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A community finance group is calling for millions of dollars to be invested in zero-interest, small personal loans to help the poorest of the poor denied credit by mainstream lenders.
Ngā Tāngata Microfinance Trust has provided 1000 interest-free, fee-free loans in the past 10 years to people on low incomes and carrying heavy debt. File photo
“These loans help to break the cycle of poverty and problem debt and improve the financial well-being of the loan recipient and their families for generations to come,” Ngā Tāngata Microfinance Trust (NTMT) chief executive Natalie Vincent said.
The trust had recycled half-a-million dollars in start-up loan capital from Kiwibank, which had grown to a portfolio of $2.5 million in community loans, valued at a maximum of $3000 each to repay debt or $2000 for purchases, Vincent said.
“When you provide fair and equitable loans that people can afford to repay, coupled with ongoing support, they are motivated and able to improve their financial stability,” she said, adding all borrowers had to work with a financial mentor to qualify for assistance.
“So 80 percent of the loans that people apply for are approved, and we’ve got a 94 percent repayment rate.”
The zero interest and fee-free loans had a multiplier effect because research indicated the loans generated a return of $3.60 for every dollar spent, in terms of improving the financial well being of clients, Vincent said.
“Every one of these loans has helped low-income New Zealanders and their whānau to get ahead with money, enabling them to pay off debt or buy the essential items they need. Importantly, working with a financial mentor means our borrowers learn how to manage their money in the future.”
The charitable organisation had provided 1000 interest-free, fee-free loans in the past 10 years to people on low incomes and carrying heavy debt but would like to do more.
Vincent said the trust was appealing to organisations and individuals to support its work with donations and sponsorship, as it aimed to double the number of loans it is able to offer clients over the next five years.
“We’d like to see perhaps another million dollars of capital made available to us, and at least another half-a-million dollars each year for operational funding.
“That way, we really believe we could go over and above another 1000 loans in five years.”
The demand for services had been increasing over the past few years, with some clients paying high interest rates, at an average rate of 35 percent, she said.
“We’re saying no, don’t go there. Don’t go somewhere that’s going to cost you 50 percent interest. Come to us, we’re providing safe, fair, kinder and affordable loans for those on low incomes or those who are excluded financially.”