Nga Tangata Microfinance: At last! Safer consumer credit may be coming soon to Aotearoa
Ngā Tangata Microfinance (NTM) welcomes the Consumer Credit Regulation Review by the Ministry of Business, Innovation and Employment. Having made its submission today, NTM hopes that the outcome of the Review will be a safer consumer credit environment – particularly for those families on low incomes and financially vulnerable.
Less income means more financial stress. And in Aotearoa, where it is legal to charge 500% interest, and then charge administration fees on top of that, having a low income and borrowing money is very high risk.
NTM works in partnership with Kiwibank, JRMcKenzie Trust and Budgeting Services to provide no interest debt relief loans (DRLS) to assist low income families who have been trapped by high interest debt. Most DRLS loan applications are from people with credit costs so excessive that their budget is in deficit, meaning not enough income for food. Research indicates that the greater the economic hardship, the greater the likelihood and severity of child abuse and neglect. An NTM loan can remove the interest costs and restore an adequate food component to their budget.
In NTM’s 2016 external evaluation, one of the key results was that nearly 80% of clients interviewed communicated a ‘huge’ improvement in well-being, peace of mind and reduced stress as a result of the loan supporting them to escape their high cost debt burden.
NTM’s Executive Officer Robert Choy says, “NTM wouldn’t exist if there was not the need to assist people trapped by the crippling cost of debt and the consequent lack of essential living standards as shown in their budgets.”
To achieve an environment of safe, fair lending, some of the critical requirements urged by NTM include:
- a capping of the total cost of credit
- more prescriptive requirements for affordability assessments and advertising by lenders
- a comprehensive creditor licensing system, along with improved monitoring and enforcement
- the enfolding of mobile traders and deferred payment arrangements within the credit legislation
- responsible debt collection practices along with enforcement
- a widened focus to include credit and store cards
In addition, Mr Choy advocated “Government, finance industry and NGOs should collaborate to create a wider eco-system of alternative, accessible, ethical credit providers. This would include services that provide relief from those in financial hardship to still provide a necessary safety net.
In New Zealand we’ve long prided ourselves in creating a safe, fair environment for businesses to operate. It is now time to provide a safe, fair environment for those on low incomes to access credit if they need it.
Background information on Ngā 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, and 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.
Ngā Tangata values the relationship that clients have with a financial mentor. Financial education occurring alongside our loans is encouraged.
The three establishing organisations of NTM are Child Poverty Action Group, New Zealand Council of Christian Social Services, and New Zealand Federation of Family Budgeting Services.
The loan capital is provided by Kiwibank. J R McKenzie Trust provides funding for operational costs. Good Shepherd Microfinance in Australia and Good Shepherd NZ, has provided advice, support and information.
In 2013, Ngā Tangata Microfinance Trust and Kiwibank were supreme winners of the NZI Sustainable Business Awards.