Social Networks and Financial Exclusion in Australia: Experiences with Microfinance and Life Outside the Mainstream

Abstract

Financial exclusion has become increasingly prevalent in Australia. While solutions to this challenging social policy problem have, thus far, tended to focus on addressing financial market failures, this thesis looks instead at the role social relations can play in assisting individuals overcome financial exclusion. The discussion is framed by an extensive body of literature pointing to the valuable instrumental benefits that can flow from social capital and social networks. This thesis begins by tracing the intellectual history of these concepts and then specifically examines the role of social networks in addressing financial exclusion.

Through a series of semi-structured interviews with a group of financially excluded people in Melbourne and Canberra, this thesis will provide a better understanding of the lived experience of financial exclusion. Research participants were drawn from the client base of an innovative Australian microfinance program, the ‘No Interest Loan Scheme’. Importantly, evidence was also collected on the positive impact such microfinance programs can have in both promoting financial inclusion and improving the lives of their clients. The definition of financial exclusion used in this thesis centred on the inability to access affordable and appropriate credit. Using this definition, I was able to document how financial exclusion, including its social consequences, manifested for the participants in my study. High degrees of exclusion from the mainstream financial system and the use of the fringe credit market emerged as recurrent themes amongst participants. Social distance was identified as a key source of exclusion.

The types of social networks that the research participants had were documented and a picture emerged of how social support, when it was available, could be drawn upon to help mitigate exclusion. The way that social networks help or hinder financial exclusion was also considered. Significantly, a comprehensive examination of this nature into the social networks of financially excluded people in Australia had not been conducted before, so this thesis makes an important contribution to the literature. In particular, my findings serve to further validate the benefits associated with social capital and deliver new insights into the content and quality of social relations in Australia.