Zero-interest Loans And Debt Solutions A Cornerstone In The Response To Cost-of-living Pressures

Ngā Tāngata Microfinance Trust (NTMT) applauds the government making the current cost-of-living pressure their ‘absolute priority’ in the coming months. This has even more significance considering the January floods and states of emergency declared in Auckland and Waitomo, and earlier in the month in Tairāwhiti.

"New Zealanders are being battered from all directions. Many are barely coping. Post-Christmas is historically a time of year when we would see an increase in the level of financial stress and the need for our support, but already this year the need is unprecedented," explains CEO, Natalie Vincent.

Credit reporting agency Centrix [1] show in their January consumer insights report that loan arrears are rising, debt-repayment defaults are at a 3-year high, financial hardship cases are on the rise and more consumers are turning to unsecured lending, such as credit cards to fund essential household spending.

"Over the past year we have seen the dire impact of soaring inflation on those New Zealanders on low household incomes who were already struggling to pay the bills. Now many of these households cannot meet their basic living costs of food and rent without borrowing. This borrowing is often at a high rate of interest which soon ends in a spiral of unsustainable, unmanageable debt," says Vincent. "In 2022 the average interest rate our NTMT clients presented with was 37%."

Fairer loans and debt-solutions improve lives

New Zealanders seeking the help of community finance and debt solution providers such as NTMT often have a high ratio of debt-to-income together with housing costs more than 50% of their income. This leaves very little for basic costs, including food, healthcare, and education-related costs. Addressing the unmanageable debt can be a game changer to their weekly budget.

"When you provide fair and equitable loans that people can afford to repay, coupled with ongoing support, they are motivated and able to improve their financial stability," says Vincent. "Our zero-interest, zero-fee loans, combined with working with a financial mentor, enable our lowest income earners to build financial capability and money skills, improve their self-efficacy, and avoid high-interest predatory lenders."

"A loan from Ngā Tāngata Microfinance can serve as one part of the solution for people seeking to break themselves out of destructive financial spiral. These loans play an essential role in the broader fight for social justice outcomes in New Zealand," explains Vincent.

Urgent investment needed to address New Zealand’s cost of living crisis

NTMT partners with Kiwibank and the Ministry of Social Development funded FinCap network of budget services to deliver its programme to across Aotearoa. NTMT is urging the government to invest significantly in budget services, debt solution services and community finance to enable the provision of fairer finance options, alongside free debt-solution and financial mentoring support to the communities who need it.

"Investing as a country to enable people to be more financially secure is critical to longer term outcomes," says Vincent. "When we lift people out of financial insecurity, their mental health improves, reducing the likelihood of family violence, risky behaviour and addictions, and decreasing reliance on emergency benefits [2] ."

"Our loans absolutely make a positive, measurable difference, helping those in severe hardship to reduce high-cost debt, access financial mentors and learn how to get ahead with their money. Greater long-term investment is needed in this sector urgently and immediately".

About Ngā Tāngata Microfinance Trust

Ngā Tāngata Microfinance Trust (NTMT) is a small, non-profit organisation that aims to help break the cycle of financial stress by providing clients with access to safe, fair, and affordable interest-free loans, as well as financial mentoring. With a mission of strengthening New Zealanders’ financial independence by providing safe, fair, and affordable finance options, NTMT offers three types of interest-free loans:

- GetControl debt relief loans of up to $3,000 to fully cover one or more high-interest loans

- GetAhead asset building loans of up to $2,000 to help build a family’s assets and improve their wellbeing.

- GetSet combination loans of up to $3,000, with the ‘GetAhead’ part of the loan being no more than $2,000.

Our vision is for a just and equitable society, with the economic and social inclusion of all those living in Aotearoa New Zealand, including those who are most financially vulnerable. With loans backed by Kiwibank, our goal is to break the cycle of financial stress, to enable New Zealanders to become more financially capable, and to help them become better off in the long term.

[1] https://mcusercontent.com/097ba4716a1bf998d98b08bb2/files/36d0a2b0-c562-a837-76fe-9362b40c2642/Centrix_Credit_Insights_Report_Jan_2023.01.pdf

[2] ImpactLab GoodMeasure Report - Ngā Tāngata Microfinance, September 2021

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