M. Claire Dale: Founder of Ngā Tāngata Microfinance

  • M Claire Dale_NZ

M. Claire Dale: Founder of Ngā Tāngata Microfinance

As part of impactmania’s Women of Impact series, we are traveling to New Zealand in November 2019. A number of the women from the program will meet their peers for cultural exchange and to create economic opportunities and partnerships. The U.S. Consulate in Auckland, New Zealand is supporting 12 interviews and a special welcome reception at the U.S. Consul General’s residence. You are invited to meet and connect with the women from the program at the Women of Impact event, November 8, 2019, in Auckland, New Zealand.

Dr. M. Claire Dale is a Research Fellow with the Retirement Policy and Research Centre in the Department of Economics at the University of Auckland. Her research interests include retirement policies, pension portability, long-term care provision, the economic effects of gender on retirement options, intergenerational equity, and child poverty. She is on the board of the Child Poverty Action Group (CPAGand the founder of Ngā Tāngata Microfinance, which translates to “for the people microfinance.” Over the last decade she has helped thousands of people change their financial outlook.

BY PAKSY PLACKIS-CHENG

You established the Ngā Tāngata Microfinance in 2009. What are the latest numbers? How much money has the organization lent and how many families have you helped?

Kiwibank, a New Zealand Bank, has provided us with about 500,000 New Zealand dollars. In total, we have lent over a million dollars in no interest loans. There are more than 500 families who borrowed from us; multiply that by 3 or 4 people and that figure represents the lives we are touching.

Stronger controls are being developed for the consumer. Regulations are being introduced in the Bill before Parliament so the contracts of third-tier lenders have to meet a certain standard of consumer protection of honesty, fairness, and clarity in the contract.

The regulations that are being introduced apply only to what has been defined as high-interest contracts. Those are defined as charging interest of over 50% a year.

How do you build relationships with families all across New Zealand?

We are a tiny organization staffed primarily by volunteers. We have one full-time executive officer and two loan officers. We rely on financial mentors within communities across New Zealand. They are our front line. We build relationships with the financial mentors, but we do not employ them. We offer service to the public through financial mentors.

The financial mentors in the community assist families with financial management?

What we do at Ngā Tāngata is provide another tool in the toolkit, to help families get on top of their financial situation by learning financial management. Often they escape situations that the crises have driven them into.

You have made a tremendous impact within the last decade. Congratulations! What are the long-term goals for the program?

We certainly achieved one of those goals this year by changing the legislation. Historically in New Zealand we have had a cowboy environment when it comes to personal loans. For example, even today it is legal for a fringe lender to charge over 500% interest. It is unbelievable—it is criminal. Stronger controls are being brewed for the consumer. There are contracts where third-tier lenders have to meet a certain standard of consumer protection of honesty, fairness, and clarity in the contract.

In New Zealand, there is still no interest rate cap on the cost of credit?

Interest rate caps have yet to be established, but they are being discussed. Caps have been proposed in the bill. Now, and you’ll be so impressed, that it’s 0.8% per day, so it’s just under 300% a year. It is an improvement.

You’re still not there, but there is at least some talk about it.

We are still not there. The predictions that have been brought in apply only to what has been defined as high-interest contracts. Those are defined as over 50% a year. Right now most of our clients are looking at 25 to 45% a year. Imagine what that does. To stay on top of 25% to 45% interest a year is almost impossible.

It is preposterous. Surveys show only 30% of people in New Zealand understand compound interest.

This is the whole problem, right? We’re not taught financial management in school. I saw Kiwibank is helping to educate school children. Are you seeing more education happening in schools?

Yes. Especially over the last few years–thank goodness! The wonderful thing about that is that the children take that information home to their families. This is good, but we have a long way to go.

We have so many people who are so far down the hole. It is really scary thinking about what the future is going to bring, because we are a low wage economy. Everybody is talking about another global financial crisis.

These issues surrounding personal finance are not limited to New Zealand. Why do most of us have such a troubled relationship with money?

We are hugely conflicted around it. I think that is where a lot of the problem comes from. Forgive me, but look at Trump and our previous Prime Minister in New Zealand, John Key. Part of the reason people were captured by them is because they are wealthy.

Wealth is success, and it almost does not matter how that wealth is accumulated. People do not consider whether or not anything is being produced by wealth, right? It is just money making money. It is how the system works. You look at the data and most of the GDP increases around the world have nothing to do with anything that’s being produced.

We are in conflict with what we are actually doing.

How do we break that cycle?

My goodness! That is a very good question. People like Kate Raworth promote the “doughnut economy,” which aims to balance human needs with the earth’s ecological ceiling. French economist Thomas Piketty advocates a global effort to tax wealth in order to elevate the wealth inequalities created from capitalism. People are trying to fight back, but everybody knows money rules.

Have you seen success in New Zealand with impact investments or regenerative capital?

We have seen some wonderful things with sustainable business organizations. They are certainly becoming more a part of the conversation. For example, there are promising  initiatives taking place internationally with children. Organizations are pushing forward because children are the ones most potently impacted by the bad decisions of their forbearers.

Still it is not enough to flip the change. I do believe it will happen.

In order for change to happen, there needs to be a system-wide shift, right? You have worked with the government. What are some of the criteria or ingredients to make it systemic?

Again, good question. More information needs to be out there. Part of the issue in New Zealand is that we have just a three-year election cycle. We are coming up to another election next year. We have a year of promises, a year of tentative doing stuff, and then a year of wanting to get re-elected.

Achieving political change is really, really challenging. The money invested in maintaining the status quo is problematic, not just in New Zealand but everywhere. The bulk of the world’s wealth is invested in maintaining the status quo. Business as usual.

I would like to return our discussion to families. What have you seen that really breaks the intergenerational cycle of poverty?

Hope: a belief in the possibility that the cycle can be broken. The data shows that a lot of family stress and violence is financial-based. When people understand that they are empowered and understand a pathway forward, it transforms the family dynamic. And that’s intergenerational. That makes a profound shift.

What can happen to families through programs such as the Ngā Tāngata Microfinance? In addition to the ability to pay off their loans, how have families been impacted?  

We see family members realize they can make headway. Over time, they see their financial situation changing. It is empowering and gives them the chance to exercise some control and some power in this aspect of their lives. Instead of going backwards every week, they start by breaking even.

That experience must be huge for these families to see.

It is transformative.

What drew you to these issues, Claire?

I have been one of the people, who when an envelope arrived in my letterbox, I put it in a jar and put a lid on it. Because I had no money, I could not pay any bills. I knew I was getting deeper and deeper in debt, but there was absolutely nothing I could do about it.

I had a couple of small kids; I did not want to be angry and fearful all the time. Having been in that place and then coming out of it, I understand how overwhelming it can be to going backwards financially. Whatever you do, you are going backwards.

How did you make that change?

Time passed and I got better and better jobs and had to spend less on childcare as the children got older. And my family helped enormously. But it certainly would have been easier if I could have borrowed money at a fair rate. Still, I managed through and held on to my house. At that stage, it was something like 18% interest we were paying on house mortgages. Bank overdrafts were ridiculous. If I had  the financial tools and a microfinance loan at the time, I would have gotten out of that hole so much faster.

You probably wanted to hold on to your house as a base for your children.

I was not going to let that go, absolutely. But most of the clients we are dealing with do not have their own home. It is an incredible joy helping a few families get out of debt and get into their own homes. It has been amazing for them and glorious for us.

Who has impacted your professional or personal DNA? I am sure there are many people, but if you look in your career, who has made a difference and helped formed you in how you go about doing things?

It started as a dream. One of the major influences in my life is the relationship with Kiwibank. They have been amazing. It took them some time to trust us, to understand what we were on about, that we had integrity and our ambitions were achievable. They have been an amazing partner.

Also, l my colleagues at Child Poverty Action Group, who have a broader knowledge of what was actually happening at the ground level in New Zealand around poverty.

The Good Shepherd Microfinance in Australia model did not work so well in New Zealand, but what they are achieving in Australia is amazing.

I do not like the Grameen group-borrowing model. I could not see that working in New Zealand because we do not have similar communities.

What Good Shepherd was doing in Australia and what the no interest loans could help achieve for people was a revelation to me. It made me believe that we could have something similar but different in New Zealand.

I would like to talk a bit about you as an entrepreneur. You founded this microfinance group in New Zealand. Apart from having the right model, what were the initial steps you took as the initiator of a new program?

Building a team of like-minded people. While this was percolating in the background, I did some research for what was then the union for workers and banks in New Zealand. I gave a presentation related to this work in Wellington. One of the things I said in that presentation was that we needed something like a no interest microfinance system for people in New Zealand. Paul Barber from New Zealand Council of Christian Social Services came up to me afterwards and said, “If you can set up something like that, we’ll be in.”

We had a meeting and brought on board the head of the New Zealand Federation of Family Budgeting Services. I was part of Child Poverty Action Group, another national organization. We had three senior members of three national organizations, all singing from the same song sheet.

There was deep knowledge of our communities and certainly our most vulnerable communities. We slowly moved forward step-by-step.

What did it take for the community to trust you? How did they see the difference between what you were setting up and what the loan sharks were doing? Did people understand what micro financing was?

They did trust us, because we do not charge interest, a setup fee, or ask for collateral.

Was that suspicious to them? In the U.S. this would sound too good to be true.  

Okay, sure, because in the US, there is an issue with people not trusting something that is free or especially, because so many organizations claim something is free when it is not free at all.

People can only access us through a financial mentor. They can go online and ask us questions and see whether or not they might qualify. But they can only access our financial loans through a financial mentor. It is all face-to-face, one-on-one contact.

The other part is that they have to work with a financial mentor for about three months. They need that to trust us. We need that to trust them, because we do not have their collateral. We are not charging interest. We have to trust them to repay us in order to stay alive.

What are some of the most important things you have learned from this?

I learned the difference between good debt and bad debt; all debt is not bad debt. We all need access to credit from time to time to move ourselves forward. Nobody would ever own a home if we did not have access to credit, right? What is disgusting is that the poorest people pay the highest interest rates. Someone with plenty of money is currently paying maybe 3% interest. Someone who is poor will be paying 45 to 600% interest. It is a lunatic system. This is cruel. After nearly ten years of doing this, the leakage rate or the percentage of people who do not or cannot pay back the loan is about 2.5%.

Wow, I understand that in the beginning it was around 4-5%.

Right. You cannot justify charging that differential rate by claiming it is high risk.

In closing, do you have a few words to describe your own journey?

I have huge respect for the volunteers in our communities who do such important work. A huge thanks to Kiwibank for coming on this journey with us. Also a huge thanks to the people who have had loans, repaid them, and shifted their lives. That is what it is all about.


Meet Women of Impact New Zealand in Auckland, November 8th, 2019. 

impactmania’s Women of Impact program has been awarded with the U.S. Embassy Public Diplomacy grant. The grant supports 12 interviews with women in New Zealand who drive cultural, social, and economic impact. The Program also includes a week-long visit to New Zealand to connect and collaborate with those interviewed by impactmania.

For more information: [email protected].

 

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