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Bank shot

Canada's big financial institutions can make a difference. They can help the poor get less poor. So why have they abandoned the North End?

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Rick Waugh is one of this city's outstanding products. The son of a Winnipeg firefighter, Waugh began his career as a bank teller in Windsor Park and retired last week as the head of Scotiabank, Canada's third-biggest lender.

During Waugh's 10-year tenure as Scotia's CEO, he tripled the bank's profits to $6.5 billion and beefed up Scotia's presence around the world. Scotiabank now does business in 50-plus countries, and makes almost as much from its operations abroad as it does in Canada. If you've ever taken a winter holiday in Puerto Vallarta, you've probably spotted the familiar red colours of a Scotiabank ATM.

Winnipeg exported Waugh to Bay Street. Waugh exported Canadian banking all over the world.

Now, if only we could import a bank back into Winnipeg's North End.

There is no Scotiabank branch in most of Winnipeg's poorest neighbourhoods -- Elmwood, Spence, Burrows, Point Douglas. There is a branch on the very edge of the North End, near Main Street and Inkster Boulevard, but that's a long hike if you live on Manitoba Avenue.

That's not to pick on Scotiabank. Nearly all the Big Five banks have abandoned Winnipeg's inner city in recent years, ceding ground to Money Marts and Cash Stores, which have, in some instances, opened in the very buildings the banks abandoned. Even with provincial regulations that are among the toughest in the country, Money Marts and Instaloans charge massive fees to cash cheques and huge interest on short-term loans. Manitoba has the most payday lenders per capita of any province, by far.

If not payday lenders, poor people use pawn shops, which also proliferate in the inner city in the absence of banks. Take Dorothy Thomas, a grandmother I interviewed last week who is sleeping in her car and who pawned her jewelry, including her dead husband's wedding ring, for some emergency money. She is paying $330 in monthly interest to keep them in hock.

Most of us, if we're ever in a pinch like Thomas, have overdraft protection. If you're middle-class, you probably haven't even set foot inside a bank branch since you renewed your mortgage. We bank online and stop at ATMs for cash or use our Aeroplan Visas. So it's hard to understand why having a local bank matters.

Jerry Buckland, a professor at the University of Winnipeg's Menno Simons College, has spent much of his career explaining why.

Put simply, says Buckland, banks help poor people get less poor. Access to proper banking services --a savings account, an RRSP, a way to establish a credit rating so you could get a mortgage or a small-business loan -- helps people get ahead, bit by bit.

So much of poverty involves lurching from one emergency to another. You get evicted because your apartment is going condo. Your kid loses his retainer. Your old beater needs a new fan belt. Having a proper bank also helps tide you through those emergencies.

My parents have banked with Scotiabank most of their adult lives, and the bank helped them get through some lean years. A little line of credit probably kept me and my sister in bus passes and winter boots when my dad went to law school when I was in junior high. Now, it's helping my parents get ready to retire with a mess of RRSPs and TFSAs and other complicated acronymed accounts many poor people have never even heard of.

But that doesn't mean poor people are financially illiterate. They actually make rational, well-informed choices about where to take their money, says Buckland. Despite the eye-popping fees, Money Marts are faster, more convenient, easier to get to and more transparent than banks. In interviews with many poor people -- which form part of Buckland's recent book Hard Choices: Financial Exclusion, Fringe Banks and Poverty in Urban Canada --he found people would rather pay a big cheque-cashing fee up-front than see their last $12 disappear in unexpected bank fees and charges. And they tend to need their money right away, with no waiting five business days for a cheque to clear. They also prefer the one-on-one service at a Money Mart, where, the fact is, staff are often nicer than bank people. At banks, there's complicated paperwork and ID requirements. Tellers don't always explain things clearly. And there can be a bit of a snooty vibe, starting with the security guard at the door.

It's not just about opening a neighbourhood branch that people can get to without spending $5 on a bus ride. It's also about offering services tailored to the poor. That means much shorter holds on cheques and some access to the kinds of short-term loans that make Money Mart so useful in a pinch. Credit cards and lines of credit aren't ideal because they can saddle people with long-term debt. Small, short-term loans with flexible repayment schedules make more sense.

Those don't exist, and nor does any willingness on the part of the Big Five banks to open branches in poor neighbourhoods, despite record profits that, taken together, are more than double the Manitoba government's entire annual budget.

Rick Waugh got his start at a neighbourhood bank. The same kind of neighbourhood bank helped my parents remortgage their house so their daughter could go to a fancy university. Imagine what a proper bank could do for the kids on Salter Street.

maryagnes.welch@freepress.mb.ca

Republished from the Winnipeg Free Press print edition November 3, 2013 A1

History

Updated on Sunday, November 3, 2013 at 8:41 PM CST: Formats headline.

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