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Personal Micro Credit Scheme Goes Nationwide – Varadkar

Minister for Social Protection Leo Varadkar has confirmed that a scheme designed to offer low-cost loans to low-income families is now being made available to credit unions right across Ireland.

The It Makes Sense loan has been available in 30 credit unions since last November on a pilot basis. It’s designed to make short-term credit available on a low-cost basis to the people who need it most, and is designed specifically as an alternative to high-cost money-lenders.

To-date more than 1,200 loans have been drawn down with an overall value of over €720,000.  The average individual loan is €500.  The pilot stage showed that more than half of those using the scheme had previously used a money-lender, and that 22% of those on the scheme were thinking about using a money-lender before they signed up.

The scheme is now moving to a permanent footing and being offered to credit unions nationally. A further 50 credit unions have already expressed interest and 18 are in the process of signing up. Minister Varadkar has urged remaining credit unions to sign up and make the low-cost loans available to their members.

Speaking at the launch event at Meath Street Credit Union, which took part in the pilot scheme, Minister Varadkar said: "This small loans scheme represents real practical help for families and individuals struggling on low incomes. Many of the participants may struggle to get credit elsewhere, and may not have a bank account or savings. So when the unexpected bill arrives for home or car repairs, a new fridge or a family occasion, some turn to money lenders and loan sharks. This new scheme will ensure access to small loans at reasonable interest from the credit union, with the option of repaying the money through my Department’s Household Budgeting Service.

"The pilot schemehas been hugely successful and I’m delighted that we can now offer it to credit unions across Ireland. I urge all credit unions to sign up and make it available to their members. There is clearly a demand for this type of scheme and the pilot shows it is providing a realistic alternative to high-cost moneylenders by offering a convenient, low-cost personal loan scheme. It also gives borrowers an opportunity to improve their creditworthiness by showing a commitment to repay a loan."

This extension of the scheme fulfils the Programme for Partnership Governmentcommitment. It’s supported by the Irish League of Credit Unions and the Credit Union Development Association, and individual credit unions around the country to encourage wider participation.

The Irish League of Credit Unions (ILCU), a member of the Implementation Group, is currently engaged in a project to extend the scheme’s coverage nationwide.  According to Ed Farrell, CEO "ILCU is delighted to support the roll out of this initiative across the country. Providing access to credit for those who need it most is at the very heart of the work of credit unions. We are all very aware of the penal interest rates charged by moneylenders across the country. This scheme can play a vital role in helping people to avoid getting trapped in a cycle of high interest debt".

Offering encouragement to other Credit Unions to take part in the scheme James Bowden, Chair of Meath Street Credit Union said "We were enthusiastic participants in the pilot phase and see the project as a major success, both in terms of providing low cost modest loans to the most vulnerable in our community and also engaging with them on how best to plan and budget for their family expenses.  The combined efforts of all involved directly confronts the issue of moneylending in our community.

Findings from the Pilot Scheme

      i.        Borrowers:

Based on the outcome of 138 telephone interviews and views expressed by attendees at three focus groups.

             o     52% had previously used moneylenders;

             o     22% had considered going to a moneylender before taking out their PMC loan; 

             o     More than 90% of borrowers rated the overall credit union service as ‘good’ or ‘very good’ and would like to borrow from a credit union again;

             o     The scheme received an ‘off the scale’ Net Promoter Score of 82% - this measurement represents the propensity to recommend to family and friends;

             o     47% stated that the loan scheme has had a positive impact on how they manage money; and

             o     All focus group participants scored their experience as 9 out of 10 (or greater) in terms of the positive impact on their lives.

     ii.        Credit Unions:

The findings based on responses from 17 of the 30 pilot credit union sites to a questionnaire were that:

             o     the vast majority of credit unions who engaged in the pilot did so from a ‘social good’ perspective;

             o     each credit union demonstrated commitment to the principles and purpose behind the initiative and viewed the initiative as having a very positive impact on borrowers; and 

             o     PMC was affirmed as part of the credit union movement’s social ethos.

    iii.        Project stakeholders: 

Based on interviews conducted with each stakeholder organisation, the consistent     responses received were that:

             o     PMC offers normal credit and financial service opportunities to a cohort of people otherwise excluded from accessing mainstream credit;

             o     the scheme helps credit unions to deliver on their core purpose; and

             o     stakeholders are, as a consequence of the pilot, committed to rolling out PMC on a nationwide basis and to introducing a similar credit offering to a wider audience than social welfare recipients with access to the Household Budgeting facility.