5 May 2014

New scheme helping poor with loans

6:01 pm on 5 May 2014

An anti-poverty trust hopes a government offer of interest free and low interest loans will deter vulnerable people from using loan sharks.

The pilot scheme, which will provide people on low incomes with affordable credit, is being launched by the government with the Bank of New Zealand, the Salvation Army and the Catholic mission Good Shepherd.

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The chair of Good Shepherd, Diana Crossan, said people in desperate financial situations had few choices.

She said those on low incomes either missed out or turned to high interest loans, which created new problems for them.

Ms Crossan said the success of the scheme would depend on how many loans were taken out and the rates of repayment.

Pam Waugh of the Salvation Army says offering interest free and low interest loans to the poorest people in the community will help break the poverty cycle.

Ms Waugh said deterring people from taking out high interest loans from loan sharks would mean families had more money to spend on essentials.

"They've got a debt paid off and that's one thing less for them to worry about. They've got more disposable income for the basic needs of food, rent, education, power."

Ms Waugh said the Salvation Army would assign the loans, and work with families to pay the the money back.