Microfinance – a life changing loan

Alleviating the stress of high interest debt can have a lifechanging impact on people’s lives – a story some of Aotearoa’s microfinance lenders know only too well.

Microfinance lenders offer people who are unable to access traditional lending the opportunity to access a no or low interest, fee free loan to help them get out of hardship.

While these organisations are based all over the country, their loans are generally available to people all over Aotearoa alongside other financial capability support.

Ngā Tāngata Microfinance has two types of loans available: a debt relief loan “get control” or an asset building loan, “get ahead”. They’re used for paying off existing debt or necessary household expenses like school supplies.

General manager Natalie Vincent says people can only access these loans if they’re working with a financial mentor, as this gives them ongoing support and encourages building long-term financial capability.

“A person needs to be connected with a financial mentor. It’s not fast money or easy cash – we don’t do cash in hand. Our kaupapa is about alleviating people of financial pressures, providing a safe and fair credit option and helping improve their financial wellbeing,” she says.

“The most important thing is that it reduces stress on the family and stress on the person that’s struggling in debt – that impacts their health.

“Our loans are also a loan of last resort; we expect people will have tried all other finance or re-financing options available to them.”

Natalie joined the organisation about two years ago, and they’ve put a focus on raising awareness of their service with both financial mentors and the public.

They redesigned the website to make it pop with lots of colour also using tools to make the site user friendly and easy to navigate. There is a specific section for financial mentors to login and access forms and information

She says this has helped raise awareness of the roles on financial mentors in the community and how microfinance can be a useful tool for mentors in assisting their clients. The website has a feature for clients to self-refer to a service and request assistance from a financial mentor.

They have 69 financial mentoring services on the list of places to refer too, although they’re always looking for more.

Natalie is encouraging financial mentors to investigate microfinance loans where they might be suitable for a client.

Newtown Ethical Lending Trust (NELT) also works closely with financial mentors and other social agencies who assist their clients in making loan applications to them.

NELT has its origins in the Wellington suburb of Newtown, but now provides interest free loans to anyone living in the Greater Wellington region.

Their service provides an option for individuals and families which allows them to avoid high-cost lenders – removing the burden of interest and fees often allows our clients to achieve a budget surplus and the therefore capability to repay the loan principal.

Manager Paul Harford says they work with financial mentors as they’re best placed to identify which clients may benefit from an interest fee loan and they can provide ongoing support to the client.

“We’re grateful to have a great group of financial mentors that we work with, and if it wasn’t for these financial mentors, we would not be able to grant anywhere near as many loans as we do and wouldn’t be able to provide the ongoing support to those clients,” he says.

He is encouraging people to look at microfinance options with the help of a financial mentor.

“Some people think that the type of microfinance that we offer can’t work as there is perhaps a belief that clients will be unable or unwilling to repay the loan,” he says. 

“We certainly haven’t found that. We have found that people want to repay, and they are grateful for the opportunity of getting out of their unmanageable high interest debt, or being able to buy or repair a car so they can get to work, buy household goods and pay medical bills – they want to honour their commitments.”

Paul says many clients are delighted to have repaid their loan from NELT, and it’s an accomplishment they are rightly proud of.

A good loan

Good Loans is another microfinance option available to everybody in Aotearoa – no matter where they live.

Good Shepherd development manager – microfinance Matt Halsey says their Good Loans are focused on improving long term financial wellbeing. Their loans are designed to support those who need a financial helping hand whilst improving personal and financial wellbeing.

“Our no and low interest loans provide a fair and affordable way for people living on limited incomes to purchase essential items. The loans can be used to purchase goods and services such as: second-hand cars, car repairs, new household appliances, computers, course costs, medical expenses and now debt solution loans,” he says.

To access a loan, clients need to get in touch with a Good Loans loan worker, either face-to-face in their community or over the phone with Good Shepherd New Zealand’s phone-based team.

They work with the client to complete an application – this includes a financial conversation about the applicant’s income and financial commitments, to ensure that the applicant can afford repayments.

Under the DEBTsolve programme, the client will also work with one of their debt coaches to create a plan for reducing, managing and getting on top of their debt, which may include a debt solution loan.

Matt says this programme helps clients get back on top of their unmanageable debt, but it also builds their skills and knowledge that will help them make more informed financial decisions in the future.

“Good Loans and DEBTsolve have had a life changing impact on our clients’ lives,” he says.

“Clients can buy an essential item like a car, washing machine or laptop that has a real impact on their day-to-day life.

“The loan itself is affordable and prevents the cycle of unmanageable debt that can start with a high-cost loan.  And we’ve seen clients gain new financial skills and knowledge as part of the financial conversation they have with a loan worker, helping them feel more in control of their finances.

“We’ve also witnessed clients get back on top of their unmanageable debts which they once thought was impossible.”

Financial mentors can refer clients in need of a Good Loan or DEBTsolve support to one of the 24 Good Loans Loan Workers around the country, or to Good Shepherd NZ’s phone-based team (0800 466 370).

CAPTION: Good Shepherd NZ’s Good Loans phone-based team of loan workers and debt coaches