The financially excluded are often denied basic financial services from mainstream banking institutions, leading them to high-cost fringe finance institutions (FFIs) such as payday loan companies and pawnshops. While strategies to address financial exclusion often include financial capabilities education, there does not appear to be evidence suggesting such education is an appropriate solution. The purpose of this study is to explore the relationship between financial capability and financial exclusion with survey data collected from the Canadian city of Kamloops located in the southern interior of British Columbia.
This exploratory research addresses the objective with survey data collected on the banking habits and financial capability levels of fringe finance users in a Canadian city.
The results imply that fringe finance users do not have lower levels of financial capability than those who do not use fringe finance, when education and income are controlled.
Limitations include the relatively small survey sample of 105 people in one urban center in Canada.
While financial literacy is acknowledged to be an important life skill for all members of society, there is no conclusive evidence suggesting it is a solution to financial exclusion. This is the first research to examine the relationship between financial exclusion and fringe finance use in Canada by collecting data on fringe finance users with face-to-face interviews.
