Pilot to Connect Disadvantaged with Financial Services
21 February 2011 at 4:03 pm
Five Community Finance Organisations are the first to be funded under a new Federal Government initiative to give disadvantaged Australians access to financial services.
The Federal Government says Australians excluded from mainstream banks and services will be assisted to access financial products, including loads, under a newly launched $6.27 million pilot program.
The pilot program was launched by the Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin, at the Fitzroy and Carlton Community Co-operative in Melbourne.
The Co-operative is one of five community development finance institutions (CDFIs) across Australia that will be supported under the pilot project.
Also being supported under the pilot are:
- Foresters Community Finance (QLD),
- Community Sector Banking (NSW, with consortium partners operating in WA, QLD, Vic, SA, Tas),
- Many Rivers Opportunities (NSW and WA),
- Fitzroy and Carlton Community Co-operative (Vic),
- MoneyFast (nationwide coverage through the web).
The Government says these institutions have all demonstrated a commitment to supporting vulnerable Australians to get access to financial services, providing individuals and organisations who are able to repay a loan but who are excluded from mainstream banks and services with access to safe and affordable credit.
CDFIs typically cover their costs through philanthropic and private investment and Government assistance with running costs – bringing together government, business and the community.
The Government says services like these can be an important stepping stone to mainstream financial services and financial independence, as they also provide practical financial literacy training and mentoring.
The Pilot Project is part of the Government’s Financial Management Program, which provides $124.5 million a year to build financial resilience.
The pilot scheme was recommended by a scoping study more than 12 months ago, with the Government announcing it would fund the pilot in January 2010.
The scoping study by Social Ventures Australia in late 2009 found that the CDFI sector in Australia is very small, especially in comparison to the UK and the US, and that this needed to change.
The Government said the pilot would seek to test the potential of the community finance model to build the capacity and resilience of disadvantaged Australians who have difficulty accessing mainstream financial services and products.
It said it would provide one-off grant funding for business development purposes to selected community finance organisations offering fair, affordable and appropriate products and services aimed at the financial inclusion of disadvantaged Australians.
The Government also said the pilot would facilitate access to capital and loan funding through the establishment of an Investment Circle – partnerships between the community development financial institutions and financial investors who can provide capital funding to the eligible applicants who participate in the pilot project. The purpose of the investment circle is to facilitate access to capital funding that otherwise may not have been available to organisations.