There is no seamless link between data and transparency

Ninety per cent of the worlds’ data has been generated in the last two years. But how effectively are we using it to revolutionise approaches to  tackling financial exclusion?

A new book by the Federal Reserve Bank of San Francisco and the Urban Institute What counts: Harnessing Data for America’s Communities challenges policymakers and practitioners to make more strategic use of available data to tackle financial exclusion and build more resilient communities. One of the questions the book addresses is how can practitioners transform data into actionable information and compelling stories and get key messages into the hands of decision-makers.

The starting point for this is, of course, getting access to good quality data. For those working to tackle financial exclusion, access to data is critical to understanding the scale and nature of the problem and to developing effective solutions.

In the UK, around 1.4 million adults are without a basic bank account. Seven million are accessing sources of high cost credit, substantial numbers of businesses struggle to access bank finance, and bank branches continue to close at high speed. But understanding who and where these underserved and excluded businesses and communities are is key to understanding what targeted intervention is most suited to meeting their financial needs.

After the US, the UK is now a world leader

in bank transparency. But it is only a start.

Data disclosure can support the ability to target financial exclusion by providing area-based lending data and information to identify local lending markets and finance providers and identify market gaps and the excluded.

The G20 group of nations has identified financial inclusion as a key driver of economic growth and better quality of life. It recognises data and measurement as essential to improving financial inclusion. In the US, evidence from transparent, comprehensive and robust bank lending data disclosure has targeted exclusion by mobilising the action of banks, new competition and financial partnerships with alternative lenders, such as Community Development Finance Institutions (CDFIs).

In December 2013, following campaigning by the Community Investment Coalition and other groups, the British Bankers Association and Council of Mortgage Lenders (CML) jointly published aggregated data on bank lending disclosure.

Now released on a quarterly basis, the data details the outstanding stock of lending that has been committed to customers across three categories:

• loans and overdrafts to SMEs
• mortgages
• unsecured personal loans (excluding credit cards).

The Community Investment Coalition, Big Society Capital, Citi Foundation and Unity Trust Bank commissioned Coventry and Newcastle University to undertake the first comprehensive analysis of this data. Tackling Financial Exclusion: Data Disclosure and Area-Based Lending Data assesses the first three quarters of data and its contribution to mapping area-based patterns in personal and SME lending markets in Great Britain.

So what is the compelling story from this data? Well, it is a great start and after the US, the UK is now a world leader in bank transparency. But it is only a start. Both the quality of data and data sets released need considerable development if we are to fully understand patterns of area-based lending and develop effective solutions to plug the gaps. Nevertheless it takes the UK one step further forward to developing financial inclusion policies based on a good understanding of how regional financial services markets work and providing effective intervention.