Extension of low-cost loan scheme to cut €100m profits of moneylenders
Published 27/07/2016 | 02:30
Huge profits being made by moneylenders are likely to be eaten into by a low-cost lending plan that is being extended nationwide.
It is estimated that profits of between €90m and €100m a year are being made by moneylenders who offer loans at people's doorsteps.
Now, a State-backed, quick-approval loan scheme is to go nationwide in a bid to attack the profits of moneylenders and cut the dependence of low-income people on the loan sharks.
The move means the 'It Makes Sense' lending product will be open to up to one million people.
The scheme is designed to allow credit unions provide small affordable loans to people who would otherwise rely on moneylenders or unlicensed loan sharks. There is a quick turnaround for assessing applications and a minimum of bureaucracy.
The loans of up to €2,000 can be used for funding back-to-school costs, and to pay for family expenses such as funerals. Interest rates of no more than 12pc will apply, compared with annualised interest of up to 200pc for moneylender loans. A pilot scheme in 30 credit unions saw 1,300 people accessing the loans, the average amount of which was under €500.
Social Protection Minister Leo Varadkar said the lending plan was being rolled out nationwide to offer a low-cost alternative to moneylenders, and would put money back into the pockets of low-income people.
"Moneylenders are making profits of between €90m and €100m a year. We could get an amount of that €100m going back into the pockets of those in receipt of social welfare with this scheme," Mr Varadkar said.
Up to 400,000 people are estimated to use moneylenders in Ireland.