Becoming 'fighting fit' with money starts with 'disciplining debt'

Nga Tangata Microfinance Trust endorses Money Week’s theme: Get your money "fighting fit".

Getting into shape physically requires regular discipline in diet and exercise. Our finances also require regular attention. Firstly, for overall financial health, the amount we pay on debt must be brought under control.

The Salvation Army’s 2015 State of the Nation Report showed that average household consumer and credit card debt rose by almost 5% in 2014, to $12,200.

One of the 5 key areas the Commission for Financial Capability has identified for getting ahead financially is becoming "debt smart", with people getting out of high interest debt faster being one of the key steps. A single high interest debt might seem harmless but the interest rates and excessive charges of third tier and pay day lenders can quickly ensnare families into a cycle of unmanageable debt that limits food for the children and other family essentials.

Budgeting Services provide a tremendous support to their clients who are under the burden of high interest debt; providing a budget plan, negotiating with creditors where possible and advising ways that limited income can be stretched.

Robert Choy, Executive Officer of Nga Tangata Microfinance Trust, says "Budgeting Advisers now have another tool in their toolbox". In partnership with Kiwibank and the New Zealand Federation of Family Budgeting Services, NTMF is expanding nationwide its provision of no interest loans to qualifying low income families. These loans are safe, fair and affordable, in stark contrast to loans offered by high interest lenders.

Robert gives the example of a couple with a low level of English proficiency and a lack of understanding of legal contracts who had taken several high interest loans, and also had a very high electricity debt. Their high debt servicing costs resulted in very little left for food. Their Budgeting Adviser negotiated with the electricity company to put a payment plan in place.

"The third tier lenders were charging in excess of 40% interest. Nga Tangata Microfinance’s loan for $2,498 meant that three of the couple’s debts could be paid off and replaced with a smaller no interest repayment over two years. This meant more money for food each week. And the

Budgeting Adviser has worked with the couple to ensure they avoid taking on any more high interest loans and they are now nearing successful repayment," says Robert.

Budgeting Services and organisations like Nga Tangata Microfinance support people to become "financially fit". Attacking one of the biggest hindrances, unmanageable high interest debt, just makes good ‘cents’ in Money Week.

Background information on Nga Tangata Microfinance

  • Established in 2010 with a vision of building a more just and equitable society for people on low incomes
  • Offers two loan products which are offered at no interest or fees. The first NILS, is to assist with family asset building and well-being or essential items or services. The second loan product (DRLS) is for relief from high interest debt, including debt consolidation.
  • Qualifying conditions for all loan applicants include a Community Services card or a low income and the willingness and capacity to repay the loan within 2 years.
  • Nga Tangata values the relationship that clients have with a budgeting adviser, with financial education and literacy occurring alongside our loans being encouraged.
  • The three establishing organisations are the Child Poverty Action Group, the New Zealand
  • Council of Christian Social Services and the New Zealand Federation of Family Budgeting Services (NZFFBS).
  • The loan capital is provided by Kiwibank. Good Shepherd Microfinance (GSM), operating in Australia since 1982, has provided advice, support and information.
  • In 2013, Nga Tangata Microfinance Trust and Kiwibank were supreme winners of the NZI Sustainable Business Awards