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Microfinance.



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Perspective

Wednesday 4 February 2004

John Wilson, Acting Executive Director, Brotherhood of St Laurence

 

Microfinance  

We Australians should live up to our name. I believe we are called the COMMONWEALTH of Australia for a very good reason.  

 

While I appreciate diversity in most things, I do not when it comes to extremes of wealth.  

 

Exclusion zones don’t only apply to Refugees.  

 

We are a land of clubs. We have first and third class education, first and third class employment. Front and back door health. Another club is banking.  

 

Around twenty five percent of Australians cannot access financial services except on the most exploitative and usurious terms. Figures up to one thousand per cent per anum are not uncommon. 

 

A couple of years ago I was talking to some senior bankers and one of them observed that ‘we bankers are competing to be the least hated’. 

 

Thankfully this is changing.  

 

But not enough.  

 

Too many Australians cannot access even theirs most basic needs through their inability to borrow on normal terms. 

 

This time of year, after Christmas, when children are going back to school, is a particularly bad time. Try buying a pair of sneakers, a uniform, two uniforms, school books, a visit to the dentist, an excursion to the zoo. I know of kids who are doing cooking classes, who had to watch their fellow student - whose parents paid the levy - eat the food they’d all cooked.  

 

Is this Common Wealth? 

 

No. 

 

The trouble is that lenders don’t like the unemployed, people on benefits, people without a credit history, people with casual jobs and odd hours, or they only want to borrow a small amount of money,  

 

The old adage that it is easier to borrow one million than one hundred is true.  

 

In some ways you can’t blame the banks. Small accounts cost as much a large ones to service. 

 

However there is another way. We at the Brotherhood of St Laurence, helped by some concerned banks are pioneering new forms of Microcredit. Microcredit has a long history and the Brotherhood has in the past set up credit co-ops that are still successfully running. 

 

Microfinance is based on a centuries-old system of trust-based lending. It began as a movement in the 1970s as an economic development tool in Asian, African and Latin American countries. The movement promoted savings programs. It enabled people to smooth out lump sum expenses relating to life cycle needs, emergencies and opportunities. 

 

And by helping build a small nest egg of savings and assets, microfinance provides the motivation and confidence for people to try to stabilise their lives. It can also provide capital to help people establish a small business, leading to job creation. 

 

Having access to financial services reconnects Australians back into the Commonwealth, makes for a fairer, more integrated society. 

 

It is ironic that the ideas of microcredit originated in the third world. And appalling that we have our own in-house third world. 

 

At the moment we are trialing three separate new schemes. The first with the Bendigo Bank, is a Small Personal Loans scheme operated out of some our stores. It enables low income people to buy essential white good like a fridge and a washing machine. A by-product is the development of a demonstrable credit history. It’s amazing the impact having access to such basic needs has on peoples self confidence and esteem. 

 

Our second is with the ANZ Bank. It’s called Saver Plus and it is targeted to help people develop savings for Educational purposes. 

 

Children’s futures are a great motivation, and Saver Plus encourages new routines and habits of regularly putting money aside. And we find it is having dramatic results. People are able to see longer term possibilities and new opportunities where before they saw clubs and closed doors. 

 

The third has been around for longer, the no cost loan program. The amounts are small, the needs great and bad debts low. 

 

Over the years we have found that people on low incomes are often very effective money managers. Bad debts risks are low, and the amounts are tiny compared with the rampages of some of our corporate cowboys.  

 

Microcredit is a practical way of helping people of poverty. I’ll wrap up with a quote from Muhammad Yunus the founder of the Grameem Bank 

 

“The microcredit movement which is built around, and for, and with money is, ironically, at its heart, at its deepest root, not about money at all. 

 

“It is about helping each person achieve his or her fullest potential. It is not about cash capital but about human capital. Money is merely a tool that helps unlock human dreams and helps even the poorest and the most unfortunate people on this planet achieve dignity, respect and meaning in their lives.”  

 

Guests on this program:

John Wilson  

Acting Executive Director of the Brotherhood of St Laurence