The Salvation Army marks five years of delivering Community Finance

August marks five years of the Community Finance initiative. In addition to its well established Financial Mentoring service, The Salvation Army has held more than 5800 financial conversations with Community Finance clients. The loan program helps people avoid the cycle of debt often resulting from third-tier borrowing.

Community Finance was established by Good Shepherd NZ and Bank of New Zealand (BNZ) supported by the Ministry of Social Development to provide NIILS no interest, and StepUP low interest, loans for people living on limited incomes to purchase essential items. Loans and appropriate financial support are delivered via community provider partners including The Salvation Army.

“People often think all debt is bad, but that’s not the case,” The Salvation Army Community Finance Coordinator Siobhan Deans says.

“When debt is used responsibly it can be incredibly empowering.”

People approaching The Salvation Army for help are often heavily indebted; the result of taking out emergency loans with unscrupulous lenders who charge interest rates as high as 400 percent.

People have been lent to in irresponsible ways, with few checks on their ability to repay the debt. Without checks on the affordability of a loan, the client often can’t keep up with repayments and begins to incur costly penalties.

People on limited incomes are struggling to pay for their basic costs of living. Throw in an emergency dental visit, or a car breaking down, and they have to find the money somewhere. Banks often won’t lend to these clients, who may be unable to meet income thresholds for a loan, or have a bad credit rating – often the result of being unable to pay back high-interest lenders in the first place.

One example was a young man who quit his job which was steeped in drug use and gang activity. He was fearful for his safety. He was out of work for several months, but he found a job three weeks after obtaining a loan through The Salvation Army to purchase a car.

Another loan was made to a woman who had had the same dentures for many years. They rubbed her gums and she was in constant pain and struggling to eat. Unable to afford new dentures, she approached The Salvation Army for a loan that allowed her to get dentures that fitted properly, and continue working.

“It has to be affordable,” Siobhan says.

“We won’t lend to people if it’s going to put them into hardship.”

Not everyone who applies for a loan receives one. While it can be hard refusing people, our clients gain financial knowledge and strategies to move forward. “It’s about education,” Siobhan says.

“Sometimes it’s not changing the world, but chipping away at the bit of the picture you can see.”

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