Different and Unequal: Payday Loans and Microcredit in Canada

The current practice of offering micro-financial services through quasi-financial organizations places at a significant disadvantage those unable to otherwise access mainstream credit. In a survey of the history, nature and current scope of microcredit and payday lending in Canada, this paper argues that the expectation of full cost recovery in the provision of these services is economically detrimental to those financially excluded. Yet, these fringe banking services have the potential to be a pathway to financial inclusion, and with it the economic improvement of the individuals who use the services, if we acknowledge and adjust-through regulation-for the social costs and benefits that exist over and above the private sector expenses and revenues.