Launch of Pilot Microcredit Scheme
Tánaiste Joan Burton T.D., and the Minister of State at the Department of Social Protection, Kevin Humphreys T.D., have formally launched the Personal Microcredit Scheme (It Makes Sense Loan) to help eligible borrowers struggling to access low-cost credit and thereby combat moneylenders.
The need for the scheme was highlighted by the Citizens Information Board (CIB) in late 2013 when a proposal was submitted to the Minister for Social Protection. The proposal followed a period of discussions initiated by CIB and MABS with interested stakeholders including Credit Union organisations, non-governmental organisations and the Social Finance Foundation.
Speaking about the scheme Angela Black, Chief Executive, CIB said: "The need for this scheme came to light when MABS clients were finding it more difficult to access low cost credit for contingencies as part of their debt management process. This left little option but to use moneylenders. The scheme is aimed at moving people away from the use of high cost moneylenders and provide convenient access to low cost personal loans. The scheme will be publicised at local level by MABS, Credit Unions, Post Offices and other voluntary organisations."
The pilot scheme will operate for the next six months in more than thirty Credit Unions and is open to social welfare recipients who collect their payment in cash at a Post Office and have access to the Household Budgeting Scheme as the loan repayment method. The loan value will range from €100 to a maximum of €2,000. The interest rate will be not more than 12% (APR 12.68%).
Speaking at the event, Minister Humphreys said: "The lack of access to low-cost credit for individuals and low-income households has long been a cause of concern and I am delighted to welcome this pilot scheme which will provide local, easily accessible and low-cost loans to those who need them. While this is a pilot scheme, the aim is to learn from the pilot and make any required adjustments before moving to a full national roll-out."
The Tánaiste said: "This scheme was developed to both assist low-income households and combat moneylenders at the same time. We know full well the exorbitant and punitive rates charged by many moneylenders for which there is no justification. This scheme is an important step in combating that situation, particularly in the run-up to Christmas, a financially difficult time for many households. While this pilot only provides for small loans to social welfare recipients who are paid in cash at post offices, I am confident we will be able to roll it out on a phased basis for low-income households not in receipt of social welfare, and for social welfare recipients who receive their payments electronically."
The Pilot will be monitored and evaluated on an ongoing basis and it is intended that it will be rolled out to Credit Unions nationwide in 2016.