NAB pilots more micro finance
(3 June 2008 – Australia) NAB has launched a small loans pilot to demonstrate the costs, interest rates and charges in the fringe credit market.
While the small loans pilot is not a commercial venture for NAB, it will look to demonstrate the costs required just to break even in small, short term loans.
NAB, which has delved into the micro finance market previously with Step-Up loans, will work with alternate credit provider, Mobile Finance Pty Ltd (trading as Money Fast), to address financial exclusion in Australia.
Under the pilot, NAB will provide up to $1 million in loan capital to Mobile Finance to fund small personal loans of between $1,000 and $5,000 on a break-even basis for a term of one year.
During the NAB pilot, loans will be provided and managed by Mobile Finance and offered for terms of 12 months at a break-even, nominal annual interest rate of 28.25 percent via telephone and internet Australia-wide.
NAB managing director and Australian chief executive, Ahmed Fahour, said that the bank believed there was a need for greater debate about the cost of providing small loans to people excluded from mainstream financial services.
Many Australians cannot access credit through mainstream financial institutions due to their employment status, income levels, or poor credit history, he added.
People are often forced to seek finance from alternative sources such as fringe credit providers and pay-day lenders. The fringe lending market has increased significantly in size and visibility in the past few years and has been rightly criticised for exploiting borrowers with high rates and charges, Fahour concluded.
NAB, which has delved into the micro finance market previously with Step-Up loans, will work with alternate credit provider, Mobile Finance Pty Ltd (trading as Money Fast), to address financial exclusion in Australia.
Under the pilot, NAB will provide up to $1 million in loan capital to Mobile Finance to fund small personal loans of between $1,000 and $5,000 on a break-even basis for a term of one year.
During the NAB pilot, loans will be provided and managed by Mobile Finance and offered for terms of 12 months at a break-even, nominal annual interest rate of 28.25 percent via telephone and internet Australia-wide.
NAB managing director and Australian chief executive, Ahmed Fahour, said that the bank believed there was a need for greater debate about the cost of providing small loans to people excluded from mainstream financial services.
Many Australians cannot access credit through mainstream financial institutions due to their employment status, income levels, or poor credit history, he added.
People are often forced to seek finance from alternative sources such as fringe credit providers and pay-day lenders. The fringe lending market has increased significantly in size and visibility in the past few years and has been rightly criticised for exploiting borrowers with high rates and charges, Fahour concluded.
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