One of the nation’s leading providers of no-interest loans is preparing to merge with a Western Australian charity in order to remain viable.
One of the nation’s leading providers of no-interest loans is preparing to merge with a Western Australian charity in order to remain viable.
Cloverdale-based WA No Interest Loans Network will mark its 16th year in operation next year by joining forces with an as-yet unnamed major charity, according to executive officer Shane Dirou.
Mr Dirou said WA NILS, loan capital for which was provided by the National Australia Bank, had attracted more than $900,000 in annual state and federal funding, but this dropped to just more than $600,000 last financial year.
He said while 97 per cent of clients repaid their loans and demand for WA NILS service continued to grow, the organisation had been unable to attract new revenue despite a host of new initiatives by the state's only microfinance lender.
Mr Dirou said the decision to find a suitable merger partner was made 12 months ago after an unsuccessful six-month search for corporate support.
“It’s very hard to get people to give money to us for what we do. People have the view of ‘why are you giving those people an interest free loan when I can’t get one?’” he said.
Mr Dirou said WA NILS had partnered with 100 community organisations around the state to promote its services and process applications.
It has a prominent social media presence, a new app and website.
The average loan amount WA NILS provides is $1,100, with small amounts of this kind most commonly used to pay for fridges, washing machines, car repairs and health services.
Repayments are automatically deducted from Centrelink payments and usually take a year or 14 months to repay.
Mr Dirou said 33 per cent of WA NILS clients were Aboriginal and most had no savings.
“Considering these clients are the most financially excluded from the normal banking system, they do very, very well. The banks would love to see a default rate of only 3 per cent,” he said.
WA NILS has five staff based in Cloverdale.
Mr Dirou said because the business practised responsible lending and investigated clients’ financial situations, it could take between seven days and two weeks to approve loans of between $200 and $1,500.
For many clients this wait was too long, he said, which sometimes led them to predatory payday lenders who may charge between 200 per cent and 1,000 per cent interest.
In an attempt to dissuade clients from this costly behaviour, Mr Dirou said WA NILS had partnered with 100 community organisations around the state to promote its services and process applications.
“We’re on Facebook, Twitter and obviously our website. In the past two years we’ve designed an online application people can now access. It works well and we’ve now seen in that two years 32 per cent of applications are now done online,” he said.
Despite these initiatives, and WA NILS being the only microfinance lender in the state, Mr Dirou said the decision to merge was made 12 months ago after a six-month search for corporate support.
“You can spend so much money, time and effort and present so many proposals to organisations, but so is everybody else,” he said.
“It’s one of those programs where we’re not sick kids, we’re not cancer.
"We don’t tug on the heartstrings.
“The last thing we want to do is lose our identity, we don’t want to lose our brand, but we need to be realistic and save money where we can. Fortunately, larger organisations have better buying power, you can save money on rent, insurance, auditing, all sorts of costs.”
