Waikato budgeting services are offering cash-strapped families interest-free personal loans in a bid to keep them out of the jaws of loan sharks.
Families finding it tough to pay for essential household and school items, medical needs and car and household repairs can now access loans of up to $3000 as part of a microfinance initiative. The loan service, which is run by Nga Tangata Microfinance Trust and backed by Kiwibank, has been a success in South Auckland over the past two years, and is being expanded out of Auckland for the first time.
Clare Mataira, manager at Hamilton Budgeting Advisory Trust, said the need for small loans to pay for essential items was quite high in Hamilton, where many clients had "dumb debt".
"They are paying 100 per cent interest. There are a lot of people that do that out of desperation.
"We're trying to encourage people to access help from other avenues as opposed to going somewhere that hires out appliances or to loan sharks."
The loans are available to people who have been clients of budget services affiliated to the New Zealand Federation of Family Budgeting Services for two months. They do not cover cash advances, debt repayment, bills, rent or general living expenses.
A Morrinsville family were the first clients to receive a loan, which they used for a washing machine.
The initiative has already been awarded a sustainable business award and is seen as an effective buffer against predatory lending by loan sharks.
Long-awaited legislation to reign in harmful lending has stalled and is unlikely to take full effect until at least 2016 - more than five years since it was first mooted by the Government.
The Credit Contracts and Consumer Finance Amendment Bill, which is now before a select committee, is due to be reported back next month.
- Waikato Times