New scheme will see loans of up to €1,000 approved in an hour
TENS of thousands of families are set to avail of easy loans of up to €1,000 as the Government seeks to break the dependence on moneylenders.
The plan, being spearheaded by the Department of Social Protection, will see loans being approved within an hour with just minor credit checks.
Some 40,000 loans are to be rolled out a year by the country's post offices and credit unions in a major effort to provide an alternative to moneylenders.
Interest rates of up to 12pc will be applied on the loans - compared to rates of up to 188pc applied by private firms.
The scheme, which could be in place by September, is specifically aimed at low-to-middle income earners who may have been refused loans by the banks.
It is envisaged that repayments would be virtually guaranteed because people would be required to have the money taken from their welfare payments under the Household Budget Scheme.
This is a scheme administered by the post offices which involves deductions being taken from social welfare payments to pay for the likes of rent bills.
Government sources said there would be a significant involvement by the Money And Budgeting Advice Service (Mabs) to ensure people don't seek loans they cannot afford.
"We need to take the moneylender out of the loop and give low-to-middle income families the chance to avail of hassle-free loans," said a source.
The Personal Micro Credit Scheme is being led by Minister for State at the Department of Social Protection Kevin Humphreys in conjunction with the Department of Finance and other interest groups.
Oversight of the scheme will be provided by the Social Finance Foundation, which collaborates with the banks and Government to promote responsible lending.
Social Finance Foundation was set up with €72m in funding from the banks with the aim of providing lending to financially-excluded groups.
The chief executive of the Foundation, Brendan Whelan, said microloans would challenge the operations of moneylenders.
"The customers of the licensed money lenders are those who can least afford to pay interest rates of over 150pc," he said.
"The scheme will be designed to meet the needs of those who most need it, in terms of simplicity, convenience, speed and affordability.
"The initiative should be seen in the context of addressing financial exclusion, so that the benefits of being within the financial system are available to all citizens," he added.
The Department of Social Protection envisages that the average loan sought under the personal micro credit scheme would be €500.