The Government has announced a $1.5m allocation towards the continued development of a micro finance programme aimed at access to affordable credit for New Zealanders living on low incomes. The scheme has been promoted as one of the avenues for reducing reliance on 'loan shark' financing for families living in financial difficulty due to high levels of unsustainable debt.

The pilot scheme, which has been running successfully in South Auckland for the past two years, is based on a public/private partnership model of micro financing run in conjunction with community NGOs and larger financial institutions, such as Kiwibank, to help provide affordable access to credit and to relieve the pressure created by finance companies who often charge extortionately high interest rates. Micro financing allows smaller organisations, such as community trusts, to provide financial accommodation using loan capital from larger financial institutions to borrowers who often get caught by fringe lenders when denied credit from banks. Further decisions regarding the pilot scheme are expected in September.

Nga Tangata Microfinance Trust is one of these, lending up to $2,000 at zero interest for purposes that support personal and family wellbeing or building assets. It will also lend up to $3,000 to consolidate debts provided that the borrower is a client of a budgeting agency, supporting financial literacy, for at least two months and has the ability to repay the loan within two years.