At this time of year, small debts can put people living on low incomes into huge hardship. A microfinance provider is doing their bit to lift people back up again.
The financial pressures that come with the holiday period are difficult enough for any family to manage. They become a lot harder when there already isn’t enough money to go around.
Christmas presents bought from shopping trucks, which drive around poorer neighbourhoods selling goods on credit and end up attracting vast interest payments. Family gatherings put pressure on food budgets. The next school year is just around the corner. It can be an extremely stressful time.
That is the case across the country, but is particularly the case in hard up regions like Northland. Data from Infometrics shows rates of homeownership in the town of Kaitaia are way below national averages, at a time when rental costs are rising and supply is being squeezed. The Northland region has the highest proportion of working age people on Jobseeker support. Northland is also over-represented among people age over 65 compared to the rest of the country, a demographic who often rely on the fixed income of superannuation.
The data is stark on the statistical level, and can have tragic consequences on a human level. Families routinely end up being pushed into crippling debt, with the small amount of money coming into their households rapidly leaving again in the form of interest payments. This cycle is only amplified at Christmas time.
This data is the context under which budgeting services and microfinance organisations are working. Their role is twofold – to help families keep better track of the money they have, and to step in to make money available when it will make a difference.
Natalie Vincent is the general manager of Ngā Tāngata Microfinance, one of the organisations doing this work nationwide. She’s very clear about where the problems begin.
“There’s a whole lot of myths around about debt, stereotypes about people having the money, but just don’t spend it wisely or know how to budget. This is just not something we are seeing on a daily basis. Ultimately there’s a deficit of income to expenses – there’s just not enough money for basic living.”
“It can be just one small thing, like tyres on a car. They need their car, because they need to get to work. So what do you do when you have no access to safe credit?”
Ngā Tāngata Microfinance provide loans, but they do it very differently to the predatory loan sharks who often take advantage of the circumstances people find themselves in. Vincent says the loans given out by NTM are interest-free and don’t come with fees attached, which can take a lot of pressure off those on low incomes.
“Our loans are not about getting people more into debt. They’re wrapped around building financial capability and financial wellbeing.”
People who need such loans get referred by budgeting service organisations and the microfinance loans fall into two distinct categories. The first is ‘asset-building loans’, which relate to a wide variety of needs, like household appliances or furniture, health needs like dental care, or education services.
The second category relates directly to the debt trap which affects so many in poverty. NTM’s ‘debt-relief loans’ are about helping people pay off high-interest loans of up to $3000. Those applying can have the slate wiped clean on financial burdens they might literally never be able to pay off, and instead, have a debt that will actually get smaller as they pay it off.
Ngā Tāngata Microfinance is a charity. The capital to provide the loans is supplied by Kiwibank with no fees or interest. “It’s sort of like community funding,” says Vincent. “We loan that money out, people repay it, and then we’re able to re-loan that money out to other people, so it just keeps going out in a circle.” Currently, NTM has about $250,000 out on existing loans, but over the time they have been operating they’ve provided more than a million dollars in loans to applicants.
“That’s a really lovely model for the people who take one of these loans. Many of them have never had a positive experience with loans, they’ve never repaid a loan before, it has always been a bad experience. And this is really empowering for them, because they realise it’s community money, so there’s a lot more incentive to repay it.”
For Kiwibank, they see their role as helping to raise awareness of the issue around high-interest debt in New Zealand and supporting NTM to advocate for safe, fair and affordable access to credit for all New Zealanders. It’s about the long-term good of their customers, communities and the country. Kerry Rolleston sees the need up close, in her role as the manager of the joint Post Shop and Kiwibank branch in Kaitaia.
“We’ve got a lot of vulnerable people up here, with the elderly and with people who aren’t working. It’s still really important for us to be spending the time – and not prejudging anybody of course – to help people along.”
Their major focus this year has been about getting customers “digitally enabled”, as a way of helping them manage their money better. Rolleston says it can make a huge difference in people’s lives to simply be able to see what is going in, and what is coming out of an account.
“It’s crucial that they’ve got a good handle on their finances. If you’re just going into the bank week in, week out, really do you know what’s going on in your account? But if you’ve got it on your phone, you can tap into it any time, have a quick run-through, and see what’s going on.”
“It’s very important that we get people into that next step. But it’s a trust thing, and a lot of people are a bit reluctant because they’re not too sure about the internet. But that’s part of our education with them,” says Rolleston, who adds that the branch has three staff on hand who can help people learn over a cup of tea.
Making ends meet is hard enough at the best of times, let alone when there are looming holiday season costs coming up. But by helping people take more control of their finances, Ngā Tāngata Microfinance and Kiwibank hope to help families have a much more merry Christmas.
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