July 2005

Help for low-income Victorians

The State Government has announced a $400,000 grant package to expand existing no-interest loan schemes and to start new schemes for women leaving prison and women fleeing domestic violence.

Deputy Premier John Thwaites and Minister for Community Services Sherryl Garbutt said Good Shepherd Youth and Family Service would expand its existing no-interest loan schemes into six new metropolitan and rural areas where there were pockets of disadvantage, as well as create specific programs for women starting new lives after prison or violent relationships.

‘Most of us are lucky enough to take credit for granted because most of us can pay it back on time but for people who least can afford it, interest rates can be up to 500 per cent,’ Mr Thwaites said.

No-interest-loan schemes (NILS) offer people on low incomes the opportunity to buy domestic appliances like refrigerators and washing machines without buying high-interest credit from retailers.

Loans average $800 and are capped at $1000.

Last financial year accredited NILS groups lent out $4 million in no-interest loans to low-income Australians including $500,000 to 850 Victorians.

Mr Thwaites said microcredit, the provision of small loans with little or no interest, helped low-income Victorians avoid entering a debt spiral.

He said an increasing number of banks and financial institutions were developing microcredit products.

2005 has been declared the United Nations’ International Year of Microcredit.

Mr Thwaites said one of the best features of the NILS program was that it was more than just a loan.

‘These loans come with strings attached but—unlike other loans—these strings include financial mentoring, support and referral services.’

Mr Thwaites said the $400,000, half of which will come from the Department of Human Services and half from the Department for Victorian Communities, will help Good Shepherd prevent the debt spiral that can cripple low-income families.

He said Good Shepherd would expand its no-interest loans schemes into the local government areas of Hume, Maribyrnong, Brimbank, Darebin and Warrnambool and the Mallee Region.

Ms Garbutt said the Government was determined to improve the lives of all Victorians.

Mr Thwaites and Ms Garbutt launched a research report on the benefits to families of the NILS program at the Good Shepherd’s Microcredit, More Than Just Small Change conference in Melbourne.

Ms Garbutt said the report examined the experiences of families using no-interest loans.

The report NILS—Small Loans—Big Changes reports the experiences of 40 families who have received these loans and showed the flow-on advantages of the scheme.

‘Apart from the obvious benefits of gaining a fridge or a washing machine, the story is one of enhanced connectedness and social participation,’ Ms Garbutt said.

‘NILS loans provide a pathway to a better quality of life through developing financial skills, building capacity to participate in the community and labour market and in building a sense of trust in others,’ she said.

Mr Thwaites said the Government would sponsor a major international Towards an End to Global Poverty: Empowering Communities and Individuals Through Financial Inclusion conference on microcredit in August.

It will feature examples of successful programs and examine how various forms of asset-building, such as shared savings, financial literacy and small loans can be used to address disadvantage in developed and developing countries.

Good Shepherd Youth and Family Service Social Policy Research Unit Manager Marilyn Webster said the Good Shepherd Sisters established Australia’s first microcredit program in Melbourne in 1980 with a $5,000 fund.

Twenty-five years later, the NILS network had $4 million available to allocate in no-interest loans.

Ms Webster said the money was ‘recycled’ when loans were repaid and the schemes had a very low default rate.

• For more information on the conference visit http://www.icms.com.au/microcredit2005.