Access to affordable credit critical for financially disadvantaged

Monday, 17 March 2008

Up to ten per cent of Australians who have a disability, or are unemployed, single parents, or Indigenous Australians are excluded from mainstream finance and have no access to a bank or building society . Many more can not obtain credit through mainstream financial institutions.

In a report released today by National Australia Bank (NAB) and Good Shepherd Youth & Family Service, into the Step UP loan program (a not-for-profit program to offer safe and affordable loans for those on low incomes), it was found that access to affordable credit was critical for the financially disadvantaged.

CEO of Good Shepherd Youth & Family Service, Mr Michael Yore, said that the Step UP program was essential in helping to address financial exclusion.

"When people are squeezed and can't access mainstream sources of credit through banks and credit unions, their lifestyles can often be severely hampered. Everyday items such as cars, whitegoods and other basic necessities become difficult to obtain," Mr Yore said.

"Microfinance schemes like the Step UP loan program are essential in offering safe and affordable credit to people who can not access it otherwise.

"In some cases, Step UP loan recipients have told us not only was Step UP their first banking experience but, it was their first ever formal financial appointment. They would not have felt able or comfortable approaching a bank," Mr Yore said. "Programs like Step UP respect the capabilities of people on low incomes and the loans, and the good and services purchased, help to place them more in control of their financial circumstances and therefore increase their dignity and self-esteem," Mr Yore said.

NAB Australia Managing Director and CEO, Mr Ahmed Fahour, said that another benefit of Step UP was that it helped increase financial understanding and capability.

"At NAB we recognise our responsibilities lie beyond those who feel comfortable walking into a branch, however, it can be a fine line between providing credit and overcommitting recipients.

"Step UP offers an extremely supportive service model, that goes above that provided by mainstream banking, giving loan recipients the right support and guidance," Mr Fahour said.

"Each loan is case managed by a community microfinance worker to help applicants examine their monthly expenditure, come to terms with other financial problems, develop a greater understanding of how financial systems operate and find out about their personal credit history. Applicants are also often referred to other government and non-government support services," Mr Fahour said.

The report, titled A step in the right direction? A report into the Step UP Loan Program, 2004-2007, details key learnings from the pilot of the Step UP program, which was originally launched in October 2004. Currently on offer through a range of community agencies at locations in Victoria, New South Wales, South Australia and Western Australia, NAB and Good Shepherd's desire is to see Step UP expanded to Queensland and Tasmania.

The Step UP program now has more than 600 loans and $1.1 million in outstandings and is recognised as a leading microfinance program in Australia, having won Money magazine's "Best of the Best" awards for most socially responsible product two years running. For a copy of the report by NAB and Good Shepherd Youth & Family Service, A step in the right direction? A report into the Step UP Loan Program, 2004-2007, please refer to

Media contact:

Kerrina Lawrence National Australia Bank T: (03) 8641 3409 M: 0417 034 738 Sue Parkes Good Shepherd Youth & Family Service T: (03) 9418 3044 M: 0404 453 550 Background

What is Step UP? Step UP is a microfinance program offered by Good Shepherd Youth & Family Service and NAB on a not-for-profit basis to address financial exclusion. Step UP loans are low interest personal loans designed for people living on low incomes to make essential purchases. They have a fixed interest rate of 7.24%p.a. (comparison rate 7.24% ) for amounts between $800 and $3,000 and are available for terms of up to three years. Loans are currently offered in 16 locations in New South Wales, Victoria and Western Australia, and across South Australia.

At a glance: Step UP loans (as at 31 December 2007) Number of loans - 599 Number of declines - 113 Average loan size - $3,000 Amount of loans written - $1.46 million Amount outstanding - $1.1 million Main loan purpose - cars and car repairs Default rate - 4 per cent

Saunders, P., Naidoo, Y., and Griffiths, M., Towards new indicators of disadvantage: deprivation and social exclusion in Australia, Social Policy Research Centre, University of NSW, November 2007, p.76 Comparison rates are based on a loan of $2500 over a term of 2 years. A comparison rate schedule is available from the community microcredit worker when you go for an interview. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Such unsecured loans would normally attract an interest rate of about 14 to 16%.

* The information contained in this media release is for media advice purposes only. The contents are true and correct at time of publishing/issuing, however may change over time. For further information about NAB products or rates, please go to Interest Rates, Fees & Charges