enhancing food security and physical activity for maori, pacific and ...

Enhancing Food Security and Physical Activity for Māori, Pacific and Low-income PeoplesMethodsThe following databases were searched in December 2008 and February 2009 for theperiod since 1998: Index New Zealand, Scopus, Web of Science, Medline, Te Puna,and Google Scholar. The Ministry of Health website was also searched at this time.Terms used in the search were: food security or food insecurity; fringe lending, fringemarkets, fringe lenders, loan sharks, credit markets; and, low-income, financialresources, household spending, household income.Interviews with four key people with knowledge of the impact of the fringe lendingmarket on consumers were also undertaken between January and March 2009; twowere policy makers and two representatives of community organisations. A semistructuredinterview was used as a guide and participants were asked about theirviews on the fringe lending market in New Zealand and its impact on Māori, Pacificand low-income families. The findings was analysed according to the interview guideand the key themes that emerged.Literature Review ResultsThe international contextThere is a growing literature on the fringe lending market and its impact on lowincomeand vulnerable communities. There has been a rapid increase in the numberof fringe lenders over the last two decades in the US. 3 This increase is largely to meetthe unmet financial needs of low-income consumers who cannot access mainstreamfinancial services. In the US in 2000, the estimated annual transaction of fringeservices amounted to approximately 280 million transactions and gross revenues ofmore than $168 billion. 3Furthermore, there are more pawnshops than credit unions and banks across the US.Lack of access to the mainstream financial market (financial exclusion) forcesconsumers to resort to high cost fringe lenders. 4 5 The level of financial exclusion inCanada is similar to that of the UK at approximately 6 percent to 9 percent, while theUS is 12 percent to 13.5 percent, with low-income people as high as 41 percent. 5There is mounting concern in the US, Canada, Britain and Australia over the high costof credit in the fringe lending market. 6 Vulnerable people on low incomes are most atrisk, as well as those who are unemployed and living on social security payments,those with bad credit, and indigenous and ethnic minority communities. 6 Evidencefrom the US indicates that fringe lenders target and thrive in minority communities. 3 7 8The consequences of borrowing from fringe lenders can be costly and can generate orprolong financial hardship for low-income consumers. ‘The high cost of credit can infact impede their ability to overcome financial difficulties, and can deplete their incomeand ability to save’. 4 Not surprisingly, a large number of consumers becomedependent on fringe lenders and their high cost credit for everyday expenses turning‘occasional users into chronic borrowers’. 9A number of studies suggest possible solutions, not only to reduce dependence onfringe lending but to improve access of low-income households to the mainstreamfinancial market. The answers are similar. A few point out that short-term loans arean essential service for low-income consumers but argue for tighter regulation toensure that the cost of credit is reasonable and reflects the risks by consumers. 3 4Howell and Wilson suggest that in order for lending to be ethical all credit providersshould assess a borrower’s ability to repay the loan before providing credit. They44