Good Shepherd MicroFinance’s 'No Interest Loan Scheme'

1. Description of the programme
2. The study
3. Key findings
4. Points to consider

Description of the programme

The No Interest Loan Scheme (NILS) is a community based programme provided by Good Shepherd Microfinance (GSM) offering loans up to $1,800 to low income individuals in Australia to purchase essential household goods or services. NILS loans carry no interest or fees, and are “circular community credit” whereby the repayment of one NILS loan provides funds for another NILS loan to be financed in the community. NILs providers also offer financial advice to clients.

The programme aims to improve clients':

• Financial capability,
• Financial confidence,
• Financial wellbeing, and
• Economic, social & health outcomes.

NILS has reached 125,000 people through 257 community-based organisations across Australia. It has a target of reaching 1 million people on low incomes over the next five years.

The study

One independent outcomes evaluation of NILS conducted by The Centre for Social Impact (CSI) at the University of New South Wales (UNSW) has been published. The evaluation comprised stakeholder workshops and a literature review to inform the outcomes framework, as well as quantitative monitoring data from 294 accredited programs and a representative telephone survey of NILS clients.

A social and economic impact analysis was also conducted, based on the outcomes recorded in the survey.

Key findings

The evaluation (which involved quantitative monitoring data from 294 accredited programs and a representative telephone survey of 710 NILS clients following the award of a loan and provision of financial advice) found positive impacts in relation to the following outcomes:

Financial and wider wellbeing:

• Eight in ten NILS clients (82%) experienced a net improvement across the four outcome areas measured- financial capabilities, cost savings, financial independence, and social and health outcomes. This included 33% who experienced cost savings and 46% improved financial independence.
• Three quarters of clients (74%) experienced positive changes in their standard of living, stress and anxiety levels, confidence in achievements, general confidence and self-esteem, physical health, and/or personal relationships.

Financial behaviour:

• Improved for almost half (47%) of the sample (including starting to follow a budget (27%), pay more bills on time (16%), save (more) money (14%), maintain an emergency savings fund (8%) and comparison shopped more often (5%)). Around four in ten (42%) stopped or decreased their use of higher cost lenders.

Clients who received financial counselling support together with their NILS loan were more likely to experience positive financial capabilities, economic, and social and health outcomes.

Clients who received a NILS loan from a centralised (state) organisation were less likely to experience positive outcomes than clients who received a NILS loan from a franchise or independent organisation, however the flexibility of the loan criteria had no impact on client outcomes.

A social and economic impact analysis based on the client outcomes reported in the survey estimated that, for every $1 invested in a NILS loan, an average $1.59 of social and economic value was created.

NILS was also found to be successful in reaching vulnerable groups.

Points to consider

While the study measured a positive change amongst programme participants, there was no comparison group so no firm causal links can be made between the programme and the outcomes measured.

Full report

Full research report