Low-cost loans pilot scheme with credit unions to be rolled out to 1m people

Struggling families will be able to avoid going to loan sharks by using a new low-interest lending scheme.

The scheme will be run through credit unions and aims to help those on low incomes, who usually would be forced to resort to money lenders offering crippling high-interest loans.

Announcing the nationwide roll-out of the micro-finance scheme, Social Protection Minister Leo Varadkar said it would mean significant profits currently made by moneylenders would instead remain in the pockets of struggling families.

Michael Culloty of the Money Advice and Budgeting Service said the scheme would put pressure on moneylenders to bring their rates down. Some, it was claimed, charge up to 188% interest. He said if a person received a €1,000 loan under the scheme, they would pay interest of €40. However, the same person would have to pay back up to €300 in interest through a moneylender.

“So there is €260 of a difference,” he said. “That’s quite a considerable sum, knowing that moneylenders have 260,000 customers at the moment.”

Mr Varadkar said: “This small loans’ scheme represents real practical help for families and individuals struggling on low incomes.

“Many of the participants struggle to get credit elsewhere, and may not have a bank account or savings. So when the unexpected bill arrives for home or car repairs, a new fridge, or a family occasion, some turn to moneylenders and loan sharks.

“This new scheme will ensure access to small loans at reasonable interest from the credit union.”

The scheme, which allows for loans of up to €2,000, was first rolled out on a pilot basis across 30 credit unions but will now be extended nationwide.

Mr Varadkar said the extension would open the scheme to around 1m people.

More than 1,200 loans have been drawn down as part of the pilot, with an overall value of over €720,000.

The pilot stage showed that more than half of those using the scheme had previously used a moneylender, and that 22% of those on the scheme were thinking about using a moneylender before they signed up.

Meanwhile, Mr Varadkar has defended plans that could see councillors’ pay rose by around €4,000 a year.

He said the plans are part of a broader scheme which would also help all those who pay PRSI.

“What I am pushing for and what I believe in is a more European-style social insurance system and that means if you pay PRSI, if you pay into the social insurance system, then you must get something back for it,” he said.

“The first big manifestation of that change is the introduction of paternity benefit on September 1. Around 40,000 fathers will benefit because they pay PRSI. They will be able to claim €230 a week for two weeks after their child is born.

“Proposals in relation to councillors is only a small part of that reform. So if they are paying PRSI, they will get the same benefits as everyone else does.”

Editorial: 10

More on this topic

Consolidation of credit unions continues apace Consolidation of credit unions continues apace

Micro loans can replace rip-off lendersMicro loans can replace rip-off lenders

Credit unions face big task to secure mortgage market shareCredit unions face big task to secure mortgage market share

Cork credit union to scrap death benefit insuranceCork credit union to scrap death benefit insurance


Throw all the veg you’ve got into this easy dish.Jack Monroe’s recalibration supper recipe

In a time when our shopping and cooking needs to be efficient and easy, we are bringing back our One List, Five Meals recipe pages.Michelle Darmody's One list, Five meals

What is the future of fashion and how will the ‘high street’ look when this is all over? Corina Gaffey asks those in the knowThe future of fashion: How the crisis will impact the retail industry and what we wear

Surveying the global market, Des O’Sullivan says when the going gets tough, the tough get goingHow art world is putting changed times in picture

More From The Irish Examiner