As a result, many people across Liverpool are ‘financially excluded’ – meaning that they are unable to access financial credit or loans. According to PwC, more than 20 million adults in the UK in 2022 were defined as being ‘financially under- served’, leading to one in three adults having difficulty to access credit from mainstream lenders such as high-street banks and building societies.
Credit unions are often one of the only places that people who are financially excluded can turn to when they require a loan. Today, over two million people across the UK are members of credit unions, helping them to access credit when they need it most. Credit unions also play a critical role in providing and delivering financial education to help people move towards being ‘financially included’ through various approaches, including by building up their levels of personal savings over time.
To help tackle the major issue of financial exclusion, IFAM is working with Enterprise Credit Union, a financial co-operative that is owned and controlled by its members across Merseyside.
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IFAM and Enterprise Credit Union are collaborating on a pilot scheme to look at how mathematics can be used to help improve financial inclusion across Liverpool and the Merseyside area for a potential customer base of around 800,000 people.
Financial and insurance mathematics are traditionally taught and studied through the lens of the behaviour of financially included people and customers. When addressing financial exclusion related challenges, the assumptions in these models need to be changed.
The IFAM team has extensive experience of adapting and adjusting conventional financial and actuarial mathematics tools to create fairer credit systems for people which also produce better risk management solutions for the financial organisations providing them with credit.
IFAM is applying their data science and financial mathematics research expertise to help Enterprise Credit Union to further grow their customer base within the large community of people across Liverpool who could meet the criteria of obtaining a loan from a credit union due to their personal circumstances.
The IFAM team is analysing anonymised data sets taken from Enterprise Credit Union’s financially excluded customer base to try to understand the fundamental factors and trends that underpin relationships and behaviours connected to social and financial history for financially excluded people and communities, as well as to help predict future outcomes.
The pilot project that IFAM and Enterprise Credit Union are collaborating on aims to study the causes and trends that will effectively reduce financial exclusion, thereby making a positive impact on the lives of real people across the Merseyside area and beyond.
KAREN BENNETT CBE, CEO OF ENTERPRISE CREDIT UNION