Step-up pilot complete
(18 March 2008 – Australia) The National Australia Bank (NAB) has completed its three year pilot of loans to low income individuals and has indicated the gap to mainstream banking remains.
From a total of nearly 600 loans, primarily loans were for used cars and furniture and other household goods and services, with an overall default rate of 4 percent.
NAB has indicated in its report at the completion of the Step-UP program that low income levels prevent many Step-UP loan recipients from accessing mainstream credit unless their circumstances change.
Effectively, most customers have been unable to ‘Step-up’ to mainstream banking as was intended at the start of the program.
The report also indicates that interviews conducted show that loans have had a positive impact on the recipient’s quality of life.
However, NAB has emphasised the high cost of the loan, primarily to do with the number of man hours required compared with mainstream lending. Microfinance loans can take around six and a half hours; while on average mainstream loans take just one.
NAB has indicated in its report at the completion of the Step-UP program that low income levels prevent many Step-UP loan recipients from accessing mainstream credit unless their circumstances change.
Effectively, most customers have been unable to ‘Step-up’ to mainstream banking as was intended at the start of the program.
The report also indicates that interviews conducted show that loans have had a positive impact on the recipient’s quality of life.
However, NAB has emphasised the high cost of the loan, primarily to do with the number of man hours required compared with mainstream lending. Microfinance loans can take around six and a half hours; while on average mainstream loans take just one.
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