A growing number of Canadians are underserved by the financial mainstream, leaving them unable to build savings, access affordable credit or obtain appropriate financial advice, says a report by the Shareholder Association for Research and Education (SHARE).
Moreover, underserved groups—including low-income people, new immigrants and Aboriginal Canadians—are more likely to use high-fee products offered by a burgeoning alternative financial services industry.
“For investors, financial exclusion carries significant risks. Principally, it contributes to the negative economic trends we are seeing in Canada: low savings rates, low asset holding, high levels of debt and growing inequality,” says Shannon Rohan, the report’s author and SHARE’s director of responsible investment.
“Investors are not immune to the negative impacts of these trends and should be seeking opportunities to promote deeper financial intermediation and greater financial inclusion,” she adds.
According to the report, one reason for growing financial exclusion in Canada is the lack of many affordable products and services that meet the unique financial needs of low-income and other financially underserved groups.
“For financial institutions that respond effectively to this market need, opportunities exist to build new and diversified client bases and improve brand image,” Rohan says.
The report encourages Canada’s mainstream banks to do the following:
- commit to understanding and addressing the financial service needs of low-income and other underserved groups;
- develop innovative products and services that meet the unique financial needs of low-income and other financially underserved groups; and
- identify and capitalize on opportunities to improve financial service infrastructure through new business models and delivery methods that are more appropriate for meeting the needs of financially underserved groups.
This article originally appeared on our sister publication, Advisor.ca.