National Australia Bank pumps $100 million into micro-enterprise loans

National Australia Bank has allocated $100 million to its microfinance division to help low-income earners start up businesses.

National Australia Bank has allocated $100 million to its microfinance division to help low-income earners start up businesses.

The program, which offers unsecured loans of between $500 and $20,000, has been running for 18 months. During that time 110 loans have been written, worth a total of $1.6 million.

Glen Brennan, head of NAB’s community finance and development division, says the bank felt it was time to expand the scheme after a successful pilot program.

“The pilot phase should be over and we should move on with the program now that we believe it works and there’s a much greater demand out there than we first thought.”

The average loan written under the scheme is $150,000. But the default rate on the loans, which have a fixed interest rate of 9.95%, is just 4%.

Brennan says the low default rate has a lot to do with the bank’s support program, which involves mentoring for 12 months and compulsory business literacy training, typically provided by federal, state and local government bodies.

But Brennan says the amount of training needs to increase and he wants governments at all levels to boost their spending.

“The loan is the easy part of this. What we need is more business literacy training,” he says.

“It’s a genuine tragedy when we have someone with the get-up-and-go to start a business but can’t get funding and can’t get the right type of training. That’s a real waste.”

Brennan says the loan scheme has already helped create a number of thriving businesses, including a cosmetics business and a gardening company that is examining the possibility of franchising.

Related stories:

• Surviving the new business investment drought
• Free money for growth – part one
• Free money for growth – part two