New low-cost lending plan to eat into moneylenders profits - Varadkar
HUGE profits being made by moneylenders are likely to be eaten into by a low-cost lending plan that is being extended nationwide, a Cabinet minister said.
Social Protection Minister Leo Varadkar said a scheme being rolled out nationwide to offer a low-cost alternative to moneylenders will put the money 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,” he said.
The scheme is designed to allow credit unions provide small affordable loans 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 expenses, and to pay for family expenses like funerals.
A pilot scheme in 30 credit unions saw 1,300 people accessing the loans, the average amount of which was under €500.
Now the scheme is being extended nationwide, in a move Mr Varadkar said would open it up to around one million people.
It applies to anyone in receipt of social welfare, including pensioners, carers and the unemployed.
Up to 400,000 people are estimated to use moneylenders in Ireland, who can legally charge interest rates of up to 200pc.
Launching the nationwide roll-out of the scheme at Dublin’s Meath Street Credit Union, Mr Varadkar said the scheme “represents real practical help for families and individuals struggling on low incomes”.
“Many of the participants may struggle to get credit elsewhere, and may not have a bank account or savings.
“So when the unexpected bill arrives for home or car repairs, a new fridge or a family occasion, some turn to money lenders and loan sharks. This new scheme will ensure access to small loans at reasonable interest from the credit union.”
Mr Varadkar urged all 333 credit unions sign up for the micro-lending scheme, called It Makes Sense.
Some 50 credit unions have now committed to offer the new loans, with more expected to sign up in the coming weeks.