Academic journal article The Canadian Journal of Native Studies

Banking in Winnipeg's Aboriginal and Impoverished Neighbourhood

Academic journal article The Canadian Journal of Native Studies

Banking in Winnipeg's Aboriginal and Impoverished Neighbourhood

Article excerpt

Abstract / Résumé

Fringe financial services, a term that qualifies non-mainstream financial institutions such as pawnshops are becoming more and more visible in lower socio-economic urban areas. Drawn from a study conducted in the North End of Winnipeg, an economically disadvantaged district home of a large Aboriginal community, this paper discusses clients' experiences with using fringe banking services. Most of our findings confirm what previous surveys conducted in large North American cities have already identified as main factors in the use of these services. However, our findings indicated that "discrimination" and "forced marginalization" played a more central role than we had hypothesized.

Les « services financiers marginaux », une expression qui qualifie les entreprises offrant des prêts à taux usurier (prêteurs sur gages et autres) se multiplient dans les quartiers socioéconomiquement défavorisés. Tiré d'une étude menée auprès de la population du quartier North End de Winnipeg - foyer d'une importante communauté autochtone-, cet article présente les expériences des utilisateurs de ces commerces. Nos résultats indiquent que les raisons qui poussent les résidants de ce quartier à utiliser ces services sont similaires à celles identifiées par les autres recherches. Cependant, il apparaît que la discrimination et la marginalisation forcée jouent un rôle plus important qu'anticipé.

Introduction

In neighbourhoods experiencing deprivation, the closure of many mainstream banks and credit unions1 has added to the difficulty for many residents to access mainstream banking services. In particular, the physical inaccessibility of bank locations compounds the difficulty that low income and loss of income creates for obtaining a bank account. A study undertaken in Canada in 2000 documents that between 650,000 and 900,000 adults do not have a bank account, and that 8% of households with incomes less than $25,000 do not have a bank account (Ramsay 2000:2). In lieu of mainstream banking facilities, there has been an emergence within impoverished neighbourhoods of an alternative banking system referred to as "fringe banking." Encompassed by this system are businesses that offer high interest financial services such as chequecashing, loans, money orders, and rent-to-own agreements usually at a much higher cost than mainstream banks (Caskey 1994: 68-73). Few studies have been undertaken in Canada on the rise of fringe financial services, and even fewer focus on the experiences of the fringe banking users. To our knowledge, their perceptions of these services have not been previously studied on a systematic basis. It is the goal of this article to shed light on the fringe banking clients.

In terms of explaining the growth of fringe banking, various factors have been identified in US and Canadian studies, including the changing financial sector that is itself related to broad processes such as financial sector liberalization and technological change (Caskey 1994 and Dymski 2003). Also, the desire of major banks to secure their leading position has pushed the banks to look for more and more groundbreaking profits. Chartered banks, to achieve these enormous operating profits that they strive for have developed several strategies allowing them to cut expenses. One of them is to leave lower-income markets. In the meantime, stagnant incomes at low-income levels, growing debt ratios, declining state interventions, and feminization of poverty have increased the number of potential consumers that live on the fringe of the mainstream economy unable to maintain a bank account, or to cover monthly expenses without resorting to extreme measures such as food banks or high cost loans. These consumers constitute a market that is now captured by the fringe banking industry. It is then arguable that the rise of fringe banks is part of a broader economic process responsible of the recent widening of the economic gap between the poorest members of society and the other socio-economic groups. …

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