Financial wellbeing - everyone's business?
Financial wellbeing is talked about as ‘when a person is able to meet expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future’, but for too many people in Australia, simply addressing financial exclusion is the key and pressing challenge. In this post, Archana Voola from the Centre for Social Impact, and Vinita Godinho from Good Shepherd Microfinance update us on the Financial Inclusion Action Plan (FIAP) progress across the sector.
Yes! According to the Financial Inclusion Action Plan (FIAP) program led by Good Shepherd Microfinance in partnership with the Centre for Social Impact, EY and the Department of Social Services, financial wellbeing should be everyone’s business.
Despite being referred to as the lucky country, Australia is characterised by high incidences of poverty and homelessness. According to ACOSS (2018) just over 3 million Australian are living below the poverty line. Given this number, it is no surprise that about 29% of households in Australia are over-indebted, most of which (77%) lack liquid assets to cover even a quarter of their debts should they experience a financial shock (ABS 2018). Exacerbating this condition is the ever-growing housing affordability and homelessness crisis – where on any given night, 1 in 200 (116,000) Australians are homeless (Muir et al. 2018). These statistics barely scratch the surface of how these inequalities are experienced based on gender, Indigeneity, migrant status and other indicators of vulnerability.
The FIAP program aims to address some of these interlinked ‘wicked problems’ by enabling member organisations to develop practical actions to improve financial wellbeing for their own customers, employees, supply chain and community partners.
But what is financial wellbeing? An oft-used definition of financial wellbeing is when a person is able to meet expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future (Muir et al. 2017). The core components of this definition are being in control, feeling secure and meeting expenses. Give that about 2.1 million Australian are experiencing severe or high financial stress (Weier et al. 2018), this is a large ask for any single government entity, not-for-profit or business to tackle. But when individuals, organisations and coalitions can work together, it is possible to realise financial wellbeing of all Australians.
With this goal in mind, the FIAP program is working across sectors to building resilient and supportive communities. A Financial Inclusion Action Plan (FIAP) is a commitment made by an organisation to take practical actions which align to its strategy, and can improve financial wellbeing for its customers, employees, supply chain and community partners. These actions, designed in conjunction with the FIAP Program, are based on global evidence on strategies that can ‘shift the dial’ on financial inclusion and resilience. As an example, a utility provider could develop FIAP actions to provide early proactive support for customers unable to pay their bills, moving them away from crisis and dependency towards financial stability, income generation and wellbeing.
Established in 2015 with 12 initial participants (FIAP Trailblazers), Phase One of this innovative program ended in 2018 with 30 members, with 7 more organisations joining since. These organisations represent various sectors including business, government, academia and not-for-profit, and together, have committed 630+ actions to achieve financial wellbeing within their own sphere of influence.
These actions are already having significant impact – $62m has been invested to support 121,000 people in financial need; 500,000 people have participated in more than 2,000 workshops to build financial capability; and 10,000 staff have been trained to improve their ability to support financially vulnerable households, just to name a few (Powell et al. 2019)
These results support recent studies (Salignac et al. 2019) which show that neither access to affordable finance nor enhanced financial capability by themselves can ensure longer-term financial wellbeing. What is needed is a holistic approach which combines these traditional approaches with a range of behaviourally-informed strategies that address personal, household and community-wide influencers.
The FIAP program is now set to expand its’ reach and impact, commencing Phase Two on 24th of July 2019, with an ambitious plan to include 100 members by 2024. The current 37 FIAP members together employ 250,000 employees, and service almost 80% of the Australian population – an already significant footprint which will grow as the program expands. The FIAP journey to date provides a useful blueprint for those focused on using ‘systems-thinking’ to solve societal inequities.
Systems-thinking is based on developing a deeper understanding of the underlying structures, behaviours and dynamic interactions amongst different elements of a system; tracing through the interlinked sources of systemic problems; and identifying the best leverage points and places to develop interventions to resolve these (Kern et al. 2019). In the case of the FIAP program, member organisations have agreed to take action in the following 4 specific areas, to influence change within their own sphere of influence.
1) Products and Services: Providing fair, affordable and accessible products and services
2) Financial capability: Fostering organisational culture to enhance financial capability of staff, customers and the community.
3) Understanding Financial Vulnerability: Investigate, advocate and collaborate for improved responses to financial vulnerability.
4) Economic Security: Remove barriers and provide opportunities for economic security, equality, and growth.
FIAP actions also target groups who are most ‘at-risk’ of experiencing financial exclusion and crisis in Australia, including women; Aboriginal and Torres Strait Islander peoples; youth; those from culturally and linguistically diverse backgrounds particularly recent arrivals; those living on low-incomes; and those experiencing homelessness, domestic and family violence; to name a few.
Systems change does not and should not happen overnight. It needs the right mix of courage, audacity and commitment from those who are willing and able to take action; time and space for reflection and refining of ideas; and opportunities for learning and evolving. In keeping with this philosophy, the FIAP program envisages a long-term horizon to 2030 and beyond, informed by ongoing insights from regular program evaluation, quality control and a growing community of practice.