Small loan program making a big difference to thousands of low income Australians

17 April 2013

Thousands of low income Australians are one step closer to financial inclusion and less likely to borrow from fringe lenders after they’ve received a StepUP Loan, new research shows.

Based on a survey of 500 StepUP loan recipients, the Centre for Social Impact (CSI) report ‘A little help goes a long way: Measuring the impact of the StepUP Loan Program’, shows 73.6 per cent of respondents experienced a positive change in economic and social outcomes after receiving a loan through the not-for-profit program.

The report evaluates the social and economic return at $2.68 for every dollar invested in the program – as a result of factors such as a reduced reliance on welfare, savings on fringe credit and reduced stress and anxiety.

The StepUP Loan program is a nine-year partnership between National Australia Bank (NAB), Good Shepherd Microfinance and more recently the Federal Government which delivers loans worth up to $3,000, at 3.99 per cent interest, repayable over a three year period to people who are unable to access mainstream credit from banks and credit unions.

Significantly, 64.6 per cent of loan recipients who used fringe lenders in the past stopped borrowing from them after their StepUP loan, and many others decreased the frequency of their use of fringe lenders.

Paula Benson, NAB’s General Manager Corporate Responsibility said the StepUP Loan Program is an important part of NAB’s role in helping more Australians have a healthy relationship with money.

“With almost three million Australians financially excluded*, too many people are turning in desperation to fringe or payday lenders for cash and being charged extraordinary interest rates.

“StepUP loans are one way we are providing fair and affordable credit in partnership with Good Shepherd Microfinance and the Federal Government. This research validates how important this partnership and program is to individuals and our economy more broadly.”

The new research also shows StepUP loan recipients feel more financially literate and confident in managing their finances, experience improvements in living conditions, have more contact with friends and family, improved confidence and self esteem and reduced stress and anxiety.

Adam Mooney, CEO Good Shepherd Microfinance said that the StepUP Loan Program is helping people on low incomes find a pathway to financial inclusion.

“Our aim is to enable clients to realise their own economic wellbeing – and to feel in control of their own finances and lives. This report shows that the StepUP loan program is realising this vision and creating pathways to financial inclusion for people in Australia.

“It confirms our anecdotal and on-the-ground evidence that the program generates significant social and economic benefits to borrowers and communities,” said Mr Mooney.

Minister for Community Services Julie Collins said the StepUP loan program is a fantastic example of what can be achieved when government, business and the community sector work together.

“I’d like to congratulate Good Shepherd Microfinance and National Australia Bank for giving a hand up to thousands of vulnerable Australians when they most need it, and helping them manage their money more effectively and independently,” Ms Collins said.

“Programs like StepUP are making a real difference in the lives of people who are doing it tough, and today’s report just reinforces that.”

On-the-ground loans provider Baptist Community Services – NSW & ACT (BCS), helped to launch the report at an event in Canberra. BCS Chairman, Dr Graham Henderson, said the findings reinforced the importance of the StepUP program.

“Every client and every loan has a story. This report captures the essence of 500 of these stories and it means a lot to hear difference StepUP is making to the lives of so many people. Baptist Community Services is very proud to be providing microfinance loans to people in our community who need fair access to low-interest loans that assist in breaking the cycle of poverty and debt, ” Dr Henderson

*Almost three million Australian adults are either fully or severely excluded from accessing financial products and services including a transaction account, a credit card and general insurance. Source: Measuring Financial Exclusion in Australia, The Centre for Social Impact (2012)

Media contacts

Kate Stevens, 0418 123 176

Chris Venus, 0477 306 694