Financial Vulnerability can be described as a
state in which a person is prone to experience financial difficulties (FCA
2015). Every person can become vulnerable as it is not always personal choices
or lack of financial acumen that decide upon financial security of an individual
(Baird and Hartley 2015). Vulnerability can be both triggered and escalated due
to commitment of multiple issues linked to it.
In term of the financial
vulnerability, small business and individual face lots of challenges. In
vulnerable times small business strive to survival and development as well as
individuals to be able to relieve themselves from debts quickly (marston).
As the development
of economy, many small businesses want to raise money to gain greater
economic benefits, however due to their small size they lack access to direct
financing, therefore they are forced to seek private finance which increases
their risk which puts them in financially vulnerable position.
In 2008, the government predicted
that over 100,000 individuals would fail during the next two years in the USA
(Sharon Cheuk). Financial vulnerability with respect to the individual is
defined as lack of knowledge, information or capacity.
For people of old age who lack
mental capacity is difficult to adopt and understand.
According to a survey about people
experiencing dementia three quarters had a difficulty managing money and only
21% had managed them on their own and one third had a hard time managing the
finances of the person they support. (Alzheimer’s Society 2011).
For disable and cognitive
impair people, their ability of managing finance is mainly influenced by
connection. They use less credit cards than non-disable people when they run
out of their money, which shows that they may not know about the financial
products. They may also have problems about transport, which make them gain
less suggestion and service. They may lack the ability of read and write as
well, which result they cannot understand the financial products and terms
It seems like there may be
connection between disabled people not using most of financial products because
of the lack of access and connection. Disabled and impaired people use less
credit related product than non-disabled people which may be showing lack of
knowledge or access. The problem with access imposes receiving less service and
advice. Being blind may suggest lack of knowledge for because there’s lack of
materials made in Braile. (Ipsos Mori, 2013). For a poll in 2013, we found
that 23% of people who are disabled have difficulty in accessing the bank or
building society. (Alzheimer’s Society, 2011).
Some households are forced to
manage their debts through their disposable income however, fluctuations in the
interest rate and adverse income effects often have influence causing financial
hardship.Household financial vulnerability is always assessed by inspecting
their debt service ratio (DSR). According to the Canadian bank, in term of
financial vulnerability, the key problem is not the level of debt, but whether
they are able to repay it. DSR reflects the ability of
debt-servicing, and the Bank of Canada has regarded DSR as the
standard of the household financial vulnerability. According to the
survey, DSR kept stable about 14% from early 2009 to the first half of 2015.
Since mid-2015 DSR increased slowly, rising to 14.3% in the second quarter of
2016. The higher the DSR the more vulnerable is the household.
vulnerability is related to the ability of the debt-servicing (Ottawa
Financial vulnerability is often caused by
uncertainty about price volatility. The volatility of financial asset
prices has accumulated a great deal of financial risk. In today’s
financial environment, the economic develops quite quickly which results
in inevitable fiercely competition, so there will be many
reckless loans under pressure, which do not have ability to pay
in the future.