Address to the National No Interest Loan Scheme Conference
Thank you very much for that very generous introduction. I have to spend the next 20 years trying to live up to it. I have a confession to make – can I first of all welcome everyone here and acknowledge the traditional owners and any elders here past and present and pay my respects.
I have a confession to make I am a big fan of country music. One of my favourite country music songs is about a grandfather talking to his grandson. Those who like and love country music know it does one of two things, it shakes your hips or it breaks your heart. You heard a lot of heartbreaking stories in this room but the difference about what you do here is your stories, more often than not because of your work, have a happy ending unlike many of those songs. But one of the songs talks about this advice and says when you grow up you have got to have a hero. When I was growing up I had many heroes probably the one I used to think about most was Mark Ella, the greatest person to ever pull on a Wallaby jumper in the country in my view. Outside of that there was a very big figure in my life growing up and it was a fellow called David Bussau. David may be known to many of you he was the founder of Opportunity International. He was a good mate of my father, still is to this day and I grew up hearing the stories of microfinance and how it was transforming the lives of people in developing countries all around the world. At that time in particular he was very active in the Philippines and a good mate of his Leigh Coleman, who is a very good friend of mine today, he and David were up there transforming millions of people’s lives. Now David is working in North Korea, in North Korea can you believe it? In David I saw the power of an individual who had incredible belief in faith but he also understood what Adam was just talking about which was the innate belief in the individual to change their circumstances when they are given the opportunity to do so, when they get a fair go to have a go which is a key principle driving the government’s views when it comes to the welfare system but more broadly how we are seeking to pursue economic policy.
So when NAB and NILS [No Interest Loan Scheme] and others came to see me earlier on in the discussions about trying to support the programmes going forward, I am not sure if they knew this was my background, but they pretty much had me at ‘g’day’. They had me at ‘g’day’ when it came to the work that is done in this sector. So it didn’t take much convincing on my part because I already knew the transformational impact and not just around the world but I knew it through the experience of my own family. My mother served on one of the, at that time, a local church board which did exactly this in a more primitive way than it is done today. That was something she believed very strongly in so this has been very much part of my understanding of how lives can be transformed over a long period of time. I don’t have to convince anyone in this room about the virtues of what we do together in this space. Robert’s story earlier I think demonstrated better than any research can but we all know the research backs it up. The research is enormously important when those of us who believe passionately in these services seek to convince central agencies and others through the budgetary process of their great value. Their great value is that they transform a life not just for a day but for a lifetime, for a lifetime. That has innate value of itself but when you are talking to Treasurers and Finance Ministers and others the impact that has on the long term liabilities for the government, financial liabilities for the government, are extraordinary. They are absolutely extraordinary. One of the measures we put in this Budget is to adopt the actuarial method of the New Zealand Government which will enable us to have a better picture about how you can make lifetime changes for people in the welfare system that are great for society but they are also great for the economy, they are also great for the Budget and that is a pretty good triple bottom line in my view.
I would like to add my name to the list of those who owe a debt of gratitude to the Sisters of the Good Shepherd. There have been many tributes paid to these farsighted Sisters and I do add mine. This is particularly pertinent given the issue of women and financial abuse featuring highly on the conference programme this year. The financial abuse of women was the very issue that drove the introduction of NILS. The Sisters saw the difficulties faced by women fleeing family violence when they could not access funds for the most essential and basic household items. The Sisters’ solution was stunning in its simplicity and its insight. Good Shepherd Microfinance programme summarised the approach in last year’s annual report. First, make money available as a loan, not as a charity. Second, show respect for clients by entering into a professional valued relationship – a formal loan agreement. Third, educate clients to negotiate a loan and, importantly, create a system that makes it very easy for them to pay it back. Fourth, charge no interest and ask people to return the money so their friends and neighbours can also benefit. These four elements continue as the basis of Good Shepherd Microfinance today and explain its great success.
The practical aim of the Good Shepherd Sisters was to improve people’s day-to-day lives. They could see, as I know all of you do, that a small loan to help someone fix their car so they can get to work or buy a washing machine so the kids can go to school in clean clothes, far outweighs its dollar value. Their insight was in professionally framing their loans in a way that made people feel respected, valued and trusted. In all the research, an important finding recurs; the NILS experience gives people confidence to handle their own affairs.
You are in the freedom business. You are in the independence business. I can think of no greater business or vocation to be involved with; in empowering people to achieve what they inspire to, in their own terms, on their own conditions, in accordance with their own beliefs and vision of their own future. There is a sense of hope, a sense of hope that someone is cared for, that is the outcome.
The Sisters’ core belief in respect, not welfare, has paid off. While 92 per cent of the NILS borrowers are on very low incomes, the loan repayment rate is consistently above 95 per cent; a great example of the result of giving people responsibility for their own affairs. Moreover, the investment has proved its worth in dollar terms. An outcomes evaluation last year found that for every dollar invested in NILS, a social and economic return of $1.59 is generated. NILS and the associated StepUP now provide loans to more than 26,000 people each year through more than 650 sites across Australia. Another 4,000 people benefit from participating in conversations about their financial circumstances, strengthening people’s financial skills, and teaching financial literacy. Financial issues and challenges are without doubt one of the biggest causes and destroyers of families and relationships in this country, and the biggest fast-track to poverty that you can think of outside things like substance abuse, things of that nature, but these things are often attended to those challenges as well as you all know. So working to help people take control of their financial circumstances and move from chaos to stability not only saves their lives but can save their family, can save their children and ensure stability for the entire family over a generation.
This is why in the Budget the Government is very pleased to have allocated $63.4 million over the next five years to support the great work of NILS, StepUP and the Brotherhood of St Laurence’s Saver Plus which includes $33.3 million for Good Shepherd which are moving thousands of people on low incomes away from welfare dependence and towards financial resilience.
Many of you also will be interested in the Budget announcement of $4.9 million in commitments over three years to Community Development Financial Institutions, CDFIs, to focus on microenterprise development. This investment marks a new phase for CDFIs with the focus of the next stage on supporting people to build microenterprises.
Microfinance is often an essential part of a complex puzzle rather than an end in itself. Loans allow people to make safe choices so they do not to end up buying an exorbitantly expensive product for example, and avoid the false economy of buying cheap goods that break down. The programme also provide a gateway to other services to help people get back on their feet, like drug and alcohol support, crisis accommodation, family and mental health services and support for women suffering financial abuse. Financial abuse is estimated to occur in half of family violence cases. It involves women from all walks of life leading all too often to poverty and homelessness. Although the perceptive Sisters of the Good Shepherd worked this out more than 30 years ago it has remained very much a hidden tragedy in our society. I am extremely pleased to see the conference bringing the issue to the fore.
Tomorrow my very good friend and ministerial colleague Minister Cash will launch the Financial Abuse e-learning model which has been developed in consultation with the Prime Minister’s Office for Women and ASIC. The learning module will help NILS workers recognise financial abuse and how they can help women access support. Also tomorrow Christine Nixon is going to chair an expert panel discussing the latest research and what’s happening in the community on financial abuse and family violence.
Another initiative the government is pleased to support is the Financial Inclusion Action Plans. The government has allocated $800,000 over the next two years to help Good Shepherd Microfinance drive this programme. Financial Inclusion Action Plans will encourage organisations – banks, retailers, government departments to build on the products and services they currently provide to vulnerable individuals, either their employees or customers, to improve their financial inclusion. I know there are organisations already doing this, exploring how they can help customers rather than excluding them, and I am pleased to say others are already putting up their hands to say they would like to be involved. We do have a lot of good corporate citizenship in this country and we need to acknowledge it and we need to encourage it.
The work envisaged originally by the Good Shepherd Sisters with $20,000 of their own funds has been greatly boosted by the social responsibility of the National Australia Bank. I want to pay my tribute to NAB as well as a real leader in this area. NAB has supported Good Shepherd Microfinance to deliver NILS and StepUP since 2003. It is not a fair-weather friend, it is not just their financial commitment. NAB also shares knowledge, time, expertise and they put their brand behind this programme. NAB and Good Shepherd Microfinance are a great example of community business collaboration.
In conclusion, I would like to mention two other issues that have been in the news recently. One involves organisations using Centrepay. More than 600,000 people on Centrelink payments use Centrepay to pay bills and to help meet ongoing expenses. But as a Government we understand that sometimes Centrepay can be used in a way that disadvantages the consumer. Following an independent review of Centrepay, my colleague Human Services Minister Senator Payne announced that consumer leases that are not regulated under the National Consumer Credit Protection Act will be excluded from Centrepay. I know that some consumer leases can lead to people paying up to triple the retail price for a product. This is just not right. As a result of these changes I hope that more consumers will turn to a better alternative to be able to make significant and necessary household purchases. One better alternative, of course, is a NILS loan. Senator Payne also announced a working group to examine issues such as whether organisations which wish to use Centrepay for consumer leases should have to disclose effective interest rates. We aim to release the new Centrepay policy by the end of this month.
There is also an upcoming independent review of the small amount credit reforms, which will look into various issues relating to small amount loans, including warnings about borrowings and caps on costs. This review will be instigated by my colleague, the Assistant Treasurer, Josh Frydenberg, as soon as practicable after 1 July. Following the G20 Summit in Brisbane last year the G20 leaders committed to taking strong practical measures to enhance financial inclusion.
Australia went down this path more than 35 years ago when the Good Shepherd Sisters began their No Interest Loans Scheme. I want to thank and congratulate all of you who continue and expand on their great work and act within the spirit in which they commenced their incredible work as you discuss how you will take these issues forward at this year’s conference. It has been a great privilege and pleasure to be involved and working particularly with Good Shepherd and the NILS programme and microfinance providers more generally.
This is an empowerment initiative which I think has few if any comparisons which are out there today. It is all about, something we believe very strongly in as a government, that the best form of welfare is a job where people have choices. We want to help people make the best choices they can. Poor choices, often based on few alternatives, poor information, lack of good counsel, mentoring and support can leave people to make decisions which can ruin the rest of their lives. Other times that occurs because of events and circumstances which exist well beyond their control and they fight to regain their independence and they fight to regain the choice that they once had. You are all in the business of giving them that choice and that’s a great business to be in and we are in the same business.
Thank you very much.