Microfinance in developed economies: A case study of the NILS programme in Australia and New Zealand

Abstract

This paper compares the role of microfinance schemes in developing and developed country contexts. Research and reporting on microfinance programmes in developing countries is vast, but there is currently little analysis of similar schemes in developed country settings. This paper contributes a new angle to the burgeoning literature by offering a small case study of Australia's Good Shepherd Youth and Family Services’ NILS scheme, which was recently invited to be involved in the establishment of New Zealand's first formal microfinance programme, Nga Tangata Microfinance.

Keywords:

• microfinance
• moral hazard
• adverse selection
• developed economy
• economic participation

Notes

1. We undertook informal interviews of many of the people involved on both sides of the Tasman, and one of the co-authors is a director of the New Zealand programme.

2. See: http://www.goodshepvic.org.au/why_women.

3. Centrelink is Australia's equivalent to New Zealand's Work and Income.

4. Nga Tangata Microfinace Trust is the national organisation, with representatives of Child Poverty Action Group, New Zealand Council of Christian Social Services, and New Zealand Federation of Family Budgeting Services as the Trustees, Kiwibank as the funding partner, and representatives of Kiwibank and Good Shepherd Youth and Family Services, Australia and New Zealand, as the Advisory Board. The Directors of Nga Tangata Microfinance Trust (Manurewa) Company, running the pilot, are representatives of Child Poverty Action Group, Methodist LifeWise Trust, Maori Women's Welfare League, Presbyterian Support Northern and Mangere East Family Service Centre. They are supported by a wider group including representatives from Mangere Community Law Centre. The legal formation and registration of the Trust and the Company, and organisation of their charitable status, has been achieved pro bono by the Auckland office of Kensington Swan.

5. The Trust and the Company are structured so success of the pilot will enable other Nga Tangata Microfinance Companies to be established with relative ease.

6. A member of the New Zealand Federation of Family Budgeting Services.

7. The relatively low percentage in Australia is mainly due to the electronic transfer system which pays benefits by direct deposit into a bank account (OECD, 2005, p. 154).

8. For example, whilst university students are also welfare recipients and often have very low income, there is fierce competition on campuses to provide them with personal credit accounts. This is motivated by a desire to establish a client–bank relationship with a potential future high-income earner.