The [Irish] government and Credit Unions have launched a small loans scheme, aimed at giving people another option to moneylenders.
The ‘It Makes Sense’ loan provides emergency credit of up to 2-thousand euro for low-income families. The scheme has been trialed in 30 Credit Unions since last November. More than 200 loans were drawn down in that time with an average value of 500 euro. Social Protection Minister Leo Varadkar says it gives access to low income families that find themselves stuck. The scheme will now be offered to credit unions nationally, with the Minister urging all of them to sign up. Michael Culloty from the Money Advice and Budgeting Service says it will help people to save money. It’s aimed at offering an alternative to money lenders who can charge high interest rates.
The scheme is being offered to Credit Unions around the country with 50 more credit unions having expressed interest.
by Fiona Reddan
Some 1,000 borrowers have availed of a new microcredit scheme piloted by the credit union movement, in an attempt to curb the growth of moneylending.
The “It makes sense” microcredit loan scheme was launched in November to offer a cheaper alternative to the expensive short-term loans offered by moneylenders across the country.
According to figures from the Irish League of Credit Unions, some €500,000 has been loaned out to 1,017 members since the scheme was launched, “exceeding expectations” and the “majority” of the loans were for an amount of €500 or lower. Since Christmas however demand for the loans has slowed, a spokeswoman said.
The microcredit loan scheme was launched across 30 credit unions as part of a pilot scheme last November. Participating credit unions include the Link, Cavan; Skibbereen, Cork; Core, Dublin; and St. Canice’s, Kilkenny. It is hoped that the scheme will be rolled out nationwide by June of this year.
To apply for a short-term loan, applicants need to bring just two social welfare slips to their local credit union, and their loan may be approved on the same day, or at most, within 24 hours. Credit unions can charge a maximum 12 per cent on the loans (12.68%APR) on amounts of between €100 and €2,000. As a comparison, a €500 loan with a moneylender could cost as much as €650 to repay, or €515.72 with an “it makes sense” loan.
Figures show that demand for short-term loans was greatest from a younger cohort, with those aged between 18-35 accounting for 62 per cent of all loans. This contrasts with just 1 per cent among the over-66s group, and 5 per cent for those aged between the ages of 56 and 65.
There was a fairly even spread when it came to gender, with 56 per cent of those opting for the loan female.
Interest in the scheme may have been less than expected however, as with 30 credit unions participating, it shows average take up was little more than 30 applicants per credit union. Latest figures for moneylenders show that there were 360,000 customers in Ireland in 2013. Moneylenders can charge interest rates of in excess of 100 per cent, which can make a short-term loan very expensive. A quarter of loan applicants to the credit union scheme said they are either moneylender customers now, or have been in the past.