Up to 900 ‘hassle-free’ loans to be provided by country’s credit unions
SOME 900 “hassle-free’ loans of up to €1,000 are to be handed out in the coming weeks as part of the Government’s bid to break the dependence on moneylenders.
A pilot-scheme being spearheaded by the Department of Social Protection will see so-called micro-loans being handed out within minutes for low-income families.
Some 27 credit unions have expressed interest in administering the loans as part of the pilot scheme, which is expected to be rolled out in the autumn.
While the list of credit unions partaking in the pilot programme has not been published, it’s understood that a number are located in the greater Dublin area.
It’s anticipated a nationwide micro-loan programme will be in place in 2016.
As part of the pilot scheme, each credit union will administer up to 30 loans which will be aimed initially at those on social welfare.
Interest rates of up to 12pc will be applied on the loans – compared to rates of up to 188pc charged by private firms.
It is envisaged that repayments would be virtually guaranteed because people would be required to have the money taken from their social welfare under the Household Budget Scheme.
There will be an involvement by the Money And Budgeting Advice Service (Mabs) to ensure people don’t seek loans they cannot afford.
The Personal Micro Credit Scheme is being led by Kevin Humphreys, Minister for State at the Department of Social Protection, in conjunction with the Department of Finance and other interest groups.
Mr Humphreys said the scheme could prove pivotal in ending the dependency on private moneylenders.
“I am very satisfied with the enthusiasm the initiative has attracted and we are hoping to learn a great deal from
the pilot scheme before a national programme is put in place,” Mr Humphreys the Herald.
“This is all about helping people who are currently left with no option but to go to moneylenders and pay exorbitant interest rates,” the Dublin Bay South TD added.
It’s also feared that the number of people using money lenders could rise to as
high as 400,000, which has caused concern within Coalition circles.
The Irish League of Credit Unions (ILCU) said micro-loans will come as a boost to the credit union sector.
Oversight of the scheme will be provided by the Social Finance Foundation, which collaborates with the banks and government to promote responsible lending.
The Social Finance Foundation was set up with €72m in funding from the banks with the aim of providing lending to financially-excluded groups.
Last month, Brendan Whelan, chief executive of the foundation, said micro-loans 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.