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Connexus : Issue 37
Lending a hand A government pilot program aims to help the financially disadvantaged. By Steve Packer The federal government has selected a credit union as one of five organisations to take part in its Community Development Financial Institutions (CDFI) pilot project. CDFIs cater to people who are unable to access fair and affordable financial services from the mainstream banking industry and may resort to riskier credit sources, compounding their financial stress and hardship. The sector is underdeveloped in Australia, where the government's scoping study identified fewer than 10 CDFI-like organisations -- although it estimates that up to 2.5 million adults experience some degree of financial exclusion. "In addition, many micro and small businesses, and social enterprises, experience difficulty in gaining access to credit and loan capital," says the Department of Families, Housing, Community Services and Indigenous Affairs' scoping study. "In terms of social impact, financial exclusion generates or sustains cycles of disadvantage in many communities." Melbourne-based Abacus member Fitzroy & Carlton Community Credit Co-op (FCCC) will use the government's seed funding to establish a foundation to attract capital to develop financial literacy and micro-lending programs. "Because we are regulated by APRA and can't take on tax status as a charity, we will use our microfinance experience over the last 33 years to set up the foundation. It has been registered and will be called the Credit Cooperative Foundation," says FCCC general manager Greg Fisher. "We'll expand beyond our current member base, taking referrals from the financial counsellors, mental health institutions and the like that we currently get referrals from, and we'll use FCCC's lending, infrastructure and licences to supply services to people who would not otherwise have access to mainstream financial services." FCCC operates from a shopfront on Brunswick Street, in inner-suburban Fitzroy. More than 80 per cent of its 5,000 members are on benefits. Its average loan is $1,200 and it has a budgeting service and its own no-interest loan scheme funded by the City of Yarra. Twelve of its 20 staff are volunteers. Natural link with the mutual sector Whether more credit unions should be involved in the pilot is a debatable point. "It's fantastic that at least one could be part of it," says Fisher. "Actually, I would have expected more to have applied and qualified for it." Daniel Newlan, an Abacus senior adviser, policy and public affairs, says about a third of the 15 applicants for the $7.5 million pilot were credit unions. "We feel that they chose the organisations most closely aligned with CDFIs," says Newlan. "It may be that, in this early pilot phase, they leant towards applicants that have a little bit more of a proven track record in this area. They want to jumpstart a sector that's in its infancy and the key thing they are looking for is that it can sustain itself. www.abacus.org.au 18 Connexus COMMUNITY