Expansion of community finance initiative
12 Oct 2016
3 MINThe Community Finance partnership announced today that its low and no interest loan schemes are now available in five new regions, after receiving additional government funding in the May 2016 budget.
The initiative, which is run by Good Shepherd New Zealand and BNZ, with support from the Ministry of Social Development and delivered by community partners like the Salvation Army, is now available in Invercargill, Wellington, Whangarei, Palmerston North and Christchurch in addition to the pilot locations in Auckland.
A pilot was established in 2014 to provide loans to a group of New Zealanders described as ‘financially vulnerable’ – meaning they don’t meet standard bank criteria and have exhausted their Work and Income options. As a result, many are forced to take out loans with alternative lenders, many of whom charge high interest rates and fees.
“Community Finance provides access to a fair, safe and affordable line of credit for people living on low incomes, and we are delighted that the success of the pilot led to the funding that is enabling us to launch our new regions today,” said Chief Executive of Good Shepherd New Zealand Fleur Howard.
“But we know it’s so much more than a loan. By connecting with community loan workers, people learn life skills like managing their budget better and become more savvy in their understanding of the dangers of third tier lenders. There are broader societal benefits in what the loans deliver too – a reliable car for many of our customers is what they need to hold down a full time job. A computer can help with further education”, she said.
BNZ, which provides the lending, said 280 loans had been approved and estimated that the $700,000 of lending to date has saved clients more than $380,000 in interest and charges when compared to borrowing the same amount through alternative lenders.
Chief Executive Anthony Healy said the bank had been a proud partner since inception and had now committed $60 million in lending over the long term as well as expertise and advice where needed.
“Community Finance addresses a very real need and BNZ is proud to be part of that. But what is most exciting is seeing what comes next for a client; what the loan enables. I heard about a young man who came to us and said that the only thing stopping him from getting a job was having a car. We were able to arrange a StepUP loan with Community Finance which meant he could buy a second hand car. We were delighted when he told us he had secured an apprenticeship the next day,” he said.
Government evaluation of the Community Finance pilot showed there were other benefits from the financial conversations that happen as part of the loan process. This includes strengthening people’s financial capability and increasing the wellbeing of families and communities.
Major Pam Waugh, Territorial Social Services Secretary for The Salvation Army said, “Running a tight budget can be hard enough without the added pressure of predatory lenders on your back. The reduced stress these Community Finance loans deliver can make such a difference to people’s family life.”
The initiative currently partners with The Salvation Army and Aviva in the new locations. New community provider partners and new locations will be added over the next 6 months.
About Community Finance:
- The Ministry of Social Development contributes operational funding to Good Shepherd New Zealand and the community providers.
- In the 2016 Budget, Community Finance was awarded an additional $4.2 million of operational funding over four years.
- Good Shepherd New Zealand has been supported through the development of the initiative here by Good Shepherd Microfinance in Australia which has been operating in Australia for more than 35 years.
- BNZ has committed $60 million in lending to the initiative.
- Community Finance loan products have no fees or charges and are available to people on low incomes who are eligible for a Community Services Card.
- No Interest Loan Scheme (NILS) is available for amounts up to $1,500 for essential goods and services. StepUP, the low interest loan, provides loans of up to $5,000 with up to three years to pay loans back.
- The most popular purpose for a StepUP loan is for second hand cars or car repairs.
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