Modelos teóricos de la procrastinación académica

The financial system in the UK, just like the US, has evolved into a two-tiered market which consists of the mainstream institutions offering traditional banking services such as savings and chequing accounts, and alternative financial institutions offering very short-term loans, usually for one month. The short-term financial services provided by the latter attract high interest rates due to the unsecure nature of the credit. Empirical studies in the US relate the growth in the industry to the concept of spatial void hypothesis (Smith et al., 2008; Smith et al., 2013) which implies that these establishments are filling a void created by the absence of mainstream financial institutions.

Contrary to this assertion, Sawyer and Temkin (2004), Fellowes and Mabanta (2008) and Fowler et al. (2014), discovered that these establishments are also present in locations where mainstream financial organisations are located. Cover et al. (2011) further revealed disparate findings, with mainstream and alternative financial providers’ locations co-existing in similar locations in three cities, thereby questioning the validity of the spatial void hypothesis. Perhaps this ‘void’ is less spatial and more about different groups’ economic ability to access mainstream providers. This view strongly supports a more socio-economic type analysis in order to examine the void, as against purely spatial analysis. In addition, another study identified that limited access to mainstream banking facilities is a further factor that promotes patronage of fringe banking services (Lim et al., 2014).

33 2.4.1 Fringe banking outlets and socio-economic deprivation

The literature on the geography of fringe banking outlets, like that of gambling, suggests that they favour disadvantaged neighbourhoods. Studies on fringe banking locations are mostly from the United States. Graves (2003) suggested that payday lenders are targeting deprived neighbourhoods after carrying out a comparative analysis of payday loans and mainstream financial institutions’ locations in eight different counties in the US. Area characteristics were determined using socio-economic indicators (including ethnicity, household income, poverty level, renters and median house value). Analysis of mean differences revealed that payday loan outlets have higher presence in areas with high proportions of minority ethnicity, renters and poor households, compared to mainstream banks. He further explained that the patterns are not clearly defined in areas with low populations where available retail spaces exert the highest influences on the location of these retailers.

Gallmeyer and Roberts (2009) examined the relationship between the geographical distribution of payday lenders and economic and demographic characteristics also in the US.

The study found significant differences in the means of outlets across various SECs, with higher means in areas with high proportions of deprived households consisting of ethnic minorities, immigrants, young adults, low incomes, poverty rates and military affiliations.

Regression showed a curvilinear relationship with payday loan locations not concentrated in the poorest areas, but rather in mid-poverty areas. Analysis further revealed that the following socio-economic variables are significant predictors of payday loan locations, even after controlling for income; areas with high proportions of senior citizens military personnel, foreign born and low incomes remaining significant predictors. It concluded that income factors and labour force composition are the major driving forces in payday loan distribution.

Due to the small size of the study area, regional and local variations in economic indices might reduce the generalisability of the results of this research.

Cover et al. (2011) explored the spatial distribution of fringe banking services in four American cities using a regression model to establish the influences of market factors, poverty and ethnic area characteristics on observed patterns. The market factors models reveal that levels of commercial activities are a major determinant of location of fringe banking services, even after controlling for other factors, in all the study areas. Likewise, poverty indicators play a significant effect on the distribution of fringe banking locations revealing a curvilinear relationship, signifying that these retailers prefer middle

34 impoverished areas compared to the poorest communities. Presumably, the very poorest have the lowest likelihood to meet repayment obligations, so these areas do not offer any attractiveness to these retailers. In particular, Hispanic ethnic minority is a major positive correlate of fringe banking locations.

Burkey and Simkins (2004) carried out a study which examined the factors that affect the location of payday lenders and mainstream financial services in North Carolina in order to explain the location preferences of these retailers relative to SECs. Regression analysis revealed that traditional banks were more decentralised in their location patterns, whereas payday lenders were concentrated in areas of high population density. Both retailers tended to favour high income inequality areas, usually highly commercialised areas. Black ethnic minority areas were significant predictors of payday lenders and not bank locations, while high and low education levels were negative and positive correlates of traditional bank and payday lender locations, respectively. Very low income and benefit claimants had a negative relationship with payday lenders only. Lack of comparative analysis with a different locality is a strong limitation of this research.

A national study by Fowler et al. (2014) compared the location of fringe banking retailers and traditional banks with area SECs (income and ethnicity), by examining the location of each fringe banking group (pawnbrokers, cheque cashing and payday lenders). These retailers were prevalent in neighbourhoods with few college-educated residents and in mid-poverty areas. In addition, mid-poverty was a significant predictor of fringe banking location, but these retailers were significantly pronounced in mid-poverty areas compared to the very poor areas. Hence, socio-economic status alone did not explain the concentrations of fringe banks in Black, Hispanic and reservation communities. Barth et al. (2015) also carried out a national investigation on the location of payday lenders using regression analysis and discovered that African American residents had a significant positive effect on the locations of payday loan outlets. Even after accounting for multicollinearity among key variables, African- American residents remained significant. Poverty rates and persons aged 15 and under were also positive explanatory variables. In addition, higher education had a significantly negative effect on payday loan locations. Similarly, Prager (2014) identified the key socio-economic correlates of the location of alternative financial service providers with a strong presence in communities with high proportions of Black minority individuals, persons with little or no education and individuals with poor or no credit score. A limitation of these studies (Fellowes and Mabanta, 2008; Fowler et al., 2014; Prager 2014) is the scale

35 of the analysis. At national level, it is difficult to disentangle the complex relationships, thus more localised analysis would unravel clear cut patterns.

In the UK, although there has been increasing generalisation that these fringe banking retailers particularly cluster in poor neighbourhoods (Hurst and Blackwell, 2016;

Townshend, 2017), and based on evidence from North America, the geography of high yield interest lenders has not been fully researched empirically (Glasgow Centre for Population Health (GCPH), 2016). An empirical study by Whysall (2014) attempted to examine the relationship between these retailers and socio-economic deprivation. The study found a significant relationship between payday loan outlets and the Index of Multiple Deprivation (2004). In addition, the available evidence in the UK suggests that there are limited studies to demonstrate that fringe banking outlets are located in areas of high socio-economic deprivation. This resonates the need for local research in the UK.

2.4.1 Effects of patronage of fringe banking services

The major concern regarding these high yield interest lenders is that interest charges for their products are extremely high, which raises the question of ‘predation’, highlighted by a number of North American scholars (Graves, 2003; Stegman and Faris, 2003; Lawrence and Elliehausen, 2008). Although there is a large demand for high interest loans, the success of the industry “is significantly enhanced by the successful conversion of more and more occasional users into chronic borrowers” (Stegman and Faris, 2003, p.25). This is achieved by continuous renewal of loans after their initial term (King et al., 2006). What is more, Gallmeyer and Roberts (2009, p. 533) contend that “pay day lenders have become an indicator of economically distressed communities just as they function as an aggravating factor in distress” (p. 533).

In the UK, Gibbons et al. (2010) reviewed the pay day loan market and arrived at two salient conclusions: pay day loans are expensive and there is a very high probability of indebtedness and repeated borrowing by users. Therefore, there is a high risk that agglomeration of these lenders in deprived neighbourhoods in the UK will continue to damage their delicate ‘eco-system’ thereby adding to the problems of inhabitants of deprived neighbourhoods.

Furthermore, the reviews carried out in the UK by the House of Commons Business Innovation and Skills Committee (HCBISC, 2014) and Glasgow Centre for Population Health (GCPH, 2016) both revealed the negative aspects of these retailers. GCPH

36 emphasised that there is an inherent risk of burgeoning debt, financial hardship and psychological ill-health for most of the customers patronising these retailers. Similarly, the HCBISC (2014) review alluded that payday loan borrowers are susceptible to the danger of exacerbating debt and argues that there is a need for a general review of the industry.