Dick Adams (Lyons, Australian Labor Party) Share this | Hansard source

The issue that the member for La Trobe raises is an interesting one and it has been around for some time; however, my interest is in its application in Australia. Already we have some development of microcredit in Indigenous communities, as can be seen in Siobhan McDonnell’s Giving credit where it’s due. In her discussion on the operation of microcredit models in Indigenous Australian communities, she states:

Micro-credit is one model which may enable Indigenous people, and in particular women, gain access to credit. It is the extension of small loans of amounts of less than $25,000 to entrepreneurs too poor to qualify for commercial lending. The aim of micro-credit lending is to provide credit to entrepreneurs who do not have access to credit from other private or government sources. By targeting women, immigrants, welfare recipients, Indigenous people and low-income earners, micro-credit loans serve a client base that has been rejected by the formal banking sector.

She explains:

The term micro-credit is used in two different contexts. First, as the process of lending small, short-term loans to individual borrowers for self-employment projects. Second, as a program which also incorporates a ‘peer-group lending model’. In the peer group lending model, borrowers form groups of approximately five borrowers. Each borrower is held accountable, as a guarantor, for each of the other borrower’s loans. If one borrower defaults the group as a whole must repay the loan. The process of borrowers forming groups by choosing their group members has been found to reduce the credit risks associated with lending and provides a mechanism for ensuring that loans are repaid such that it is financially viable (ie the micro-credit fund records a high repayment rate on loans).

In 1997, James Evans from First Business Finance Australia wrote:

Microcredit has international currency. European and North American countries regularly use the term, both in government policy formulation, and in their approach to lending. It is also successfully established in developing countries, most notably in Bangladesh where last year the Grameen Bank alone lent US$380 million; average loan size $100, and a repayment rate in excess of 98%.

There have been examples of microcredit schemes in communities around Australia. Small credit unions, revolving community loan funds and similar mechanisms have come and gone over the years. Indeed, the creation of the first Australian Credit Unions fifty years ago were in part a response to the needs of “modest farmers and small business folk”.

So far there has been one over-riding problem with these commercial microcredit initiatives. They have been local and small. In an informal survey of twenty microcredit providers around Australia in 1994, the author found that not one had disbursed more than five business loans in the previous year.

So it is all well and good to support the microcredit movement overseas. I know that many in Australia feel this is a good way of supporting developing nations, helping them to help themselves in simple ways. But why aren’t we doing it here? In one sense, the NEIS allowed many people to use their unemployment benefits to start up, and there have been schemes like Young Aussie, where young people are able to start their own business under the umbrella of the Young Aussie scheme until they are ready to go it alone. Now we need some method of loaning small amounts to people who want to start up in a very small way. Banks are not equipped to do this sort of thing. As Evans says:

There is little dispute about the most common reasons for the difficulties that very small, often young, businesses have finding suitable debt finance (Time expired)

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