Why will some Australians pay 6 times more for this fridge than they should?

Imagine that you didn’t have a fridge, you didn’t have anywhere to store fresh ingredients for your family’s meals. Imagine not having a washing machine or being without basic furniture – a bed to sleep in, a chair to sit in or a table to sit at.

It sounds grim. It probably feels frightening, disempowering and alienating but there is a group of more than two million Australians that are so hard-pressed financially they do go without these basic household items.

This can have a huge social impact on the whole family affecting self esteem and the ability to participate in the community. Basic chores take longer, and families are less likely to spend time together because they don’t have comfortable spaces to actually be together.

Australia’s financially excluded are generally not bad money managers, they are just cash poor, leaving them vulnerable to crisis. What some of us might consider a small obstacle like an unexpected doctor’s bill, or minor car repair, can tip the scales creating a downward financial spiral from which it can be hard to recover.

And when faced with desperate situations it is the people that can least afford it that often resort to measures like predatory lenders that charge crippling fees and only worsen the situation. Often borrowers have paid four times the original price by the time the loan is repaid thereby exacerbating financial hardship and poverty.

This leads to some interesting questions and some pretty uplifting answers

What can be done to help Australia’s financially excluded?

It’s not about hand-outs. Individuals and families on low incomes need someone to invest trust in them, and their future.

What is microfinance?

Microfinance is a range of financial services and products designed to assist people who are largely excluded from mainstream financial services. Australia has the largest and longest running microfinance program in a developed economy.

This largely hidden sector of the finance industry is dedicated to giving people who are financially excluded a dignified hand up, rather than a hand out.

Part of this is the partnership between National Australia Bank (NAB) and Good Shepherd to provide microfinance loans, including the No Interest Loan Scheme (NILS®) and StepUP low interest loans.

How do NAB and Good Shepherd microfinance loans work ?

The programs are delivered through local Good Shepherd-accredited community agencies around the nation.

NILS works in a circular credit system so as one loan is repaid, another can be issued to someone else in need in the community.

What are the loans generally used for?

Essential goods and services or health and education costs: car repairs to ensure the kids go to school, a washing machine so the family starts the day in clean clothes, or a fridge to store fresh food.

An AddsUP matched savings account is also available to develop financial skills around saving, as well as Microenterprise loans to help low income earners start or grow a small business.

Are the loans ever paid back?

Many people assume that people in this situation are unreliable and default rates on these microfinance loans are high. In fact, people who are financially excluded often just need someone to give them a chance and the loans have an excellent repayment rate.

How many people are assisted each year through NAB and Good Shepherd’s partnership ?

In 2011 1500 loans for disadvantaged Australians will be written, but this is just the tip of the iceberg. NAB will continue to work with Good Shepherd, State and Federal Governments and the community sector to grow the availability of these products, so more people have real alternatives to predatory lenders.

How are the loans decided?

Each recipient is treated with dignity and assessed on an individual basis taking into account their unique circumstances when determining the size of the loan and terms of the repayment.

NAB believes access to safe and affordable financial services is a basic right for all Australians. Microfinance is a step towards offering real solutions to people experiencing financial hardship.

Click here to learn more

The NILS® Trade Mark is registered to Good Shepherd Youth & Family Service (No. 766 836).

Have you ever benefited from a loan (not necessarily a bank loan or even a financial loan)? Has somebody lent you a hand in a time of need?

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