The impact of charity banking challenges in the UK

The impact of charity banking challenges in the UK

As the demand for charities and voluntary organisations continues to grow, access to reliable banking and effective financial management is vital for sustaining their services. Despite this, a growing number of charities and voluntary organisations across the UK are struggling to access suitable banking services, putting their ability to deliver services and support at risk.

Challenges in charity banking

Voluntary organisations remain disproportionately concentrated in London and the south of England, with these regions accounting for 48% of income and 64% of assets in England [1]. A 2024 survey by the Charity Finance Group revealed that 92% of voluntary organisations encountered at least one banking issue over the past two years. Common problems included administrative complications such as delays in updating signatories, misplaced documents, and difficulties opening accounts.

Of greater concern is the impact of unexpected account closures, with 11% of voluntary organisations losing access to their funds without clear explanations. Poor communication between banks and charities only worsens these issues. 26% of charities reported that compliant documents were rejected without clear reasoning, and 27% reported that banks failed to explain their requirements or provide clear information when resolving issues.

Over half of the organisations surveyed said that banking difficulties caused significant stress for trustees and volunteers. For smaller charities, the time spent resolving banking issues could have been better spent in delivering services.

The growing issue of financial restriction and exclusion

A recent report from the Muslim Charities Forum reveals a troubling pattern of financial restriction and exclusion affecting charities across the UK. Muslim-led charities, in particular, face disproportionate scrutiny from banks, leading to delayed fund transfers, restricted access to banking services, and even account closures.

The report highlights that 68% of Muslim charities struggle to open bank accounts, while 42% have had their banking services withdrawn entirely. Despite strict adherence to banking regulations, these charities often find themselves unfairly targeted. According to the report, there is evidence that “structural Islamophobia plays a role in these financial challenges, with Muslim-led charities often unfairly targeted by banks for perceived risks without concrete evidence of wrongdoing.”

As a result, Muslim-led charities often face a significant administrative burden, with 78% reporting severe strain on human resources due to ongoing banking difficulties. This diverts time and resources away from their core services, including vital humanitarian work.

The cost of banking failures

Financial restrictions on charities have real-world consequences. Delays in transferring funds can mean the difference between life and death in humanitarian crises. When banking services are unreliable, projects are postponed, partnerships erode, and some charities are even forced to close entirely. The ripple effect of banking failures extends beyond administration – it directly impacts the lives of vulnerable communities that depend on charity services and support.

What needs to change?

Recommendations for banks, regulators, government, and charities have been outlined in these reports, including those from the Charity Finance Group and Muslim Charities Forum. They stress the need for greater transparency, fair decision-making, improved financial inclusion, and systemic reforms to ensure charities can access the banking services they need.

To read more about the impact of charity banking in the UK, take a look at the reports below.

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