Finance, wellbeing and helping everyone do and be

How do we better understand the complexities of poverty and disadvantage? The “capability approach” developed by Nobel Prize-winning economist Amartya Sen is one approach and it is becoming increasingly adopted - and successful.

Sen’s approach is to concentrate on understanding human freedom. The question that originally motivated him was: what are people actually able to do and be?

This approach can help society understand the multidimensional nature of poverty and social exclusion and the real limitations people face in practice.

For those who use the capability approach, when asking whether someone is actually free to do something, the focus should be on what kind of factors might constrain or prevent people from undertaking a particular action. Rather than just looking at whether a person has the right to do it.

In contemporary society, the experience of poverty is often multidimensional, with different areas of deprivation interacting to multiply the challenges individuals face to get out of poverty. In that sense, helping people move out of poverty requires an approach that tackles the issues surrounding their experience of poverty.

Intersecting impacts

Consider someone with a physical impairment who is currently income poor because they are experiencing long-term unemployment. Their physical impairment is one which restricts the range of transport options available to them, requiring access to a specially adapted car. Being unable to access transport creates other challenges for the individual, including their ability to travel to and from work.

This person may be perfectly capable of undertaking work but because they are unable to access transport, they are unable to get a job. And so they continue to live in poverty.

For this example, problems in the domains of health, income and access to transport all intersect to impact what the person is actually able to do. Addressing a complex situation like this requires efforts from a variety of stakeholders ranging from government support through to support from community organisations, a potential employer or from other people in their support network.

Inclusive economies

Because banks play a major role in the formal economy, they are an important stakeholder in helping support people and communities.

As a central point of contact into the financial world, banks help to shape the connectivity and inclusiveness of the economy, creating the opportunity to help people in situations where they might otherwise experience exclusion and deprivation.

Financial education programs like ANZ’s Saver Plus are valuable in this regard - they help build the financial capabilities of people at the same time as increasing their inclusivity in the economy.

Some limitations on freedom are intuitive and straightforward – like in the transport example above. But some limitations are much more complex and require deeper understanding of a specific context.

As the ANZ Tony Nicholson Research Fellow, I will be researching some of the more complex, multidimensional problems which contribute to financial insecurity and negatively impact the financial wellbeing of individuals.

This work will be used to guide practical responses addressing these problems, and to inform existing policies and programs currently being undertaken at the Brotherhood of St Laurence.

Dr. Jeremiah Brown is the ANZ Tony Nicholson Research Fellow working in the Research and Policy Centre at the Brotherhood of St Laurence. He will be sharing his research for the fellowship later in 2019.