted Money Advice clients. In fact, respondents saw helping low income people as part of the Credit Union remit. Nearly three quarters of respondents (73%) agreed with the proposition “The Credit Union exists to help low income people”. More than four fifths of respondents (84%) agreed with the proposition that “credit is just part of life now” and nearly half (44%) agreed that “credit should be available to everyone, no matter what”. Respondents did however feel that checking a client's financial position was a necessity, with 68% agreeing with that proposition. This could signal two disparate views. Firstly it could be seen as recognition that credit companies bear some responsibility in ensuring that a client is in a financial position to repay. Secondly it may be a reflection of a view (typified in previous studies) that when a loan goes wrong it is the creditor's fault for granting a loan in the first place. Certainly those who are indebted are likely to share the blame in part but certainly not in whole. This acknowledgement of shared responsibility seems to be reflected in the 70% disagreement with “People who get themselves into debt have only themselves to blame.” And respondents were empathetic enough to give massive support for the view that “once people get into money problems it is difficult to get out” with 93% ether agreeing or strongly agreeing.

34

More than half disagreed that “the opportunity is there for everyone to have good life if they want it” and more than two thirds (68%) agreed with the proposition that people just don’t have enough money to survive. More than three quarters (78%) agreed that it was the government’s responsibility to give people sufficient money on which to live. It is not surprising therefore that more than four fifths (81%) agreed that the government should offer interest free loans to low-income families. Certainly respondents felt that “there should be more help for people on low income” with a 94% agreement rate.

5.8

The Credit Union

We wanted to inquire about respondents’ view of the Credit Union - did it match Credit Union ethos and practice? A total of 70% of respondents had Credit Union membership and the results of this section suggest that respondents had a good idea about its place and function. All respondents said that they knew something about the Credit Union and what it did. We asked whether respondents were aware of the location of the local Credit Union and all respondents were asked to name their local office. Only one person did not know the location of their local Credit Union. There was considerable consistency of response in this part of the survey. Most respondents (86%) disagreed that “the Credit Union is not for people like me. A total of 94% agreed that “it’s for everyone that wants to join” and almost exactly the same number (95%) disagreed with the view that “it’s only for professional groups”. There was a major disagreement over the view that “you have to save for a long time before you borrow” with 48% disagreeing and 47% agreeing. This may depend on respondents’ conception of "a long time". But for those on low income who are in emergency need, we have to acknowledge that a few weeks may constitute an unduly lengthy waiting period for a loan. However respondents did have a view of the Credit Union that acknowledges its social role. Nearly three quarters (73%) agreed with the proposition that “The Credit Union exists to help low income families” and 79% agreed that “It helps people with money problems”. Nearly two thirds (64%) of respondents agreed that “It runs a special scheme for people in debt” - although more than a quarter were unable to comment either way. Certainly those interviewed regarded the Credit Union as more accessible than other financial institutions. Nearly three quarters agreed with the proposition that “I’d be less likely to be refused (a loan)” and the same number agreed that “It doesn’t have so many rules as other lenders.” We wanted to examine the question of the local emphasis of Credit Unions (each Credit Union is independent) and the role of it volunteer staff. Views have emerged from research studies elsewhere that there is some suspicion of this aspect of Credit Union practice. Some feel that local volunteers will know “all their business” and that the system lacks confidentiality. But nearly half (48%) agreed to the proposition that “It’s all run by volunteers”, whilst 36% disagreed. Yet the Credit Union has been subject to an increasing professionalisation demanded by increases in membership and savings. Although the volunteer aspect remains a strong part of Credit Union policy and ethos, certain branches feature mainly paid employees - often from outside the area. A total of 88% agreed that “it is run locally”, which is the case. The Credit Union is proud of its independent status and the Irish League of Credit Unions regards itself as a facilitator rather than as a “head office”. Although most respondents show themselves to be aware of these factors, it still 35

gives some cause for concern. When respondents were asked about the disadvantages of the Credit Union, more than a tenth (11%) stated that they felt uncomfortable with the local-voluntary aspect. Respondents stated that the biggest advantage of membership was the dependability of the Credit Union (18%) and that it was always there if needed. Low interest rates26 (16%), approachability (14%), flexibility (11%), ease of getting loans (14%) and helpfulness, particularly in paying bills (10%) were all mentioned. Asked about the biggest disadvantage of the Credit Union, nearly two thirds (65%) of respondents were unable to think of any. More than half (54%) of respondents stated that there were no disadvantages and the remainder of replies relating to disadvantages were disparate. A total of four respondents each said that it was too easy to get more than you needed and another four mentioned the qualifying period for a loan as a drawback. The four respondents who felt that they had been discriminated against because of where they lived, gave some cause for concern and this question will be examined in a later chapter.

5.9

Local economic trading

The survey revealed little activity that could be described as a local economic trading scheme in that no formal organisations were discovered. However there was evidence of existing local trade involving more than one third (36%) of respondents. In these cases trade and exchange of goods with others - where no cash changes hands - was in evidence. Mostly this was more a feature of the way in which neighbourhoods work. But information from Connemara reflects a traditional way of life and it is here that the 4% of respondents who co-operated on specific tasks like turf cutting and storage are located. The largest single trading category (21%) includes odd jobs and skill exchange. Child minding exchange was operating in 5% of cases whilst another 5% regularly exchanged used items.

5.10 Critical observations The picture that emerges from this study is one of a group with quite specific views and requirements. It is strongly in favour of the Credit Union and in the main, distances itself or is even distrustful of banks. It displays a good knowledge of the Credit Union and exhibits a positive attitude to the institution itself - believing it to be “on its side”. Attitudinally there seems to be quite a strong sense of ownership and there are few who can find anything negative about membership. But naturally there are a few quibbles. The voluntary and local aspect of Credit Unions is both an advantage and a disadvantage for many members. And as we will see from our case studies, this criticism derives from a historic view of operations - a situation that used to be the case but which is in the process of change. A Credit Union informant, recognising that this view continues to exist, commented that now there were large numbers of people saving and borrowing through her office. This precluded the identification of individuals with problems because it was impossible to remember them all. Nevertheless, if this view continues to retain credibility then the problem for certain elements of low-income access to credit will also remain. 26

Sometimes referred to as “fair” interest rates by respondents.

36

Those on low income appear aware of limitations and problems imposed by their financial position. They appreciate that those in employment have a better life but acknowledge that they could be worse off financially. Citizens are instinctively aware of the poverty trap that moving into employment often brings. Respondents commented that they appreciated having a medical card enormously and must be aware of the possibility of losing that through employment. A case study in Limerick exemplifies this. A woman with a husband on low income had a disabled son and had to fight to get her medical card. She would not have survived financially without it. Clearly, people would prefer to be employed. This may represent a tacit recognition that employment has an inclusive effect - a feeling of less isolated, of being in the mainstream rather than the margins. Certainly, those interviewed do not agree that everyone is in the same position regarding money and money problems. They recognise that credit is a current feature of life, that this it is unlikely to change and that most people cannot get along without it. So every day, respondents live with the possibility of over indebtedness. And recognising that it is difficult to extricate oneself from such a position, they fight shy of moneylenders and loan sharks with varying success. However it is not uncommon to be a member of the Credit Union and run a money-lending account. For those with children living on an isolated estate, the collection aspect of money lending is socially valuable. Nevertheless, most would approach family and friends and the Credit Union first if they needed emergency borrowing. The prospect of ill health or of a death in the family sharpens the picture slightly. Most people admit that they would have to borrow in this eventuality and they are quite aware of available credit options. They are not necessarily aware of the conditions pertaining to loans, however. This is because the need for emergency cash makes the capital sum more important than the interest rate attached to the loan. It also explains why illegal top-up borrowing continues to exist. Poor knowledge of rights as crystallised in the Consumer Credit Act 1995 - implemented in April 1996 - represents a real failure in communications. State practice stemming from the Act has been effective in removing the worst excesses of illegal credit through licensing and control27. But at a popular level most citizens remain unaware of its provisions. There is an urgent need for education programmes to explain the meaning and relevance of APRs for example. The recent IBIS video study packs28 go some way towards this - but ensuring that this is an integral part of civics courses at secondary school level would at least promote awareness for those about to become independent of their families. Respondents viewed new measures very positively - although we must take into account that those on low incomes are likely to be sympathetic to any option that ameliorates their position. Nevertheless, although the idea of a Credit Bank was new to most people, they displayed a definite view on those for whom this bank should cater.. Respondents do feel the government should do more for low-income citizens and ensure that they have enough money to have decent life. On the other hand, there was an acknowledgement that certain measures would have to be taken to ensure that the “right people” were assisted. The majority of those interviewed did feel that the government should have the power to write 27

A view exists amongst community development workers, that to some extent the problem has been driven underground. 28 The Irish Banks Information Service (IBIS) produces a range of study material aimed at first and second level pupils such as Paymaster, a video, and specimen cheque books and cards

37

off debts - selected debts and emergency debts taken together accounted for nearly half of survey respondents. So most respondents believe that this kind of strategy should be a targeted rather than a universal measure. Few however supported the idea that it should deal with state debts only - which would be rather easier for the state to arrange. Writing off money-lending debts is likely to be unacceptable to Government for example. The incidence of local economic trading was patchy. It appears that some respondents are familiar with exchange through performing tasks for each other in a mutual neighbourly manner. This may provide the basis for initiating new and more formal schemes. This initiative would need to preserve the cultural patterns existing in Connemara for example and which are historically based on a pressing common need. Labour in return for equipment use and socialised forms of turf harvesting is already established in this region and it may be foolhardy to formalise such arrangements. Perhaps a study of this phenomenon could locate good practice that in turn might influence new initiatives in Ireland. Clearly a solid cultural base exists which could itself provide a launch pad for innovative exchange and co-operative practice.

38