Microenterprise gets a $100 million boost from NAB

Monday, 6 October 2008

National Australia Bank (NAB) today announced a further $100 million to support micro-businesses in Australia.

Over the last 18 months, NAB has piloted its not-for profit Microenterprise Loan program; supporting more than 110 businesses with unsecured, business loans of between $500 and $20,000. Loans are offered to people on low incomes with few or no avenues to access affordable business credit.

The program has been recognised by Money Magazine’s Best of the Best Awards as the best socially responsible product in the small business loans category.

The program’s “whole of community” approach involves the support of community and government organisations to help reach eligible customers as well as ongoing business training and mentoring to eligible loan applicants.

Mr Ahmed Fahour, NAB Executive Director and CEO Australia, said that the $100 million loan capital injection to the program dramatically advances microfinance in Australia and improves access to affordable financial services.

“At the Prime Minister's 2020 Summit in April, we discussed the need to ensure micro-finance has a long and secure future in Australia,” Mr Fahour said.

"While loan programs like this have been successful overseas it's still an underdeveloped concept in Australia, where access to affordable credit is still a challenge for people on low incomes.

“Today’s announcement demonstrates NAB’s genuine desire to innovate and deliver real social and economic improvement for Australians excluded from mainstream financial services.

“We’ve learnt a lot about microfinance – our earlier commitment of $30 million to address financial exclusion has helped hundreds of people who for whatever reason did not have opportunity to access affordable credit.

“We’ve done our research and know there is demand so it makes sense for NAB to take the lead to increase the scale of microenterprise in Australia,” Mr Fahour added.

At full capacity, NAB’s commitment will make Australia a world-leader in microenterprise development in the developed world.

Microenterprise Loans complements NAB’s range of microfinance initiatives including support for the No Interest Loan Scheme (NILS®) and award-winning Step UP Loans (both in partnership with Good Shepherd Family & Youth Services), Step UP insurance and a range of concessional bank accounts.

More information about NAB’s microenterprise loans can be found at NAB’s website http://www.nab.com.au/microenterpriseloans.

Media contacts: Kerrina Lawrence National Australia Bank T: (03) 8641 3409 M: 0417 034 738Kerrina Lawrence M: +61 (0) 417 034 738

About NAB’s Microenterprise Loan program

At a glance

  • NAB Microenterprise Loans at 3 October 2008
  • Number of loans - 110
  • Number of declines - 23
  • Average loan size – $15,000
  • Amount of loans written $1.6million
  • Loan purpose – business only
  • Default rate – 4%
  • Cost per dollar lent – 15 cents

If you are eligible to obtain a normal business loan, you will not be eligible for a NAB Microenterprise Loan.

What is a microenterprise?

NAB defines microenterprises as basic business enterprises of five or fewer people. This includes an owner-operated business and businesses operated from home.

How much can be borrowed?

The maximum value of a NAB Microenterprise Loan is $20,000. The minimum value of a loan is $500.

  • The loans come with a 9.95% p.a. interest rate fixed for the period of the loan.
  • 90 day access period is interest free.
  • Loan repayments are monthly.
  • Loan term depends on whether you pay more than the minimum monthly payment or make any extra payments, but may be up to 3 years.
  • There are no account-keeping fees. Fees apply for certain activities, such as purchases in foreign currencies or repeat statements.

Because liability for the loan sits with the individual and not the business, careful attention will be paid by NAB to make sure a customer has the ability to repay a loan and not over extend their weekly budget.

How much does it cost?

This will depend on:

  • how much you borrow;
  • the term of the loan which is up to 3 years;
  • how often you pay a loan instalment. In the case of a NAB Microenterprise Loan this is monthly only.

There are no account-keeping fees, although fees do apply for certain activities when using the account. The interest rate on a NAB Microenterprise Loan is 9.95% p.a. (fixed). Your minimum monthly payment is calculated as 3% of the credit limit agreed between you and your banker. This table gives you a guide of what you would pay monthly with a 9.95% p.a. interest rate.

Loan Term of 3 years Loan Amount
$5000 $10,000 $15,000 $20,000
Monthly Repayment $150 $300 $450 $600

This table shows what you will pay in total, if you make only the minimum payment every month. This is the loan amount plus all interest over the life of the loan with a 9.95% p.a. interest rate, but without any extra fees included. By making more than the minimum monthly payment, or by paying off extra amounts (which can be done at any time without penalty) you may be able to reduce these amounts.

Loan Amount
$5000 $10,000 $15,000 $20,000
Total payment over 3 Years $5841.73 $11,683.46 $17,525.19 $23,366.92

What can the loan be used for?

NAB Microenterprise Loans can be used for plant and equipment; leases; furniture and fixtures; and working capital. This list is not exhaustive. Loans are not limited to one item. However, NAB Microenterprise Loans are not for consolidation of any debt.

* 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