DUBLIN, Ireland–Following a successful pilot test, a government-backed loan program aimed at stopping moneylenders is now set to go national.
Ireland’s Social Protection Minister, Leo Varadkar, reported the pilot “It Makes Sense” program was a “huge success” at the 30 credit unions at which it was tested, according to The Independent. The national program will be the first time the government has taken on loan sharks on such a scale.
According to The Independent, some 400,000 people in Ireland are estimated to use moneylenders, who can legally charge interest rates of up to 200%. And illegal moneylenders, who are not licensed by the Central Bank, are known to charge even more – and to use threats to force those in arrears to make repayments, The Independent reported.
The program to be offered through credit unions offers what are being called hassle-free loans of up to €2,000 to cash-strapped people, with a fast turnaround for borrowers seeking approval.
Loans can be approved in a day, a fraction of the time it normally takes a credit union to assess a loan application, according to The Independent.
“It Makes Sense” is designed to match how easy it is to get cash from a moneylender. The goal is to allow people on low incomes to get a loan from a credit union and have it paid back out of their social welfare payments. This reduces the risk of default.
According to The Independent, “Moneylenders are understood to have been hit hard by lower demand for loans in the 30 areas where a successful pilot of the scheme was run over number of months.”
The national effort will be open to all 333 active credit unions in Ireland with a goal of being up and running by Autumn. The Central Bank has lifted some restrictions on credit unions offering the micro-loans.
The Independent reported that many of the credit unions that operated it reaching their threshold of 50 loans within weeks, and that the 30 credit unions in the pilot project loaned out a combined €720,000 to 1,200 borrowers. Most people borrowed under €500. Half of those taking out a loan had not been members of a credit union.
A quarter of those getting a loan were current, or previous, moneylender customers. Less than 6% of the loans were in arrears up to the end of April, The Independent reported.