Financial exclusion hurts new Canadians preventing them from being financially stable and contributing to Canada's economic success.
June 16, 2022
Financial exclusion costs immigrants, refugees and racialized individuals in Canada income and opportunity but, if asked, they might have difficulty defining it, much less even knowing what it means.
Financial exclusion refers to a lack of access to financial services or products ranging from bank branches and accounts to credit cards, loans or mortgages. Research estimates between one and five per cent of Canadian adults are financially excluded. This leaves many of these individuals to seek banking services through payday lenders and other poorly-regulated organizations offering credit products with unnecessarily high rates of interest.
Francis Fong, Managing Director and Senior Economist at TD Economics says financial or economic inclusion, as it is sometimes referred to, runs counter to financial exclusion. It refers to the ability to take part in the economy and the financial system.
“It means being able to participate in the education system, the labour market, in the business community, in accessing financial products, free from any systemic barriers or challenges that one might face,” Fong adds.
Fong believes it is important for newcomers to Canada to understand the concepts of financial exclusion and inclusion so they are prepared for the barriers they may face in settling into their new country.
“The challenges that many face when trying to integrate into the labour market are generally well understood. These include language barriers, Canadian experience requirements, foreign credential recognition, etc. However, less understood are some of the systemic or unique barriers one might face in, for example, accessing the financial system, which is a key tool in successfully settling in the first place,” says Fong.
He indicates navigating the Canadian financial system can be particularly challenging for immigrants, refugees and racialized individuals. They may have difficulty accessing loans or investment products to build wealth. However, Fong believes there are reasons for optimism in addressing financial exclusion such as increased public awareness of the issue and several different initiatives across the financial sector in response to make banking more accessible.
For newcomers, Organisation for Economic Co-operation and Development (OECD) research suggests strengthening financial knowledge can help combat economic exclusion and build an understanding of the products and services available through the Canadian financial system.
Fong suggests financial inclusion of immigrants is key to Canada’s future economic growth. “Canada is a nation of immigrants. The immigrant community has always played a critical role in addressing skilled labour shortages, in opening up trade, enriching our communities – that role is only going to become more important as the Canadian population ages. In the coming decades, immigration is going to account for close to 100% of our net population growth, meaning our economic growth is wholly-dependent on how well we integrate our newcomers.”
Making financial services more accessible to new Canadians ensures that economic growth can be fully unleashed.
To learn more about steps to strengthen your financial knowledge and support your own successful integration in Canada, download Windmill’s Skilled Immigrant Career Success Guide.
