Govt defends microloans system after FF criticise timing

The Government is defending its new plans for a microloans system after opposition parties attacked the timing of the plan.

The "personal microcredit scheme" will allow people to borrow up to €1,000 with only minimal credit checks to help them avoid moneylenders.

Fianna Fáil has attacked the pilot scheme and claimed the Government had no plans to bolster the credit union sector.

Junior Minister Kevin Humphreys said the scheme was good news for credit unions, as well as consumers and post offices.

"The average loan will be about €500," he said. "We hope the repayments will be made through the credit unions and the post offices, adding to the sustainability of local post offices right throughout the country."

Meanwhile, the Money Advice and Budgeting Service (MABS) said the repayment process for the new loan scheme would be as painless as possible for the consumer.

Payments on loans of up to €1,000 will be taken from a person's benefits before they are paid out, under the terms of the scheme.

The aim is to discourage low and middle income families from turning to moneylenders when they need cash.

MABS spokesman Michael Culloty said the scheme also included incentives for the credit unions, which will provide the loans.

"It should be as painless as possible for the consumer so it competes with the moneylender loans, but the repayment process also gives security to the credit union," he said.