ABC Business – 13 August, 2015
An organisation offering low and no interest loans to low income earners has opened its doors in Adelaide’s northern suburbs.
The Good Money store has been operating in Salisbury for about two weeks, and will be officially launched today.
It will provide no-interest loans of up to $1,200 and loans of up to $3,000 with an interest rate of 5.99 per cent.
The store’s parent company is Good Shepherd Microfinance and chief executive officer, Adam Mooney, said 97 per cent of loans are fully repaid.
“It’s not only a financial transaction, it’s also an opportunity for dignity, for self esteem to rise, to look somebody in the eye and say ‘I respect you, I value you, I trust you’, and that’s worth so much in someone’s life,” he said.
Good Shepherd Microfinance was created by the Good Shepherd Sisters in 1981 in Victoria.
The first Good Money store opened in Geelong in 2012, followed by stores in Collingwood and Dandenong.
The Salisbury store is the organisation’s first business outside Victoria.
Mr Mooney said Salisbury’s average income level, unemployment rate, and the impending closure of Holden all contributed to choosing the location.
“But we also looked at the desire of both the City of Playford and Salisbury to grow into the future,” he said.
Most of the organisation’s capital comes from National Australia Bank, which is providing $130 million for loans, interest free.
The South Australian Government has committed $3.68 million over the next four years, which the organisation says will contribute to operating costs.
“For many households, the cost of living is increasing and it can be a stretch to find enough to go around,” the Minister for Communities and Social Inclusion Zoe Bettison said.
“The temptation is to resort to payday lenders as a quick fix … with crippling interest rates leaving many people in a situation where their debt spirals out of control.”
Good Shepherd Microfinance aims to provide a safer alternative to the payday loan schemes that often attract high interest rates.
“Very soon [people] find themselves spending everything they can to service that loan and then need to take out another loan, and another loan”, Mr Mooney said.
“That continuous cycling of that debt can lead to interest rates of up to 300, 350 per cent within a year.”
In Collingwood, the Good Money store has pushed out several nearby payday lenders.
“There has been a significant reduction in the number of high street payday lenders in and around Collingwood,” Mr Mooney said.
“We don’t ever want to put anyone out of business, we just hope that payday lenders can offer fair, safe and responsible credit at an affordable rate.”
A week ago the Federal Government announced a review of the payday lending industry.
The five month investigation will examine the effectiveness of current laws covering payday lenders and providers of small amount credit contracts.
The announcement came just days after Westpac followed the other major banks by cutting ties with the payday lending sector.