The NAB & micro-enterprise loans

Dec 2006
Australia , December, 22 2006 - Establishing a Microenterprise Development and Loans Program in Australia is a National Australia Bank–sponsored study. ProBono Australia reports that this study, conducted by The Boston Consulting Group on a pro bono basis, estimates between 6,000 and 12,000 potential new micro-businesses require funding each year.

What did the study cover?

  • The study looks at both the local and international experience of providing loans to ‘asset poor’ people on low incomes who have limited access to affordable credit for what could be great business ideas.
  • It explored how finance of up to $20,000 could help establish or develop small business enterprises that would otherwise have little or no chance to thrive.

What was the NAB’s response?

Ahmed Fahour, NAB Australia’s CEO, says they are passionate about supporting financially vulnerable Australians who have great business ideas.

They are working out a way - a specialised product - to deliver affordable small loans to financially disadvantaged micro-enterprises based on this research.

While the NAB ‘builds the product’ it is looking for appropriate pilot locations and business literacy programs with a view to launching the loans early in 2007.

Micro-enterprise lending is seen as a natural progression from NAB support for low-income householders through the StepUP loan program - developed with the Good Shepherd Youth and Family Service - and also from their support for the No Interest Loan Schemes (NILS®).

The StepUP loan program

People who are financially disadvantaged have few options when seeking small personal loans from banks if they do not have a credit history. The only mainstream banking option is typically a credit card which can add to debt problems for people on low incomes. Funds may also be accessed from alternate finance providers such as payday lenders which may exacerbate debt problems with interest rates up to 48%.

Good Shepherd originally approached NAB with the idea of developing a low interest loan to address this need and from here the StepUP low interest loan was developed. It is an unsecured not-for-profit loan from $800 up to $3,000 and is designed as a bridge between NILS (which sit outside the mainstream financial services system) and access to affordable, safe mainstream credit.

The first Step UP loan was written in October 2004. Uptake in the loan has been slow - 43 loans are now active. During the period over 520 enquiries for loans have been made through the pilot locations in Melbourne city and surrounds, the Mornington Peninsula (Vic), the Blue Mountains (Lapstone to Mt Victoria), Lithgow, Bathurst, Cowra and Orange (NSW).

At each location a community-based micro-credit worker case manages the loan, from initial interview and budget review to loan application. The majority of loans have been written for second hand cars and essential household goods. Loans have also been taken up for medical expenses and training course fees.

NAB will be doubling the reach of the program by offering StepUP in South Australia and in WA (Perth, Geraldton, Kalgoorlie). NAB views StepUP as a vehicle for learning about micro-credit products and how best to assist people on low incomes who traditionally don’t bank, but prefer loans from non-mainstream lenders.


Through these programs NAB learned:

  • Such programs require volunteer assistance and partnerships with community groups to reach the target customer and deliver appropriate support;
  • Successful use of the loans requires a strong relationship between the loan recipient and a community organisation;
  • The loan application process needs to be significantly simpler to that which is traditionally used by banks;
  • We need to be clear on our success measures - the number of loans written needs to be secondary to the level of mentoring provided or level of increased wellbeing or employment.

In April, NAB committed $30 million over three years to delivering small, affordable loans – microfinance – to people who are unable to access credit from mainstream financial services companies.


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