The Ridge is publishing stories about financial literacy and inequality in B.C., in partnership with The Discourse. In response to a community survey, B.C. residents said they want to better understand the barriers that some people face in accessing financial institutions and resources, and where solutions exist.
In this article, two researchers share seven insights that point to how we can work towards a more accessible and equitable financial future, together. Jerry Buckland is a professor of economics and international development at Canadian Mennonite University in Winnipeg. Guy Dauncey is a Ladysmith-based author who is working to publish a book called The Economics of Kindness, about ways all of us can help build an economic system that works for everyone and for the environment.
End the myth that low-income people are bad with money
Since 2018, Buckland has led the Canadian Financial Diaries Research Project, which seeks to deeply understand the financial lives of Canadians with low or modest incomes. Project participants track their income, spending and other financial behaviours and meet regularly with researchers. The first phase of the research followed 28 people living in Winnipeg over the course of a year. Three-quarters of the participants lived below the poverty line.
A primary insight from that work is that the participants, on average, had a great deal of financial resilience, Buckland says. Financial resilience describes the ability to make ends meet, to keep spending within income and be able to manage both day-to-day costs and bigger expenses, either expected or unexpected, that come up.
There’s a bias in academia and popular media “that if you’re poor, you’re to blame for it,” Buckland says. “You’re not working hard enough, you’re not saving enough, you’re not planning enough, whatever.”
But that’s not what Buckland and his team saw in the people who participated in the project. “What I saw was evidence of rationality and hard work, at least as much as I’ve seen it among people who are middle income or upper income,” he says.
People who find themselves excluded from financial systems and opportunities find creative ways to make it work, Buckland says. An example of this is leaning on social credit — loans and financial support from family, friends and community — when credit through financial institutions is not accessible.
Recognize how personal and systemic traumas perpetuate poverty
Buckland and the research team looked closely at the role of trauma as a barrier to financial empowerment. Many participants reported personal trauma related to mental health, physical health, relationship issues and employment. They also spoke to systemic traumas including racism, colonization, ableism and sexism.
People impacted by trauma and poverty need support that recognizes and responds to the complexity of the issues they face, the researchers concluded in a report. Improved finances alone often isn’t enough; personal support, social support and broader socio-political change are also needed. Addressing these complex, interwoven issues takes patience, and attempting to address them quickly, all at once, is unlikely to be effective.
Addressing people’s financial needs is critically important, but it’s not the whole picture, says Buckland. It’s also “so important for us to work at dismantling colonialism and racism and all these things.”
Support community organizations that build bridges to financial access
Community organizations across Canada are working to support people with limited means to build financial resiliency, Buckland says. For most people who find themselves excluded from mainstream financial systems, financial literacy programs alone are unlikely to bridge the gap.
Organizations like SEED Winnipeg and Calgary-based Momentum offer more direct and personal support, he says. That could involve support from staff and peers to start saving money and building financial goals, or it could be something as basic as helping someone get a government identification card in order to open a bank account.
“They do some really excellent work, but their funding is very limited,” Buckland says. “The demands on their services are quite a bit higher than what they’re able to provide.”
People can help by supporting this type of work directly and by advocating for more government support. “We need more funding for those types of programs right across the country,” says Buckland.
Build a stronger social safety net
The pandemic brought new energy to the conversation around establishing a universal basic income, or other avenues to increase the level of basic support for people living in poverty, says Buckland.
A universal basic income describes government programs that guarantee a minimum level of income for everyone, regardless of their employment status.
The country’s experience with the Canada Emergency Response Benefit showed that “a basic minimum income is an idea that has more potential than I guess a lot of people thought,” Buckland says.
And while he isn’t advocating for a minimum basic income, specifically, Buckland says that increased financial support for people in poverty is critical.
“I don’t think it’s realistic for someone to be earning $200 a month, and we expect them to somehow get out of that very difficult situation,” he says. “It’s really a vicious cycle. To get out of that, it’s virtually impossible.”
Reform banking regulations
Better rules for banking could also help to reduce financial barriers. “Right now in Canada, we have access to basic banking regulations, but they’re very weak, and they’re old, and they need to be updated and renewed,” says Buckland.
“The Feds need to say to the banks, ‘Look, you folks are regulated oligopolies, you earn tons of money, and banking is a human right. You need to go out and provide banking to all people, not just those with assets and investments.’ I think that’s huge.”
ACORN (Association of Community Organizations for Reform Now) Canada, a union representing 140,000 members of low and moderate incomes, is leading a push to change rules that exclude people from banking systems and force them to rely on payday loans and fringe banks, which can charge exorbitant interest rates and fees.
The Government of Canada has launched a consultation on lowering the legal maximum interest rate in an effort to fight predatory lending. In its submission, ACORN asks the government to cut the maximum interest rate in half, including all related costs and fees. Additionally, the group asks the government to apply this interest rate cap, regulated through the Criminal Code of Canada, to short-term payday loans. The cap previously applied to short-term, but the government excluded payday lenders from this cap in 2007. And, ACORN asks the federal government to create a Fair Credit Benefit and support other initiatives to ensure all Canadians can access low-cost loans in an emergency.
Push local credit unions to lead the way
Both Buckland and Dauncey noted the potential for credit unions to help create more inclusive financial systems. “We need to get our credit unions to continue innovating, coming up with ideas. And then we need banks to follow their lead,” says Buckland.
A credit union is owned and run cooperatively by its members. This means that surpluses can flow back into communities, either through dividends to members or through grants supporting local groups and initiatives, says Dauncey.
But the potential for credit unions to make a difference depends on who their members are, what their members want and how they are governed.
To truly serve their commitment, credit unions must commit to active engagement with their members and democratic governance, says Dauncey. That means encouraging lively and open engagement in board elections. He also recommends term limits for board members, to ensure that new and diverse perspectives are included.
“Each credit union should take its election period as an opportunity to re-energize itself,” he says. The boards should encourage diverse candidates to run and promote lively campaigning and open debates, he says. The election period can also serve to build membership, since candidates would help to bring in new members who support their ideas.
It takes this sort of open, democratic governance to generate innovative programs that better serve members and their communities, Dauncey says.
Support co-operative models for housing and business ownership
Co-operatives enable people to pool resources for shared ownership, which can open up opportunities for people with limited resources.
There are ways to encourage and support co-operative housing and businesses, which can help people to start accumulating wealth and have more agency in their lives, Dauncey says. “We need systematic methods to enable that to happen.” That could include free training, courses and support programs.
Mechanisms to support investment in local businesses and co-operatives would also help, he says. And the evidence suggests that co-operatives and employee-owned businesses are a safer bet for investors, compared with private businesses. “The failure rate is much lower,” he says.
New regulations could pave the way for more local community investment, says Dauncey. In Nova Scotia, for example, a law paved the way for the creation of community investment funds, which allow people in the province to invest collectively in local businesses. Similar legislation at the federal level has the potential to shift trillions of dollars into local economies, he says.
All of these systemic changes will require community mobilization — people coming together to push politicians for better policies, and to elect politicians who support that change, says Dauncey.
He has a vision for a cultural system based in kindness and cooperation, instead of selfishness and domination. To get there, we need democracy, Dauncey says. “Because if your values are not automatically assumed to be selfish, you’ve got to ask: What are our values, what matters? And you have to use democracy to do that.”
This reporting was made possible through the financial support of Coast Capital, a member-owned cooperative. The article was produced with full editorial independence; Coast Capital was not involved in the story selection, reporting and editing process. You can read all previously published articles here:
- Generation Squeeze: How younger Canadians got left out
- Financial literacy program aims to support Vancouver Island’s marginalized youth
- Who profits from high inflation?
- Governments, employers called on to support a living wage in B.C.
- B.C. student unions fight for financially accessible education
- How does the BC Budget fare on tackling affordability and inequality?