CitationDownload as .RIS
Emerald Group Publishing Limited
Article Type: Editorial From: International Journal of Bank Marketing, Volume 33, Issue 5.
This Special Issue of the Journal of International Bank Marketing focuses on issues related to poverty, particularly the denial of access to the traditional financial institutions to the poor. Even though financial exclusion of the poor is a major issue and has long been tackled by studies in such fields as urban geography and sociology, it is ironic that marketing journals, particularly those dedicated to financial institutions, have been relatively quiet on a problem that some experts contend is accelerating the bifurcation of the world’s population into the “haves” and the “have-nots.” While this single Special Issue does not “cure” the dearth of research in marketing on financial exclusion, it contains five original papers that span a wide breadth and are also deep with insights.
The first paper by Paul Sergius Koku is a literature review on financial exclusion of the poor. Besides highlighting current studies in the area which as indicated above mostly come from other fields, the review also serves as a sort of “one-stop shopping center.” Researchers in marketing who are interested in studying the problem of financial exclusion will find this review useful. Besides distilling the prevailing thoughts on the problem of financial exclusion and their plausible solutions, the review succinctly maps out what has been done thus far. It is a “compass” of sorts to those who want to study the field.
The second paper by Yuliya Komarava Loureio and Laura Gonzalez titled “Competition against common sense: insights on peer-to-peer lending as a tool to allay financial exclusion” is interesting and insightful. The authors argue that peer-to-peer lending platforms which resemble auctions, not only instill a competitive mindset, but also foster peer-to-to lending decisions that are suboptimal given the limited objective decision criteria and personal characteristics that are used. In two experiments designed to test their hypotheses, the authors find evidence of age bias where younger borrowers are offered smaller loans (“younger age” is being used by lenders as a signal for higher risk). More interestingly, the experiment shows that more attractive and successful loan applicants are also more likely to be perceived by lenders as a personal threat. The “take-away” from this study is that lenders in peer-to-peer platforms need to be cognizant of their possible biases and guard against them.
The problems of the working poor, like those of the very poor, have received limited attention in the marketing literature. However, the working poor have a unique problem in the sense that they work and earn income, but are yet too poor to qualify for a loan from the traditional financial institutions. To get through difficult times, the working poor often avail themselves to the supposed short-term loans from payday loan institutions. Unfortunately, these short-term loans more often than not turn into “debt treadmills,” without an easy escape route, into which the working poor are caught. The ongoing debate is whether payday loans “do more harm than good” to the working poor? Paul Sergius Koku and Sharan Jagpal have undertaken an extensive review of the literature on public policy and economics and have proposed a new policy angle to the problem – that the government requires the traditional financial institutions to set aside a certain percentage of their loans for the working poor. The authors acknowledged that critics of such a proposal might view it with skepticism and even dismiss it as unworkable bureaucratic intervention. They, however, noted that the proposal is consistent with the Corporate Social Responsibility (CRS) viewpoint of corporations and the underlying social contract on which the major banks were bailed out by tax dollars during the recent financial crisis.
Crowd funding has become a popular and yet unorthodox way of funding many innovations. While it has been largely used by for-profit ventures, not-for-profit organizations are also beginning to “join the act.” The laws in different countries do, however, act as a deterrent to or a promoter of the use of crowd funding as a source of capital for social causes. Nadiya Marakkath and Laurence Attuel-mendes studied the regulatory climates in France and India. They held in-depth interviews with some users and likely users of crowd funding for social causes in France and India in order to gain a deeper insight into this social/financing phenomenon. On the basis of these interviews, the authors offer their views on how different regulatory climates either inadvertently stifle or encourage the use of crowd funding of social causes. They call for the elimination of regulations that stifle crowd funding of social causes as a means to make financing more easily available for not-for-profit ventures.
The massive indebtedness of college students and recent graduates is a common knowledge, however, there is no consensus on how these folks can work their way out of debt or avoid getting into one. Being overwhelmed by large debts and the inability to meet their financial obligations in a timely manner leads many college students and recent graduates to earning low credit scores which leads them to becoming “financially excluded.” Alvin J. Williams and Ben Oumlil, who have studied this issue over a considerable period of time, think that part of the larger issue is the financial knowledge deficit of college students. The authors have therefore in this study developed a conceptual model that enhances the financial acuity of college students. College students can also use the model as a framework for making intelligent financial choices.
“Happy reading” to readers of this Special Issue; I also wish to take this opportunity to invite them to submit their high-quality manuscripts on the marketing of financial institutions and its associated issues to the International Journal of Bank Marketing for publication consideration.
Professor Paul Sergius Koku - College of Business, Florida Atlantic University, Boca Raton, Florida, USA