An Outcomes Evaluation of Good Shepherd Microfinance’s

Report prepared by the Centre for Social Impact for Good Shepherd Microfinance.

All of us want to live full lives with positive relationships, a sense of purpose and emotional and economic resilience.

To do this we need to define our own economic wellbeing, rather than being told by others what it should be.

Achieving wellbeing over time, using one’s own capabilities and applying existing personal and community

strengths, progressively builds a sense of hope, control, and confidence in participating in society. All Australians

are better off when this happens, as is evident in this report about the impact of Good Shepherd Microfinance’s No

Interest Loan Scheme (NILS).

Good Shepherd Microfinance aims to reach and enable economic mobility for the large numbers of people who are

deemed financially excluded in Australia – supporting them to move away from crisis and hardship towards stability

and economic participation and ultimately resilience.

Drawing on knowledge gained over 33 years, and on our commitment to these aims, we have already reached over

125,000 people, and every day, across all state and territories, NILS reaches more financially excluded people. Our

collective strength is best illustrated in the community-led principle of NILS. It is delivered locally by 257 accredited

community providers in 609 locations by community development workers, including a large, vibrant, connected

and highly capable volunteer base.

This report tells us that people on low incomes who are unable to access mainstream financial services are now

achieving economic mobility through NILS. Receiving a NILS loan can boost a person’s confidence, create feelings

of inclusion and a sense of direction and hope. It is particularly pleasing to see broad recognition that the social

and moral case for financial inclusion sits alongside a compelling and clear economic case. Economic mobility,

through access to financial services and increased financial capability, directly drives economic growth. NILS plays

a vital enabling role in this - the case for continued and extended investment is clear.

We are fortunate to work alongside wonderful volunteers and leading and diverse community organisations that

deliver NILS, as well as all state governments and many investors of time and other resources. I acknowledge in

particular, the leadership and commitment of NAB in investing in NILS for over ten years. NAB truly is a recognised

global leader in microfinance through its $130 million commitment and shared goal, with Good Shepherd

Microfinance, of reaching 1 million people on low incomes with innovative new programs over the next five years.

Finally, the Federal Government, under various governments over the past ten years has also actively supported

the development, growth and impact of NILS. Thank you for this essential investment to enable all Australians to

participate in the fullness of life with confidence, control and dignity.

Chief Executive Officer

Good Shepherd Microfinance

Behind the facts and figures in this report are the stories of Australians seeking a healthier relationship with money.

Many financially excluded Australians come to No Interest Loan Scheme (NILS) providers purely seeking a loan

but, on top of that, they also receive advice that allows them to take control of their finances, providing them with

confidence, relieving their stress and giving them a sense of feeling ‘normal’ again.

I commend the efforts of the 257 NILS providers across Australia who work tirelessly to provide the financial

assistance and advice that help lift people out of difficult situations.

This report is full of stories that reveal the true impact of financial exclusion. We know that more than 17 per cent

of the adult population, 3 million Australians, are financially excluded. Addressing this issue provides an enormous

opportunity for the Australian economy.

This report shows that microfinance products such as NILS benefit more than only the client, helping to build

prosperous communities. We all benefit from assisting more people to become economically active.

NAB is committed to helping all Australians have a healthy relationship with money, through delivering fairer

banking products, but also through growing our microfinance program. We are proud to have partnered with Good

Shepherd Microfinance since 2003 to deliver effective microfinance programs including NILS. We look forward to

taking the findings in this report and continuing to work with Good Shepherd Microfinance to further improve and

enhance the impact of NILS.

Group Executive

People, Communications and Governance

National Australia Bank

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 5

National Australia Bank

National Australia Bank (NAB) is a financial services organisation with over 12.4 million customers and 42,000

people, operating more than 1,800 stores and service centres globally.

Our major financial services franchises in Australia are complemented by businesses in New Zealand, Asia,

the United Kingdom and the United States. Each of our brands is uniquely positioned, but built on a common

commitment to provide our customers with quality products and services, fair fees and charges, and relationships

built on the principles of help, guidance and advice.

At NAB, Corporate Responsibility is about how what we do in our everyday jobs impacts the lives of Australians,

their communities and the environment. It’s about understanding the role our business plays in society - and using

our unique position to address the issue of financial exclusion and help all Australians to have a healthy relationship

with money.

Supported by the Australian Government Department of Social Services.

Contribution

The Centre for Social Impact research team would like to acknowledge the support and assistance from:

• Good Shepherd Microfinance who commissioned the research

• The staff from the NILS Provider network across Australia

• Mike Quarg, Community Banker, National Australia Bank

• Paul Handley, Data Manager, Good Shepherd Microfinance

• The NILS state coordinators:

- Karen Denham, NILS State Coordinator, Queensland, Good Shepherd Microfinance

- Share Dirou, Executive Officer, Western Australia NILS

- Kathleen Hosie, NILS State Coordinator, Victoria, Good Shepherd Microfinance

- Julie McMahon, NILS State Coordinator, Uniting Communities, South Australia

- Samantha Simmons, NILS State Coordinator, Lismore Neighbourhood Centre, NSW

- Rick Tipping, NILS State Coordinator, The NILS Network of Tasmania Inc.

- Allison O’Connor, Manager Financial Services & Special Projects, Somerville, Northern Territory

• Chris Connolly, Research Associate, the Centre for Social Impact

Good Shepherd Microfinance would like to acknowledge the contribution of the Centre for Social Impact, the

guidance and direction offered by Les Hems and Stephen Bennett, and the input of research team members.

Particular thanks go to the diligence and statistical modelling by Meiko Georgouras.

The Centre for Social Impact, University of New South Wales

The Centre for Social Impact (CSI) creates beneficial social impact in Australia

through teaching, research, measurement and the promotion of public debate.

CSI is a partnership of the University of New South Wales, the University of Western

Australia, Swinburne University of Technology and The University of Melbourne.

• Les Hems: Project Owner, CSI/Net Balance*

• Stephen Bennett: Project Manager, CSI

• Jade Wong: Researcher, CSI

• Meiko Georgouras: Researcher, CSI

• Axelle Marjolin: Researcher, CSI

*Les Hems departed CSI in January 2013 to commence a position as the Director of Research and Development for Tomorrow’s Agenda Research Institute.

Research Reference Committee

• Randall Pieterse: FMP Policy Section, Money Management Branch, Department of Social Services

(formerly the Department of Families, Housing, Community Services and Indigenous

Affairs)

• Dr Anton Mischewski: General Manager, Public Affairs, Good Shepherd Microfinance

• Dr Gillian McILwain: Manager, Research and Policy, Good Shepherd Microfinance

• Corinne Proske: Head of Community Finance & Development, NAB

• Kate Stevens: Senior Consultant, Community Finance & Development, NAB

1 Note: Authors made equal contributions and are listed in alphabetical order.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 7

Introduction

Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) offers no interest loans (up to $1,200) to people on

low incomes for the purchase of essential household goods and services. Started in 1981 in Australia by the Good

Shepherd Sisters, the NILS network now spans 609 locations through 257 community-based organisations across

Australia.

In its 33 years of operation, NILS has reached over 125,000 people. Good Shepherd Microfinance (GSM) operates

NILS through a highly valued partnership with the National Australia Bank (NAB) and the Australian Government

Department of Social Services (DSS - formerly the Department of Families, Housing, Community Services and

Indigenous Affairs), and is part of a broader range of microfinance products offered to support low-income

individuals.

In 2012 the Centre for Social Impact (CSI) at the University of New South Wales was commissioned by Good

Shepherd Microfinance to conduct the first national quantitative outcome evaluation of the NILS in Australia.

The evaluation aimed to identify changes in recipients’ financial capabilities, economic, and social and health

outcomes; and to assemble evidence to facilitate continuous improvement and stimulate innovation in the

microfinance sector. The research involved a mixed methodology including qualitative stakeholder engagement

with the NILS providers, a quantitative national survey of selected NILS recipients, and social and economic modelling.

Key Findings

A NILS loan creates positive changes in clients’ financial capabilities, and in their economic and social outcomes. As a result of a NILS loan:

• 82% of the 710 surveyed NILS clients experienced a net improvement in social and economic outcomes, with only 2% experiencing a net worsening of outcomes.

• The economic outcomes of more than a third of the surveyed clients improved due to increases in cost savings (33%) and financial independence (46%).

• 74% experienced an improvement in their social and health outcomes due to positive changes in their

standard of living, stress and anxiety levels, confidence in achievements, general confidence and self-esteem,

physical health, personal relationships and participation in society.

• The financial capabilities of 47% of surveyed clients improved: they followed a budget, paid bills on time, saved

money, maintained emergency savings funds and comparison shopped more often.

NILS reaches vulnerable Australians and directly improves their lives.

The NILS clients surveyed were characteristic of vulnerable Australians, in that they were:

• three times more likely to be severely financially excluded (55%) than the average Australian (17%)

• predominantly (94%) living below the poverty line, were reliant on government allowance as their main

source of income (92%), were unemployed or out of the labour force (85%) and had an average fortnightly income of $856.80

• more likely to be female (74%), live in a single parent family with dependents (43%) and rent either privately

(38%) or through public housing (47%) and

• 6.5 times more likely to identify themselves as Aboriginal or Torres Strait Islander (17%) than the Australian

average (2.5%).

NILS diverts clients away from predatory lenders such as fringe credit providers and goods rental

services:

• 42% of surveyed clients who had used fringe credit providers in the past either stopped or decreased their use of them as a result of receiving a NILS loan.

For every dollar of value invested in a NILS loan, $1.59 worth of social and economic value is created.

• For the 710 NILS clients surveyed, a total value of $1,063,010 of economic and social benefit was generated

over a three-year period at a cost of $668,000 – an average benefit of $1,497 per client.

other funding - $418,000) is considered.

funding (actual costs of $352,000 – almost 2/3 of the value of investments).

The social and economic impact differs according to loan purpose and loan delivery structure.

• The rate of economic and social return varies for each NILS loan purpose type.

• The purchase of a fridge through NILS generated the greatest return ($2.45 per dollar invested).

Although the NILS loan delivery process varies across states and providers, there are elements of best practice that

could be utilised across the NILS network. There are also elements where there is potential for improvement.

The NILS loan delivery process contributed to some positive changes in respondents’ outcomes:

• Respondents who received support services (such as financial counselling) together with their NILS loan,

were more likely to experience positive financial capabilities, economic, and social and health outcomes than

respondents who did not.

• Flexibility of the residential loan criteria appears to have no distinct impact on clients’ improvement in

outcomes.

NILS client outcomes appear to be impacted by the variations in how providers deliver the

NILS loans.

• Surveyed clients who received a NILS loan from a centralised (state wide) organisation were less likely to

receive positive outcomes than clients who received a NILS loan from a centralised (organisation wide),

franchise or independent organisation.

Recommendations

The recommendations were formulated with a focus on improving and increasing four main elements: the number

of NILS loans, the impact of the NILS loans, the governance structures & organisational capacity and performance

and the administration of the NILS network.

The evaluation provides strong evidence for program expansion as most respondents (82%) experienced

improvements in outcomes due to NILS. Despite the significant outcomes generated by a NILS loan, only 6% of

eligible Australians access NILS. Strategies to access the remainder of financially excluded Australians need to be

explored, trialled and implemented.

Recommendation 1: Explore and implement strategies to expand NILS and to increase the number of loans to

meet unmet demand.

Recommendation 2: Refine the design of NILS to meet the needs of clients who may otherwise choose

alternatives that lead to negative outcomes.

2 Please note that the process and network analysis were exploratory. The findings provide useful insights which require further research.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 9

In addition to increasing the reach of NILS, increasing the value created per loan is an essential part of expanding

the impact of the NILS. Currently, NILS generates a positive rate of return of $1.59 for every dollar invested in the

program.

To ensure that the rate of return increases, further exploration is needed to understand which NILS client is less

likely to receive positive outcomes from NILS and to identify ways to improve their outcomes.

Recommendation 3: Investigate the client groups who are more likely to experience a worsening in outcomes.

Recommendation 4: Investigate methods to improve the financial capability of the NILS loan recipients.

Recommendation 5: Further research the premise that the use of goods rental services is as prevalent and

predatory as fringe credit.

Recommendation 6: Explore the role of accessing credit in defining financial exclusion and the role of the NILS

in providing a pathway to financial inclusion.

Recommendation 7: Increase awareness among the NILS clients of the risk of non-insurance and under-insurance.

The study revealed a variety of governance structures related to both state level NILS operations and to individual

NILS providers. The variation in governance structures are tentatively linked to differential performance in terms

of costs and outcomes achieved, but equally, the process evaluation and network analysis revealed numerous

elements of best practice that could be shared across the NILS network.

The study also revealed the importance of support services in achieving positive outcomes for the NILS clients.

Recommendation 8: Identify and further explore the diversity of governance structures and links to positive

outcomes, especially:

Recommendation 9: The role of centralised services and case management systems.

Recommendation 10: The contribution of support services to delivering better outcomes.

Recommendation 11: Invest in and conduct measurement of NILS quality standards and performance.

Data and information management is important to the functioning and performance monitoring of the NILS

network. Ongoing high-quality monitoring and measurement across the NILS network is needed to identify where

approaches are more or less successful.

Recommendation 12: Invest in and support the data collection process across the NILS network.

• Chapters 1 and 2 provide the history and context of microfinance in Australia, the project scope and an

overview of NILS and how it is delivered.

• The evaluation methodology is introduced in Chapter 3.

• The literature on financial exclusion is reviewed in Chapter 4, which focuses on the Australian context, the

consequences of financial and credit exclusion and pathways to financial inclusion.

• An evaluation framework and theory of change, which links social, health and financial outcomes from NILS

to the NILS product and delivery mechanism is presented in Chapter 5.

• A market and SWOT analysis are used in Chapter 6 to assess the market and competitive landscape for NILS

in Australia.

• The quantitative (national NILS client survey) and qualitative (interviews with the NILS providers) data is

analysed in Chapter 7. This includes key survey findings and the exploratory process and network analysis.

• The social and economic impact model is presented in Chapter 8.

• The conclusion and recommendations are discussed in Chapter 9.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 11

FOREWORD 4

EXECUTIVE SUMMARY 8

TABLES 13

FIGURES 13

ABBREVIATIONS 14

GLOSSARY OF TERMS 14

1. INTRODUCTION 16

2. THE NO INTEREST LOAN SCHEME (NILS) 18

3. RESEARCH METHODOLOGY 25

4. LITERATURE REVIEW 29

5. THEORY OF CHANGE 34

6. MARKET ANALYSIS 37

7. OUTCOME EVALUATION RESULTS 41

8. SOCIAL AND ECONOMIC IMPACT MODEL 65

9. EXPANDING IMPACT: DISCUSSION AND RECOMMENDATIONS 67

BIBLIOGRAPHY 72

APPENDICES 74

TABLES

Table 2-1: Explanation of the NILS 18

Table 2-2: Description of the NILS loan delivery process 20

Table 2-3: The NILS Delivery Systems 22

Table 2-4: Loan details: Generalist and Specialist NILS programs 23

Table 2-5: NILS loan recipient characteristics: Generalist and Specialist NILS programs 24

Table 3-1: The Research Methodology 25

Table 3-2: Market Analysis methodology 26

Table 3-3: NILS Survey Recruitment 26

Table 4-1: Summary of financial exclusion – definitions and consequences 30

Table 4-2: Pathways to financial inclusion 31

Table 4-3: Summary of the NILS evaluation studies 33

Table 5-1: Credit Product Outcomes 34

Table 5-2: Examples of Positive Economic and Social Outcomes by the NILS items purchased 34

Table 5-3: Outcomes from the NILS Loan Process 35

Table 6-1: Characteristics of different credit products in Australia 39

Table 6-2: Strengths and weaknesses of the NILS loan and process 40

Table 7-1: Respondent demographic characteristics 42

Table 7-2: NILS Loan Purpose, Numbers and Payment Methods 44

Table 7-3: Lack of ownership of financial product due to cost. 61

Table 7-4: Relationship between respondents’ outcomes and rigidity of organisations’ eligibility criteria 63

Table 7-5: Other services received through contact with a NILS worker 64

Table 7-6: Relationship between respondents’ outcomes and the receipt of supporting services 64

Table 9-1: Example of NILS provider scorecard metrics 70

FIGURES

Figure 2-1: The NILS loan delivery process 19

Figure 2-2: NILS governance structures by centralisation and size 21

Figure 2-3: The four NILS governance structures 22

Figure 2-4: Supporting networks 23

Figure 4-1: Microfinance conduits to financial inclusion 32

Figure 5-1: Overall Outcome evaluation 36

Figure 6-1: Market Analysis, size of the market for the NILS 37

Figure 7-1: Respondent poverty line status 43

Figure 7-2: Respondent financial exclusion status 43

Figure 7-3: Items Commonly Purchased with a NILS loan 44

Figure 7-4: Outcome Constructs 45

Figure 7-5: Total change in outcomes due to a NILS loan 46

Figure 7-6: Net changes in the financial capabilities outcome construct due to a NILS loan 49

Figure 7-7: Changes in financial capabilities dimensions due to a NILS loan 49

Figure 7-8: Net changes in the cost savings construct due to a NILS loan 52

Figure 7-9: Changes in cost savings dimension due to a NILS loan 53

Figure 7-10: Net change in the financial independence construct due to a NILS loan 54

Figure 7-11: Changes in financial independence – individual dimensions due to a NILS loan 54

Figure 7-12: Change in fringe credit use due to a NILS loan 55

Figure 7-13: Change in fringe credit breakdown due to a NILS loan 56

Figure 7-14: Change in social and health outcome construct due to a NILS loan 59

Figure 7-15: Change in social and health outcomes due to a NILS loan 59

Figure 7-16: Change in Financial Inclusion Status due to receipt of a NILS loan 60

Figure 7-17: Financial product ownership of the NILS clients 61

Figure 7-18: NILS recipients’ reasons for not owning a credit card 61

Figure 8-1: The Social and Economic Impact Model 65

Figure 8-2: Social and economic return by item purchased 66

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 13

ACOSS Australian Council of Social Service

ABS Australian Bureau of Statistics

CSI Centre for Social Impact

DSS Department of Social Services (formerly the Department of Families, Housing, Community

Services and Indigenous Affairs (FaHCSIA).

GSM Good Shepherd Microfinance

HYSR Half Yearly Statistical Report

HCC Healthcare card

HESS Home Energy Saving Scheme

HUGS Hardship Utility Grant Scheme (WA)

IDA Individual Development Asset Program (US)

LAC Loan Assessment Committee

NAB National Australia Bank

NILS No Interest Loan Scheme

PCC Pensioner concession card

SROI Social return on investment

UNSW University of New South Wales

HREC Human Research Ethics Committee (UNSW)

Microfinance Microfinance is a tool used in the field of economic and social development in both developing

and developed countries, which helps alleviate the consequences of poverty and enables

economic mobility for low-income individuals. In the Australian context, microfinance is

advocated as a means to allay the negative consequences of financial exclusion.

Specialist A NILS program that caters for loan applicants from specific target groups such as individuals

NILS Program who have experienced domestic violence.

Generalist A NILS program that caters for the broader Australian population.

NILS Program

NILS Governance How a NILS provider structures and organises their operations and processes

structure

NILS Delivery Refers to the level of support the NILS providers receive from a single, statewide organisation,

system including the support provided by the NILS state coordinator. Each state adopts a different

delivery system.

Financial exclusion In the Australian context, financial exclusion applies to individuals, groups or organisations

and is broadly defined as the lack of access to “appropriate and affordable” financial products

and services. The most widely used definition of financial exclusion in Australia is provided

Financial capability An individual’s ability to keep track of finances, plan ahead, choose financial products, stay

informed and their perceived level of financial control (ANZ, 2011).

Financial capacity The stock of funds that allows the individual to fully engage in the financial market.

Risky NILS Are those NILS loan applicants who are more likely to incur financial hardship from taking out

applicants a NILS loan due to its repayments and who are subsequently more likely to default on the loan.

Payday lending/ Refers to loan practices of credit providers, which include the provision of loans for a short

fringe lending period with a high interest rate and high fees (Banks, Marston, Karger, & Russell, 2012)

Rent-to-own Credit providers that offer credit products in the form of rental contracts for goods (often

providers white goods) for a specific period of time.

Economic mobility Movement along stages of a financial inclusion continuum.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 15

This study was undertaken by the Centre for Social Impact (CSI) on behalf of Good Shepherd Microfinance (GSM)

to evaluate the No Interest Loan Scheme (NILS) and is the first comprehensive nationwide study on this scheme in

the 32-year history of its delivery in Australia.

1.1 Context

Australia is called the “lucky country”, offering wealth and opportunities to the majority of its people. In spite of

this, a sizeable portion of Australians do not share in this wealth – 2,265,000 individuals or 12.8 per cent of all

Australians lived under the poverty line in 2010 and 3,123,519 individuals or 17.7 per cent of all Australians were

either fully excluded or severely excluded from financial services in 2012 (ACOSS, 2012; Connolly, 2013). Australians

who face financial hardship and financial exclusion are more likely to seek emergency relief, go without meals or

basic necessities, or sell or pawn their possessions (ABS, 2011; Australia, 2012). As the level of poverty has remained

the same over recent years, the potential for economic mobility is most likely limited for many Australians. Section

4.1 provides further insights into the scale and nature of these problems in Australia.

Financial inclusion is advocated as a means to allay the consequences of financial hardship in Australia (Australian

Government Treasury, 2012). The financial inclusion agenda was borne out of the increasing use of short-term, smallamount

loans provided by fringe providers as they often adopt predatory lending practices and provide loans that

carry high interest rates and hidden charges (Banks, Marston, Karger, & Russell, 2012; Marston & Shevellar, 2010;

Rivlin, 2011). Though fringe loans are considered the least affordable and inappropriate for low-income, financially

excluded individuals, they are more likely to use them to buffer against financial shocks or unexpected expenses

(Burkett & Sheehan, 2009; Connolly, Georgouras, Hems, & Wolfson, 2011). Sections 4.2 and 4.3 contain a discussion

of the role of financial inclusion in addressing the consequences of poverty and providing a passage to economic

mobility.

Microfinance is a tool that is used in the field of economic and social development in both developing and

developed countries, which helps alleviate the consequences of poverty and enables economic mobility for

individuals living on low incomes. In the Australian context, microfinance is advocated as a means to allay the

negative consequences of financial exclusion and is defined as:

Section 4.4 contains further insight into the role of microfinance in Australia.

1.2 The No Interest Loan Scheme (NILS)

NILS is the largest microfinance program in Australia. NILS offers small loans, typically worth up to $1,200 (but can

be up to $1,800), to low-income individuals to purchase essential household goods or services. The loan carries no

interest or fees.

The loans are currently delivered through 609 locations throughout Australia and have reached more than 125,000

individuals who are typically excluded from accessing credit from mainstream financial institutions.

Based on Good Shepherd Microfinance’s 2012-2013 annual report:

• NILS loans were delivered by 257 accredited programs (providers)

• 22,349 NILS loans were approved with a cumulative value of $20.8 million

• 92% of NILS borrowers live below the poverty line

• 22% of borrowers were of Aboriginal or Torres Strait Islander people

• Loan volume increased by 473.8% between 2006 and 2013

• NILS loan recipients can hold only one loan at any one time, but are able to obtain additional loans when they

complete their NILS repayments3.

NILS has been operating since 1981 and is currently supported by a valued, trusted partnership between Good

Shepherd Microfinance, National Australia Bank (NAB) and the Department of Social Services (formerly FaHCSIA).

NILS is also supported by a range of other government and non-government agencies such as the New South

Wales Office of Fair Trading, the Queensland Department of Communities, the Department for Child Protection

Western Australia, the Department of Human Services Victoria, and in Tasmania, state government, Aurora Energy

and Federal Group, Tasmania.

3 The proportion of NILS recipients who have received more than one NILS loan is unknown.

16

1.3 Project scope

In November 2012, the Centre for Social Impact (CSI) at the University of New South Wales (UNSW) was

commissioned by GSM to conduct the first comprehensive, nationwide study of the NILS that evaluated and

quantified the effects of a NILS loan on the lives of its recipients.

Through the outcome evaluation, CSI sought to identify changes in recipients’ financial capabilities, economic, and

social and health outcomes as a result of receiving a NILS loan. CSI also assembled evidence to generate debate,

facilitate continuous improvement and stimulate innovation in the microfinance sector.

Since it was the first time that such a large-scale study and outcome evaluation was conducted, the project

adopted different methodologies, some of which were exploratory. These are explained in detail in Chapter 3.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 17

This chapter contains a description of the NILS (Section 2.1), how the loans are delivered (Section 2.2), how the

NILS providers are organised (Section 2.3) and general statistics (Section 2.4). Since the NILS is a communitybased

scheme, providers are able to tailor the design and implementation and can therefore operate differently.

These differences are acknowledged throughout.

2.1 What is NILS?

The basic components of NILS including what it is, who it is for, how it works and what it can be used for, are

presented in Table 2‑1.

• A loan that is typically worth up to $1,200.

• The loan carries no interest or additional fees.

• Repayments are typically made every fortnight over a 12 to 18 month period.

• The maximum loan amount can differ across providers. Smaller community organisations typically offer

smaller loans, but there is flexibility to offer loans up to $1,800.

• The maximum loan amount can also differ across client types. For instance, some NILS organisations place

a lower cap on the loan amount that individuals on NewStart Allowance can borrow.

To obtain a NILS loan, applicants must fulfil an eligibility criteria. The NILS loan applicants must generally fulfil

the following criteria:

• Income: Applicants must hold a concession card (Health Care Card or Pension Card) or live on a low income.

• Residential: Applicants must live in the same residence for at least 3-6 months.

• Willingness to repay the loan: Applicants must show that they are managing existing debt.

• Capacity to repay the loan: Applicants must show that they will have a fortnightly budget surplus once

fortnightly expenses, including NILS repayments, have been accounted for.

• NILS is considered “circular community credit” where the repayment of one NILS loan provides funds for

another NILS loan to be financed in the community.

• The loan can be a pathway to the StepUP loan and AddsUP saving programs, which are other microfinance

programs delivered by GSM, NAB, and DSS.

• The loan is typically provided to recipients as an EFT or in the form of a bank cheque, which is made out to

the supplier of the good and/or service.

• The loan is typically used to purchase essential household goods or services or items that improve

recipients’ quality of life.

• In practice, what is considered “essential” is assessed on a case-by-case basis.

2.2 How are the NILS loans delivered?

NILS is delivered through two types of programs: the generalist program and specific purpose NILS. The latter

caters for applicants from specific target groups such as individuals who have experienced domestic violence. The

generalist program caters for the broader population. NAB and DSS contribute funding to microfinance programs.

The typical NILS delivery process, from initial enquiry to loan repayments, is presented diagrammatically in Figure 2

1. Table 2-2 contains a description of what typically occurs at each stage of the loan delivery process.

18

Stage 1: Initial enquiry

It also contains examples from the study’s exploratory process evaluation and network analysis of how providers

can tailor the loan delivery process to suit their organisation’s and the NILS recipients’ needs. Table 2 1 supplements

Figure 2 1.

Additionally, as the NILS loan is a non-interest bearing loan it does not fall within the same regulatory framework

as other mainstream credit products. This increased flexibility helps to explain some of the variance in delivery and

eligibility process across provider organisations.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 19

Stage 1: Initial enquiry

Stage 2: Applicant books interview with loan worker

Stage 3: Loan Assessment Committee (LAC) assesses application

Stage 4: Applicant attends final meeting to sign loan contract

and receive cheque

Stage 5: Loan repayments commence

Applicant receives information on NILS

Interview is conducted

Applicant is ineligible Loan application is completed

and applicant is eligible

Applicant is declined Application is approved

Repay loan Do not repay loan

NILS worker engages in follow-up procedure

Stage Typical loan delivery process E.g. of differences across providers

STAGE 1

Initial NILS

loan enquiry

The applicant contacts a NILS provider to

enquire about the loan. A NILS worker sends

the applicant information on the NILS loan,

such as:

• What NILS is, including the items the NILS

loan can and cannot be used for;

• Who is eligible for the NILS loan; and

• What the NILS application process entails,

including a description of the documents that

must be brought to the loan interview.

On initial contact, some NILS providers

screen potential applicants for eligibility.

The NILS loan applicant typically will not

be sent information on NILS if ineligible

based on the initial screening.

Some providers refer applicants to other

relevant internal or external services,

such as emergency relief or second-hand

stores.

STAGE 2

Book and

conduct

interview

with the NILS

loan worker

Once an applicant feels ready to apply for a

NILS loan, they book an interview with a NILS

worker.

The face-to-face interview is conducted to

ensure the loan application form is complete.

The interview includes a “financial conversation”

and a household budget task where the

applicant documents their fortnightly income

and expenses with bank and Centrelink

statements to demonstrate their willingness and

capacity to repay the loan.

The NILS applicant usually must obtain quotes

for the item or service that they intend on

purchasing with the NILS loan.

Some providers:

• Offer a telephone interview if the

applicant cannot attend a face-to-face

interview.

• Deliver NILS concurrently with other

services such as financial counselling.

• Identify applicants who would benefit

from additional assistance such as the

Home Energy Saving Scheme (HESS)

or the Hardship Utility Grant Scheme

(HUGS) in Western Australia.

• Identify discrepancies in Centrelink

payments.

STAGE 3

Loan

Assessment

Committee

assesses

application

The Loan Assessment Committee (LAC) meets

to approve or decline the loan application

based on the eligibility criteria.

The applicant is informed of the loan outcome.

For declined applications, the applicant is

informed why the loan was not approved and is

referred to supporting services.

In Western Australia, the NILS Regional

Coordinator can approve or reject

loan applications that comply with set

criteria. The Loan Assessment Committee

assesses loan applications that fall

outside the set criteria.

STAGE 4

Final meeting

The approved applicant revisits the NILS worker

to sign a loan contract. They receive a cheque,

which is written out to the retailer of the good or

service. The goods are purchased. In some cases

the money can be made available through EFT.

• The cheque (or EFT payment) can be

sent directly to the retailer of the good

or service.

• Some recipients are sent the cheque via

mail and so do not have a final meeting.

STAGE 5

Loan

repayments

The NILS recipient makes fortnightly

repayments. When a fortnightly repayment is

missed, the NILS worker engages in a follow-up

procedure. This usually entails contacting the

recipient when:

• The first payment is missed,

• After two months of no contact, and

• After four months of no contact.

If payments cease for more than 12 months,

the NILS loan is written-off. Unlike mainstream

credit products, the recipient’s credit record is

not impacted when a loan is written-off.

The arrears procedure varies across

provider organisations and can even vary

within provider organisations.

Some providers use SMS text to keep in

touch with recipients, e.g., they might use

SMS text reminders to notify recipients of

a missed payment.

The NILS loan is not a form of emergency relief and cannot be used to fund debt repayments4, fines, bills or nonessential

items or services.

Section 7.4 presents further insights gained from an exploratory process evaluation and network analysis.

4 A loan program relating to existing debt – Debt Deduct – is currently being piloted in Victoria.

20

2.3 How are the NILS providers organised?

This section provides a summary of the distinct governance structures and delivery systems across the NILS network.

The NILS providers are organised in different ways - they adopt a variety of governance structures and delivery systems

and operate within stylised network structures. Section 7.4 and Chapter 8 further examine these differences through the

exploratory process evaluation and network analysis and the social and economic impact model respectively.

A governance structure describes how a NILS provider can organise their operations and processes. Three features

that distinguish the types of governance structure are: whether the provider is part of a larger organisation; the

location of the Loan Assessment Committee; and the geographical scope of the provider’s organisation. The

governance structure classifications are based on the insights gained from the exploratory process evaluation and

network analysis.

Figure 2-2 diagrammatically shows the four types of the NILS governance structures: independent, franchise,

centralised (organisation-wide) and centralised (state-wide).

Most NILS providers are small, independent, community-based not-for-profits. A small number of the NILS providers

are large, statewide or organisation-wide not-for-profits that deliver NILS loans across many geographical locations

(refer to the y-axis).

The degree of centralisation varies among the larger NILS providers (refer to the x-axis). Providers that adopt

a more centralised model operate some processes such as loan approvals, in a head office and devolve other

processes such as conducting loan interviews, to the NILS branches based in the community. Other large NILS

providers operate a franchise model with little or no centralised processes.

The different governance structures are further explained in Figure 2-35. The nodes (black circles) represent

different NILS providers. The larger node within the centralised (organisation-wide; state-wide) structures

represents a central organisation or state office from which community-based NILS providers are connected.

5 Please note that the governance structures presented are not exhaustive. There are many structures within the NILS network – the diagrams only

represent the classifications identified through the exploratory process and network analyses.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 21

Independent

Franchise

DECENTRALISED

DEGREE OF CENTRALISATION CENTRALISED

Centralised

(organisation-wide)

Centralised

(state-wide)

process, administrative and support functions.

maintaining over key activities such as LAC processes and data management, but would still operate within loose

guidelines that are provided by a centralised node.

geographic scope (potentially interstate or national coverage) with several NILS delivery nodes. There is typically a

central management office that is responsible for the LAC process, administrative support and the NILS reporting

functions.

NILS providers within a state and undertakes key functions such as approving loans, marketing and training of

microfinance workers and provision of advice and compliance reporting.

A delivery system refers to the level of support the NILS providers receive from a single, state-wide organisation,

including the support provided by the NILS state coordinator (refer to Figure 2-4). Each state adopts a different

delivery system.

Does a single, state-wide organisation…

Manage the

loan book?

Promote NILS

in the state?

Channel state government

and some private funding?

Support frontline

providers?

Partially

A Centralised delivery system is where a central office manages the loan book, promotes the NILS in the state,

channels state government and private funding and provides direct support to frontline NILS providers. Tasmania

and Western Australia are examples of a centralised system with a state based governance structure.

A Partially Centralised delivery system is where individual providers receive less support from the single, statewide

organisation because the providers within the state manage their own loan book. New South Wales has adopted

this system.

In a Decentralised system (Victoria, Queensland, South Australia), the NILS providers may receive little to no

support from a single, state-wide organisation6.

6 ACT and NT were not considered.

22

Independent

Small indpendent

NILS providers without

a central node

Franchise

Series of nodes that are

linked together, without

a central node

Centralised

(organisation-wide)

Many NILS providers

are connected to a

central organisation

Centralised

(state-wide)

Many NILS providers

are connected to a central

state office

ORGANISATION STATE OFFICE

The NILS providers can offer additional, supporting services to the NILS recipients (i.e. “supporting network”).

These “networks” are shown in Figure 2-4. The diagrams represent the two extremes in network structures.

In the “External services” model, the NILS provider is represented by the large, closed circle and receives referrals

from and sends referrals to supporting organisations, such as financial counselling, housing assistance or food

vouchers. The NILS Providers that fall under the “external services” model often offer a limited range of services

and so will build relationships with other organisations to signpost and facilitate access to services that their own

organisation does not offer.

The large, open circle represents the NILS providers from the “In-house services” model. Often they offer a wider

range of supporting services in-house and so can provide holistic or wrap-around services for the NILS recipients.

Examples of the additional services and formal and informal links include:

• Independent organisations that deliver the NILS loans alongside other community services.

• Larger devolved and centralised (organisation-wide) NILS providers may offer in-house services to

the NILS recipients.

2.4 General NILS statistics

Analysis of the GSM Half Yearly Statistical Report (HYSR) revealed there were 22,703 active loans with a cumulative

value of $13.2 million in the July to December 2012 period. Table 2‑4 contains the number of active loans, loans

given, written-off, currently not paying and completed loans. These data are separated into the general and

specialist programs during the July to December 2012 period. Approximately 10% of all the NILS loans were from

specialist programs.

Active loans No loans

given Written-off Currently

not paying

Completed

loans

Table 2‑5 contains basic demographic characteristics of recipients who obtained a NILS loan during the July to

December 2012 period separated into the general and specialist programs. Most NILS loan recipients were female

between the ages of 25 and 54, received some form of government allowance and were either renting privately or

publicly.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 23

External services In-house services

PROVIDER

PROVIDER

= supporting service = supporting service

Active loans No loans given Written-off

Gender

Male 32 28

Female 68 72

18-24 11 12

25-54 83 73

55+ 6 15

Income

Disability 34 23

NewStart 16 19

Age Pension 6 5

Single parent 25 27

Other 18 25

None 1 1

Tenancy type

Private renting 37 44

Public renting 46 40

Own home 6 6

Other 11 10

Background

Australian - non-ATSI 66 48

Australian - ATSI 21 28

Other 13 24

24

The CSI developed a mixed-methodology to conduct an outcome evaluation on the NILS. The outcome evaluation

sought to determine whether, and to what extent, the NILS affected the lives of its recipients by identifying

and quantifying changes in their financial capabilities, economic, and social and health outcomes, as a result of

receiving a NILS loan.

To conduct the outcome evaluation, CSI analysed different data sources and used qualitative stakeholder

engagement, a quantitative client survey and social and economic modelling. As this was the first national

quantitative evaluation of the NILS, the methodology was largely exploratory.

Table 3‑1 outlines the five-stage research process.

Stage 1: Develop the theory of change and outcome framework

• Review the literature and case studies

• Conduct workshop with stakeholders (including Good Shepherd Microfinance and NILS State Coordinators)

Stage 2: Conduct a market analysis

• Calculate the demand for a NILS loan

• Compare the NILS to alternative credit products

Stage 3: Collect primary data

• Analyse the NILS Half Yearly Statistical Report (HYSR)

• Deliver a quantitative survey to 710 NILS clients

• Engage with NILS providers and sites

Stage 4: Create the process and network analysis

• Engage with frontline NILS workers

• Analyse providers’ “Policies and Procedures” manuals

Stage 5: Create the process and network analysis

• Develop model blending cost-benefit analysis, program evaluation and social return on investment

• Measure the economic and social impact created by a NILS loan

3.1 Stage 1: Develop the theory of change and outcome framework

To develop a theory of change and outcome framework:

• The literature and the NILS case studies (collected as part of the NILS HYS) were reviewed to understand the

nature and consequences of financial exclusion in Australia and the role of microfinance in addressing financial

exclusion.

• CSI conducted a workshop with stakeholders, (including representatives from GSM and the NILS State

Coordinators) to gain their perspective on the effect of the NILS loans on recipients’ lives. The workshop

helped clarify the progression from activities (providing the NILS loan) to outcomes (financial capabilities

economic and social and health outcomes).

This process helped identify common outcomes that were experienced by the NILS recipients and to clarify

the relationship between recipient outcomes, loan purpose and the loan delivery process. This informed the

development of the theory of change and outcome framework (Chapter 5).

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 25

3.2 Stage 2: Conduct Market Analysis

A market analysis was conducted to quantify the demand for NILS loans in Australia in 2013 and the extent to

which the demand was being met. The market size was determined in three stages; 1) Eligibility, 2) Affordability

and 3) Demand for an item that can be purchased with a NILS loan. These stages are outlined in Table 3‑2 below.

Stage Description

1. Eligibility Identified the proportion of the Australian population eligible for a NILS loan,

namely, those who hold a healthcare card (HCC) or pensioner concession card

(PCC). The 2009-10 Australian Bureau of Statistics (ABS) figures on the number

of pension or allowance recipients, by household type, was extrapolated to 2013,

to determine the number of eligible Australians for a NILS loan (ABS, 2011).

2. Affordability Households who were identified as eligible in stage 1 were separated into

those who could afford and those who could not afford to make fortnightly

repayments on a NILS loan. Households with a fortnightly surplus (income

minus expenditure) greater than or equal to the average NILS repayment

amount of $11.92 per fortnight were able to afford the loan.*

*Refer to Appendix A for calculations.

3. Demand for essential

household item that can be

purchased with a NILS loan

Connolly et al. (2011) found that approximately 27% of financially excluded

respondents were unable to replace faulty whitegoods, purchase a car or car

registration, or pay for car servicing or repairs during the 12 months prior to

the survey. This figure was used as a proxy for the demand for an essential

household item that can be purchased with a NILS loan within a single year.

3.3 Stage 3: Collect primary data

CSI conducted a telephone survey of the NILS loan recipients across Australia7. The survey was designed to

capture the demographics of the recipients and to understand and measure changes in outcomes that occurred

due to the receipt of the NILS loan. Only active loan recipients were invited to participate in the survey.

The survey sample frame for the telephone survey was developed using the July to December 2012 NILS Half

Yearly Statistical Report (HYSR), a report collected biannually by GSM. The 2012 HYSR collected information on the

2948 NILS accredited programs across Australia, including their loan summary statistics and aggregated recipient

characteristics. The sample frame was designed to achieve representation across the NILS network, including both

generalist and specific purpose NILS programs and the different recipient groups.

Thirty NILS providers were identified and invited to participate in the survey. Table 3–3 indicates that the 13

providers who agreed to participate spanned 34 NILS sites, providing considerable coverage of the NILS network.

Participating NILS providers were responsible for recruiting survey participants from their client population through

either an SMS text or letter. Over 3610 invitation messages were distributed, of which 982 (27%) replied positively.

From this pool, 710 NILS loan recipients were contacted by an external market research organisation to complete

the survey. Survey respondents were given a $20 grocery voucher for their time.

7 Appendix B contains the survey instrument.

8 This information was obtained from data provided to GSM by the NILS providers. Generalist and specialist programs run by the same organisation

were counted as separate providers.

26

3.4 Stage 4: Create and conduct a process and network analysis

An exploratory process evaluation and network analysis was conducted to understand how the loan delivery

process (i.e. “organisation” level) and network of services recipients received (i.e. “network” level) influenced

outcomes. To achieve this:

• Four NILS governance structures (centralised, partially centralised, franchise and independent) were selected

to reflect some of the diversity within the NILS.

• Policies and procedures manuals were obtained and analysed to understand how the NILS loans are delivered

through the four governance structures.

• Exploratory interviews were conducted with nine NILS worker’s from the four government structures, to gain

a high level understanding of the NILS process from their perspectives.

3.5 Stage 5: Create the social and economic impact model

A social and economic impact model was developed to quantify the social and economic value created by a

NILS loan for the 710 survey respondents. The model blended the approaches of cost-benefit analysis, program

evaluation and social return on investment (SROI). The outcomes were projected over three years9 to create the

social return on investment ratio.10 The model was developed in three steps.

In particular:

• Key stakeholders supporting the delivery of NILS (e.g. NILS providers, DSS, NAB, state governments and

volunteers) were identified. Each stakeholder’s cost of delivering the NILS was measured and valued.

• Based on the survey responses, material outcomes were identified and assigned a monetary value. The

materiality of outcomes was assessed on a case-by-case basis and considered factors such as the total value

of the outcome experienced by the NILS respondents and the number of respondents who experienced the

outcome.

Outcomes within the model were valued in two ways:

• Tangible economic benefits for each stakeholder group were valued according to the costs avoided and/or

increases in income or revenue.

• Proxy values were assigned to social and health outcomes to determine their monetary value.

As part of refining the model, survey respondents were segmented by:

1. The item purchased - to reflect variations in outcomes associated with different loan purposes. Recipients

who purchased a fridge, for instance, typically only experience cost savings on food bills.

2. The NILS delivery structure (centralised, partially centralised and distributed) - to capture the different types

of stakeholders who support the delivery of a NILS loan and their associated inputs.

Once the model was segmented, “deadweight” (what would have happened without a NILS loan) and “drop-off“

(reduction in the value of an outcome or attribution of that outcome to a NILS loan over the timeframe of the

model) were applied.

Sensitivity testing was conducted to test the robustness of the model. Each figure (cell) within the model was

evaluated to test whether changes in parameters, from best-to-worst case scenarios, made a significant impact on

the final results. Any figure that generated a shift in the rate of return above 9.9%, when changed, was adjusted to

be more conservative. Figures that had an impact of 4.9% to 9.9% on the final results were reassessed.

9 The maximum length of time needed to be confident in the value of the outcome attributed to the NILS loan. Further information on the outcome

timeframes can be found in the model’s supporting documentation.

10 The model captured changes in regulations over the project period (for example, changes in the responsible lending regulations) to provide more

accurate results.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 27

3.6 Research Ethics

Ethical approval to undertake this study was granted from the University of New South Wales’ Human Research

Ethics Committee (HREC) (Approval HC13042). The Good Shepherd Youth and Family Service ethics panel ratified

this approval.

3.7 Research Limitations

The limitations with the approach and data were:

1. The quality of the data captured in the NILS HYSR, covering the July-December 2012 period, whilst providing

useful administrative and descriptive data, was not robust enough to stratify the sample by the key

characteristics identified in the literature and evidence review. This presented a challenge when developing

the sample frame for the survey. CSI have provided GSM with a series of recommendations to improve the

data quality within the system.

2. Due to the complexity of the NILS network and lack of a central database of the NILS recipients, the NILS

providers were required to recruit their own recipients to the study. We were therefore unable to include

providers from the Northern Territory and the ACT and smaller providers.

3. Self-reported behaviour captured in the survey might be different from actual behaviour. This is a limitation of

all survey methodology.

4. CSI was unable to obtain a traditional counterfactual to compare individuals who received a NILS loan to

individuals who did not. To mitigate this, respondents were asked to what extent the NILS loan contributed to

changes in outcomes and to what extent other factors contributed to the changes.

5. The aim of the process evaluation and network analysis was to identify factors within the loan delivery

process that corresponded to improvements in outcomes. Since other variables that could contribute to

improvements in outcomes could not be controlled for, only correlations were analysed and reported, not

causality.

28

This section describes the review of the literature on financial exclusion (Section 4.1) with a particular focus on

why financial inclusion, specifically access to credit, is important to the wellbeing of individuals (Section 4.2). The

theoretical pathways to financial inclusion are also considered (Section 4.3), including whether NILS can provide a

pathway for the broader outcomes financial inclusion helps to achieve (Section 4.4).

4.1 Financial exclusion in Australia

The term “financial exclusion” was first developed in 1993 by geographers who identified that bank branch closures

geographically excluded individuals from accessing financial services (Leyshon & Thrift, 1995). Kempson and

Whyley (1999) built upon this definition to include individuals who cannot access mainstream financial products

– namely a transaction account, savings, credit and insurance – due to reasons including, but not limited to,

geographical exclusion. One cause of financial exclusion, for example, is cost exclusion, which occurs when the

individual does not have the sufficient funds to purchase financial products. The definition of financial exclusion

(Affairs & Fund, 2006).

In the Australian context, financial exclusion applies to individuals, groups or organisations (Associates, 2004;

Burkett & Drew, 2008), and is broadly defined as the lack of access to “appropriate and affordable” financial

products and services (Burkett & Sheehan, 2009; Connolly et al., 2011). The most widely used definition of financial

exclusion in Australia is provided by Connolly et al. (2011: p.6):

Using this product-based definition, 17.7% of the adult Australian population or 3,123, 519 Australians in 2012 were

either fully or severely excluded, as they did not own, or only owned, one of the three key financial products

specified in the definition, namely a transaction account, general insurance and a credit card11.

4.2 Consequences of financial exclusion, and particularly credit exclusion

Poverty in Australia is often described in terms of relative income. Specifically, an individual lives under the poverty

line if s/he earns an income that is lower than a given proportion of the Australian median income (ACOSS, 2012;

Research, 2013). Poverty, however, is multidimensional - it goes beyond income to encompass the inability of

individuals to engage in activities and experiences considered standard by society:

On this basis, individuals who are financially excluded experience the consequences of multidimensional poverty

(Barnes et al., 2012). Burkett & Sheehan (2009:3) articulate that exclusion from affordable and appropriate financial

In addition to these consequences, financial exclusion can reduce the individual’s ability to asset-build, worsen

mental and physical health (Dobbie & Gillespie, 2010) and impede the capacity to lead a fuller life which includes

attaining financial stability and sustainability (Sen, 1999).

Credit exclusion is particularly prevalent in Australia. In 2012, 56.6% of adult Australians lacked access to a

mainstream credit card (Connolly, 2013). Credit exclusion can exacerbate financial hardship, decrease social and

economic participation and adversely affect health and mental wellbeing because it makes asset building, cash

flow management and buffering against financial shocks or unexpected expenses more difficult. This might drive

individuals to use fringe credit providers.

11 There are two main drawbacks associated with the definition adopted in Australia. First, the definition does not consider why individuals are

financially excluded, including those that voluntarily or for cultural reasons do not own a financial product such as a credit card. Involuntary financial

exclusion can occur, for example, due to geographical, technological and cost barriers. A products-based definition does not therefore account for these

nuances. Second, there is no standard definition of financial exclusion and is therefore inconsistent across and even within some countries. The United

Kingdom, for instance, measures financial inclusion as access to banking, affordable credit, and free face-to-face money advice. The NAB/CSI financial

exclusion indicator utilises a methodology that is national and therefore standard across states.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 29

The capacity to asset build is often linked to the ability to access credit, as most individuals are unable to save

enough money to pay for big-ticket items fully and upfront, such as large household appliances or motor vehicles.

Asset ownership contributes to individuals’ economic, social and psychological wellbeing (Barnes et al., 2012). For

example, Mills, Patterson, Orr, and DeMarco (2004) evaluated the United States’ “Individual Development Asset

Program” (IDA), a matched savings account for low-income individuals for the purpose of purchasing a first house,

education, small business or motor vehicle. They concluded that asset building helped enhance economic and

social participation.

Asset ownership can also change the way an individual views the world as it encourages them to consider the

future and pursue long-term goals (Sherraden, 1991). It might likewise have inter-generational benefits – studies

suggest that children who are brought up in households with assets are more likely to have lower rates of teen

pregnancy, fewer behavioural problems, better self-esteem and a greater sense of future orientation than children

who are brought up in households without assets (Adams, Nam, Williams-Shanks, Hicks, & Robinson, 2010;

Williams-Shanks, Kim, Loke, & Destin, 2010).

Individuals who cannot access affordable and appropriate credit and do not have sufficient savings to draw upon

are less able to manage cash flow and buffer against financial shocks or unexpected expenses (ABS, 2011). For

these individuals, an unexpected expense such as a car repair or a sudden spike in utility bills can result in going

without basic necessities, such as food or essential household goods. This is reflected in the findings from a survey

delivered to Salvation Army clients who sought emergency relief in 2012. When faced with financial difficulties, 52%

of respondents went without meals and 59% reduced their consumption of essential products like clothing, petrol,

or milk and bread (The Salvation Army Australia, 2012).

Individuals who are financially included can use credit cards, savings or secure a bank overdraft for short-term

credit needs to buffer against financial shocks. The inability to buffer against financial shocks, however, can push

individuals to inappropriate sources of credit such as fringe credit from payday lenders and rent-to-own providers.

This is reflected in Banks et al. (2012), who found that 16% of their survey respondents acquired their first loan from

a fringe lender to “make ends meet”.

Fringe credit providers are often associated with predatory lending practices such as high interest rates and

hidden charges and penalties (Banks et al., 2012; Marston & Shevellar, 2010; Rivlin, 2011). Though fringe loans are

considered the least affordable, appropriate or fair for low-income individuals, these individuals are more likely to

be excluded from mainstream credit and therefore less able to cope with financial shocks or unexpected expenses.

As such, they often need small, short-term loans the most.

Component Description

The consequences of financial

exclusion are:

The consequences of credit

exclusion are:

30

4.3 Pathways to financial inclusion

To understand the pathways to financial inclusion, two frameworks need to be considered.

- Capacity and capability framework and a market deficiency framework.

stock of funds that allows the individual to fully engage in the financial market. An individual who does not know

how to use financial products or services, has had negative past experiences with financial products resulting from

not understanding their associated costs and risks, or does not have the means to pay for the financial products or

services, might voluntarily exit the market (Corrie, 2011). Burkett and Sheehan (2009, p. 6) suggest that:

The market deficiency framework explains why financial institutions exclude some individuals from accessing their

products and services. This type of exclusion typically stems from “information asymmetry”, where lenders do not

know the creditworthiness of borrowers, and borrowers cannot reveal their credit-worthiness to lenders (Aghion

& Morduch, 2005; H. Treasury, 2004). Proxies such as income level and credit history are thus used to assess an

individual’s ability to cope with credit. As a consequence, banks are often unable to offer credit to low-income

individuals as they have a higher likelihood of defaulting on repayments based on income (Howell & Wilson, 2005)

In addition, accessing credit is even harder for low-income individuals since the Global Financial Crisis, as lending

regulations have tightened in order to protect bank deposits (Davis, 2011).

Understanding the causes of financial exclusion allows us to identify the ways to address financial exclusion.

Improving the individual’s financial position and literacy reduces, the financial capacity and capability failures.

Rectifying the market deficiency failure reduces information asymmetry. These pathways are identified in Table 4-2.

Barriers Pathways

Capacity and

capability

• Financial capability: Individuals do not know

how to use financial products.

• Financial capacity: Individuals cannot afford

financial products.

• Financial capability: Teach individuals how to

use financial products.

• Financial capacity: Improve the financial

position of individuals.

Market

Deficiency

Framework

• Access: Individuals cannot access banks due

to bad credit record or low income.

• Affordability: Individuals cannot pay for

financial products due to cost.

• Access: Improve the credit-worthiness and

financial position of individuals.

• Affordability: Provide low cost and

appropriate financial products

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 31

4.4 The No Interest Loan Scheme – a proposed solution?

Microfinance is advocated as part of the solution to the problem of financial exclusion. Being financially included

matters because it enhances individuals’ economic, social and health outcomes (Section 4.1) The GSM NILS (refer

to www.goodshepherdmicrofinance.org.au) can provide a pathway to financial inclusion if it can overcome the

market deficiency and financial capability and capacity barriers. This is shown in Figure 4‑1.

Other studies which evaluated no interest loans, were reviewed, specifically to verify whether they do provide a

conduit to financial inclusion and whether it can help achieve the outcomes financial inclusion delivers. Table 4‑3

contains a summary of the results. The table considers whether a NILS loan provided a means to overcome the

market deficiency, financial capacity and financial capabilities barriers, and whether it provided a conduit to financial

inclusion and improved economic, social and health outcomes. The table is interpreted as follows: “x” indicates

that, for the respondents in the evaluation study, the NILS loan did not help them overcome the barriers to financial

results were mixed, and “N/A” indicates that the barriers and/or outcome were not considered in the study.

Based on the findings from the evaluation studies:

• Many recipients felt excluded from the mainstream financial market (market deficiency framework).

• A NILS loan generally helped recipients improve their financial capabilities but did not help improve their

financial capacities (financial capabilities and capacities framework).

• For the most part, most recipients were still financially excluded from the mainstream financial market.

• Most recipients experienced positive economic and social and health outcomes as a result of receiving a NILS

loan.

32

Financial Exclusion

Microfinance

Financial Inclusion

Achieve agency and financial sustainability

Overcome market deficiency:

Improve financial capability

and capacity

- Stop using fringe lenders

- Better financial literacy

- Improve financial position

The literature to date shows that a NILS loan did not provide a direct pathway to financial inclusion, (as measured

by access to a transaction account, a small amount of credit i.e. a credit card and general insurance). Financial

exclusion using the product based definition was predominantly driven by self-exclusion – the NILS recipients

either felt that they would be denied access to mainstream products and services due to their low income status

and reliance on government benefits (market deficiency and financial capacity barrier), or chose to go without due

to the high cost of financial products or services (financial capacity barrier).

As noted earlier, however, financial inclusion is important because it decreases the likelihood of financial hardship

and poverty, increases the ability to participate in economic and social activities and improves health and mental

wellbeing. From the review of the literature, receiving a NILS loan can result in greater social participation, reduced

financial hardship and improved health and mental wellbeing. Mouy (2010, p. 21), for instance, found that “the most

prevalent theme for seeking a loan… was to improve daily living experiences or to enhance an applicant’s quality

of life”. NILS also gave recipients a greater sense of financial security and made them feel “like everyone else”

(Cabraal, 2010). Through the loan interview, the NILS recipients also felt that their financial capabilities improved.

NILS thus provided a direct conduit to the suite of outcomes financial inclusion seeks to achieve (Figure 4-1).

Study Sample Size Research Method

Market Deficiency*

Financial Capacity

Financial Capabilities

Financial Inclusion

Economic Outcomes

Social and Health

Outcomes

Semi-structured

interviews

StepUP clients

Ayres-Wearne

and Palafox

(2005)

40 NILS clients

Quantitative and

qualitative data

gathering methods

Corrie (2011)

30 NILS/

StepUP/

AddsUP clients

Baur (2010)

The NILS

Network of

Tasmania

N/A

Quantitative and

qualitative evaluation

of data from various

sources

clients

Quantitative and

qualitative data

gathering methods

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 33

From the review of the literature, improvements in financial capabilities, economic, and social and health outcomes

were hypothesised to result from receiving a NILS loan. Improvements in recipients’ financial inclusion status, as

defined by ownership of a transaction account, credit product and general insurance, was not identified as an

outcome of receiving a NILS loan. Through creating the outcome framework, CSI identified three ways in which

NILS can generate these positive outcomes for its recipients:

1. The loan as a credit product;

2. The item that was purchased using the loan; and

3. The process in which the loan was delivered.

These findings informed the theory of change, where each outcome can be logically expressed as a result of

receiving a NILS loan.

5.1 The loan as a credit product

recipient, regardless of the item purchased using the NILS loan or the process in which it was delivered. Table 5-1

contains examples of how the loan as a credit product can improve recipients’ outcomes.

Outcome Description

credit and some public amenities.

Financial independence Greater financial independence through reduced reliance

on fringe credit, Centrelink Advances, Emergency Relief

and financial support from family and friends might be

experienced through the provision of NILS.

Social and

health

Reduction in stress and anxiety The NILS loan recipient does not have to seek an alternative

method to purchase the NILS item or live without the item.

Improved relationships with

family and friends

Reliance upon family and friends to provide the needed item

might strain relationships.

5.2 The item purchased using a NILS loan

The type of item(s) purchased using a NILS loan could also create positive social, health and economic outcomes.

Examples of positive outcomes, categorised by item type, are presented in Table 5‑2.

NILS item Outcome Description

Basic

household

items

Economic Asset building Purchasing a new item such as a fridge or washing machine

or paying for essential repairs on the car or house, allows the

Cost savings

on utility bills

Replacing an old or faulty item with a more energy efficient

one could result in a reduction in electricity bills.

Social and

health

Quality of life Basic household items such as a bed, sofa, washing

of the recipient.

Selfesteem

and

confidence

Owning a new household item can make the recipient feel

that their home is more similar to the average Australian

34

on groceries

Owning a fridge can lead to less food spoilage and allows

the recipient to bulk buy perishable items.

Social and

health

Physical

health

Purchasing a fridge allows the recipient to buy more fresh

Medical

expenses

Social and

health

Health; selfesteem

and

quality of life

Spending on medical expenses such as therapy, home

fit-outs or dental work may improve the recipient’s health,

employment

prospects

Savings on

fines

Having a reliable roadworthy motor vehicle allows the

recipient to travel further to access employment or apply for

positions that require the employee to own a motor vehicle.

offences, if the alternative the recipient faced was to drive

an unregistered motor vehicle.

Computer

and

education

Economic Increase

employment

prospects

Using a NILS loan to buy a computer or pay for education

earning potential.

5.3 The NILS loan delivery process

The NILS loan application and repayment process can also result in improvements in financial capabilities,

economic and social and health outcomes (Table 5‑3).

Outcome Description

Financial

capabilities

Financial management Completing the household budget task during the loan

interview may result in positive behavioural change, such as

increasing the number of bills paid on time or comparisonshopping

more often.

successfully completes the loan application and (for most)

recipients the repayment process.

explaining the consequences of using fringe credit during

the loan interview, can result in behavioural changes that

lead to cost savings.

Social and

health

Feel more supported Receiving guidance and assistance from the NILS worker

might make the recipient feel more supported by their

community.

Confidence in achievements Successfully negotiating the loan process and receiving

the loan might increase the recipient’s confidence in their

achievements.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 35

5.4 Summary

The NILS loan, as a credit product, is a means to purchase an essential household good or service, and as a

process, can generate positive financial capabilities, economic and social and health outcomes. This is summarised

in Figure 5‑1.

36

Outcome generated by process Outcome generated by loan as financial product Outcome generated by item (Higher level outcomes)

• confidence to apply for a credit card

• confidence applying for a mainstream loan

• comparison shopping • understands loan process

• budgeting • pays bills on time • savings

Financial confidence

Financial management

• access to mainstream credit

• access to general insurance

• access to transaction account

Financial

inclusion

Financial

capabilities

• able to access healthcare services • improved diet and nutrition

• improved fitness and general health • increased physical function

• reduction in discomfort and pain • reduction in other symptoms

• able to access mental health services

• general confidence and self-esteem

• increased ability to function

• reduction in symptoms

• confidence in achievements

• reduction in stress and anxiety

Physical

well-being

education

quality of life

social contribution

• stability • living standards • independence

• increased time at home with family

• child education • basic social skills • adult education

training

asset-building

fringe

finance

• reduction in fringe credit use overall

• avoided fringe credit for item • avoided renting item

• personal relationships

• feeling part of the community • feeling supported

social

inclusion

Mental

well-being

Based on the market analysis, in 2013, it is estimated that the overall demand for a NILS loan is 345,000

households. However only 21,114 NILS loans were delivered in the 2012 financial year. On this basis, only 6% of the

demand was met in 2012.

6.1 Demand for the NILS

Though the literature and available evidence suggests that a NILS loan creates positive outcomes for its recipients,

many stakeholders believe that there is considerable unmet demand for the NILS in Australia. This proposition was

tested this by means of a market analysis using data published by the Australian Bureau of Statistics and other

agencies. The results are shown in Figure 6-1.

A total of 2.55 million Australian households were eligible for a NILS loan in 2009, because they held a Healthcare

Concession Card (HCC) or Pensioner Concession Card (PCC) (PHIDU, 2011). However, only 1.28 million of these

individuals had sufficient weekly surplus to repay the NILS loan, which is on average $11.92 per week. Of the 1.28

million households who were eligible and able to afford the NILS loan, 345,000 were estimated to be in need of an

essential household item that could be purchased with a NILS loan (Australian Bureau of Statistics (ABS) 2011). As

21,114 loans were delivered in the 2012 financial year (Microfinance, 2012), only 6.1 per cent of the estimated demand

is being met. This suggests that there is considerable room for program expansion.

In addition, 341,000 households were eligible and had a need for an item that could be purchased through NILS but

were unable to afford the NILS weekly repayments. Based on our analysis, single person households who received

the NewStart allowance and coupled households where one or both individuals received similar allowances were

identified as more likely to be unable to afford the repayments on the NILS loan. Couples with four children

receiving benefits were most likely to be able to afford repayments. This highlights the very narrow margins on

which these households operate their budgets and the value of providing financial counselling and other forms of

support to low-income households.

Conduct further market analysis and other research on barriers and incentives to understand why NILS only meets

a small percentage of the market. Develop strategies and projections based on these strategies to expand NILS.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 37

All Australian

households

(8.92 million)

Eligible

households

(2.55 million)

Can’t afford

(1.27 million)

928,000

341,000

345,000

938,000

Can afford

(1.28 million)

Need NILS another

year but can’t afford

Need NILS this year

but can’t afford

Need NILS another

year and can afford

Ineligible households

(6.37 million)

6.2 Alternatives to NILS

Due to the design features of NILS, in terms of both product and delivery service, a NILS loan may not meet the

demand for credit from some eligible individuals. These individuals may choose alternative options, including going

without or accessing credit through other providers such as fringe lenders.

When individuals lack access to credit, they are often also unable to save enough money to purchase upfront

essential household items. They might consequently go without the essential item, continue using a faulty item, or

turn to fringe credit providers for the cash, or goods rental outlets for the product.

The NILS loan was compared to other credit products to assess its strengths and weaknesses and to understand

the barriers and incentives for it and its competitors. The other credit products were chosen to reflect the formal

alternatives that the NILS recipients can select when seeking credit. The credit products were assessed on the

following characteristics:

• Cost: the total repayment cost of the credit product12

• Speed: how long it takes to access the funds

• Amount: the maximum amount of the credit product

• Purpose: what the credit product can or cannot be used for

• Accessibility: the different ways of applying for the credit product

• Eligibility: the eligibility criteria to obtain the credit product

• Repeatability: how often the credit product can be accessed

• Capacity-building: additional capabilities developed through the receipt of the credit product

Table 6‑1 presents the characteristics of different credit products in Australia, as of 30 August 201313, while Table

6‑2 summarises strengths and weaknesses of the NILS loan as a credit product.

12 Assuming the amount is $930 (average NILS loan amount), and the loan term is 12 months (average NILS loan term).

13 Refer to Appendix C for a comprehensive breakdown of the fees and terms of each credit product considered.

38

Centrelink

Advance

NILS^

StepUP

Credit Card

Goods rental

Small amount

loan from fringe

credit provider

Personal finance

from fringe

credit provider

Cost (% of principal)

1-year horizon

100% 100% 104% 120-130% N/A 140-170% 178%

Cost (% of principal)

Average term length

100% 100% 112% 120-130% 209-359% 124%1 148-178%2

Term

Must be able

to afford to

repay over a 6

month period,

repayments

are deducted

from fortnightly

income

Up to 18

months Up to 3 years Open ended

36-48

months,

weekly or

fortnightly

15-30 days

(unless

extended),

2-4

repayments

depending

on applicant’s

pay schedule

6-12

months,

13 fortnightly

or

26 weekly

repayments.

to 7 days

4 days

– several

weeks3

5 days 1-3 days 24 hours 1 hour –

3 days 1 to 2 days

$1110.155 Max $12006 Max $1200 Max $20007

Max $2000

- $5000

depending

on provider

items Essential items Anything

Furniture,

vehicles,

appliances,

mobility

aids and

electronic

equipment

Anything Anything

online

Online

Phone

In-person

online

In-person

online

Eligibility

In receipt of a

government

benefit9

Concession

card OR

low income;

Residence

> 3 or 6

months

Concession card

Residence > 3

months

Over 18

Good credit

rating

Income

requirement

Australian

resident

Over 18

Employed10

Australian

resident

Over 18

loan is repaid

As soon as loan is

repaid

Ongoing/

Monthly Ongoing

As soon

as loan is

repaid

As soon

as loan is

repaid

Build

financial

capabilities

including

financial

literacy and

management

skills*

Build financial

capabilities

including financial

literacy and

management skills.

Also build financial

confidence

(Impact, 2013).

None None None None

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 39

1. Payday loans operate on a 4-6 week basis depending on the provider. “Personal finance” loans operate over a longer period (6-12 months) and at the same interest

rate – that is 4% per month or 48% per annum – with the same establishment fee rate (plus additional fixed admin fees that are charged per repayment).

2. For a $1000 unsecured loan over 6 months. Includes a 20% establishment fee, 4% interest or account-keeping fee per month (48% per annum).

3. Average time; actual time varies across providers.

4. ABSTUDY, Austudy Payment, Newstart Allowance, Parenting Payment (Partnered), Parenting Payment (Single), Widow Allowance, Youth Allowance.

5. Single pension customer; applies to recipients of age pensions, disability support pension, carer payment, widow b pension, wife pension.

6. Varies across providers.

7. Depending on provider and income of applicant.

8. Exceptions.

9. ABSTUDY, Age Pension, Austudy, Carer Payment, Disability Support Pension, Family Tax Benefit Part A, Newstart Allowance, Parenting Payment (partnered),Parenting

Payment (single), Widow Allowance, Widow B Pension, Wife Pension, Youth Allowance

10. This is now a criterion for most fringe credit providers on their short-term small-amount loans.

11. Depending on support payment received.

Strengths Weaknesses

For Applicants

cheapest credit product* available as only the

principal needs to be repaid.

The loan amount restricts its use.

Speed

Recent innovations in the NILS delivery

process have improved the accessibility of

the NILS. For example, NILS is available online

in Western Australia and through

Good Money Hubs in Victoria.

The NILS approval process takes between

four days and several weeks**. Other options

may take hours before the applicant has cash

in hand.

require the applicant to attend a face-to-face

interview.

credit for low-income earners. Credit

history and income is not a barrier for these

individuals. Rather, the willingness and some

capacity to repay the loan are the criteria.

Applicants who do not receive income from

the government (e.g. working poor) might be

excluded by some NILS providers. Mainstream

credit providers might also refuse these

applicants due to their low incomes.

NILS applicants are required to have lived

in their current residence for at least three

months (sometimes six months).

essential assets that improve the standard of

living for individuals.

NILS applicants are required to use their loan

for essential household goods and services,

whereas other products can be used at the

applicant’s discretion.

Recipients can only hold one NILS loan at a

time.

Capacitybuilding

The household budgeting task, which is

the documentation of monthly income and

expenses, during the interview helps develop

financial capabilities, including financial

literacy and management skills.

*A NILS loan is still more expensive (repayment of capital) than Emergency Relief or other non-credit options.

**Average time; actual time varies across providers.

While the NILS loan generates considerable benefit for its recipients, as shown through the literature review, the

limitations created by the lengthy and detailed process, eligibility criteria and limited purposes means that it is not

a viable option for many low-income households.

Explore the potential to meet unmet demand by refining and enhancing the design of the NILS in terms of both the

loan product and the delivery process. Two areas with potential are: streamlining the NILS process so that cash can

be made available more quickly and expanding access to loans online to remove components of the competitive

advantage of fringe lenders.

40

This chapter describes the outcome evaluation, its analysis and the results. To test whether, and to what extent,

the NILS creates positive outcomes for its recipients, a telephone survey of 710 NILS recipients was designed and

commissioned to capture changes in outcomes due to NILS.

The demographic characteristics of NILS respondents are outlined in Section 7.1. The changes in outcomes due to a

NILS loan are reported in Sections 7.2 and 7.3.

The relationship between the loan delivery process and outcomes is explored in Section 7.4.

• More likely to be female (74%), live in a single parent family with dependents (43%) and rent either privately

(38%) or through private housing (47%).

• 6.5 times more likely to identify themselves as Aboriginal or Torres Strait Islander (17%) than the Australian

average (2.5%).

• Mostly living under the poverty line at the time of the survey (94%), reliant on government allowance as their

main source of income (92%), unemployed or out of the labour force (85%) and had an average fortnightly

income of $856.80.

• Three times more likely to be severely financially excluded (55%) than the average Australian (17%).

• Due to the vulnerable status of the NILS recipients, improvements or stability in recipients’ outcomes were

classified as positive changes.

• Four out of five survey respondents experienced a net improvement in outcomes (82%), with only 2%

experiencing a net worsening in outcomes.

• The financial capabilities of 47% of respondents improved, as they followed a budget, paid bills on time, saved

money, maintained emergency savings funds and comparison shopped more often.

• The economic outcomes of more than a third of respondents improved due to increases in cost savings (33%)

and financial independence (46%). 42% of respondents who had used fringe credit providers in the past either

stopped or decreased their use of them.

• 74% experienced an improvement in their social and health outcomes due to positive changes in their

standard of living, stress and anxiety levels, confidence in achievements, general confidence and self-esteem,

physical health, personal relationships and participation in society.

• Respondents who received supporting services (such as financial counselling) concurrently with the NILS

loan, were more likely to experience positive financial capabilities, economic, and social and health outcomes

than respondents who did not.

• The governance structures of NILS providers might affect respondents’ outcomes. Respondents who received

a NILS loan from a centralised (state-wide) organisation were less likely to receive positive outcomes than

respondents who received a NILS loan from a centralised (organisation-wide), franchise or independent

organisation.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 41

7.1 The Survey Respondents

Most respondents displayed characteristics of a vulnerable Australian in that they were reliant on government

allowance as their main source of income, lived under the poverty line (based on income) and were severely

financially excluded at the time of the survey (based on a product-ownership approach). Table 7‑1 contains the key

demographic characteristics of the NILS respondents14.

• Survey respondents were more likely to be female (74%) than male (26%).

• Age ranged from 18 to 79 years. More than three quarters (75.5%) were 25 to 54 years of age. Only 5.8%

were 18 to 24 years of age and 18.7% were 55 to 64 years of age.

• Most were born in Australia (87%). Only 9% were born in an English speaking country that is not Australia.

4% were born in an overseas non-English speaking country.

• 17% of respondents identified as Aboriginal or Torres Strait Islander, which is 6.5 times higher than the

Australian average (2.5%).

• The dominant household type was single parent family with dependents (43%), followed by lone person

household (29%).

• Respondents had up to eight dependents.

• Most respondents were renting either privately (38%) or through public housing (47%). A small number

owned their dwelling outright (4%) or were paying a mortgage (5%).

• More than half of respondents’ highest level of education was year 10 (52%).

• 8% had a bachelor’s or postgraduate degree.

• 85% of respondents were unemployed or out of the labour force at the time of the survey. 21% of all

respondents were not in the labour force work and 64% were unemployed but seeking work.

• 41% of respondents who were “not employed” were prevented from finding work due to a disability or

their age.*

• 15% of respondents were employed at the time of the survey. However only 13% of those employed were in

full-time work. Most were employed on a contractual basis (46%).

*This includes respondents who were 65 years of age or older, on an age pension and respondents who reported not being able to find

employment due to a disability.

• Fortnightly income was between $500 and $999 for more than half of the 676 respondents who disclosed

their income (59%).

• Average fortnightly income was $856.80.

• The most common form of government support received was Family Tax Benefit A (46%), followed by

disability support pension (38%) and parenting payment (30%).

14 A more comprehensive set of demographic characteristics is contained in Appendix D, which includes a comparison to the StepUP population (refer

to the report).

42

Based on the Melbourne Institute’s (2013) poverty line, which measures the minimum disposable income required

to meet the basic needs of a family, and as shown in Figure 7-1 at the time of the survey:

• 1.7% of NILS respondents were living above the poverty line.

• 93.5% were living below the poverty line, and

• 4.8% did not report their income.

As a consequence, the majority of the NILS clients surveyed would have found it difficult to acquire the basic

financial products (a transaction account, general insurance and a moderate amount of credit) due to their lowincome

status and the cost of financial product ownership.

The average, annual cost of owning these financial products is approximately $1739 (Connolly, 2013).

The extent of financial exclusion among the surveyed NILS clients is presented in Figure 7‑2, and is contrasted to

the national average. 55% of the NILS clients were severely financially excluded at the time of the survey. This is

more than three times higher than the national average. A fully financially included individual owns a transaction

account, general insurance and a moderate amount of credit. A “marginally excluded” individual owns two of these

products; a “severely excluded” individual owns one of these products and a “fully excluded” individual owns none

of these products.

These findings suggest that most NILS clients live in a precarious financial condition. Due to their low-income

status, they are denied the benefits of owning financial products often due to costs. However, also due to their lowincome

status, owning them would most likely cause financial stress.

Fully excluded

NILS respondents Population

8%

37%

55%

0%

40%

43%

17%

0%

Severely excluded

Marginally excluded

Fully included

0%

10%

20%

30%

40%

50%

60%

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 43

44

7.2 NILS Loan Purpose, Loan Numbers, Payment Methods and Other

Supporting Services

Survey respondents used the NILS loan for different purposes, had varying levels of experience with NILS and

engaged in the NILS loan process differently.

The most common use of a NILS loan was for the purchase of a fridge (21%), followed by furniture (17%).

Figure 7‑3 displays the other items most commonly purchased with a NILS loan.

There were variations amongst the surveyed NILS clients in relation to loan numbers, payment methods and the

availability of support services, as indicated in Table 7-2.

• 21% had received two NILS loans in total and a further 13% had received three or

more NILS loans.

*Only external additional

services obtained as a result of

contact with the NILS worker

were captured. Additional

services provided by the NILS

worker themselves were not

captured.

• In addition to a NILS loan, 103 respondents stated that they received additional

services through their contact with their NILS worker.

Additional services received No. %

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 45

Financial

capabilities

Following a

budget;

Paying bills

on time;

Saving money;

Maintaining

an emergency

savings fund;

Comparison

shopping.

Economic outcomes

Cost savings

Food bills;

Utility bills;

Spending on

services;

Spending on

goods rental

schemes.

Financial

Independence

Financial

assistance from

family and

friends;

Use of

emergency

relief;

Use of

Centrelink

Advances.

Use of fringe

credit

Change in use

of fringe credit

Social & health

outcomes

Standard of

living;

Stress and

anxiety level;

Confidence in

achievements;

General

confidence and

self-esteem;

Physical health;

Personal

relationships;

Participation

in society.

7.3 Outcome Evaluation

• Financial capabilities

• Economic outcomes

• Social and health outcomes.

Figure 7‑4 contains the dimensions that were considered within each outcome construct.

• The loan as a credit product;

• the item purchased through the loan; and

• the process in which the loan was delivered.

The characteristics of the NILS respondents suggest that some will be highly unlikely to attain financial

sustainability, particularly those who live under the poverty line, are severely financially excluded and face

fundamental barriers, such as disabilities or full-time carer duties that prevent them from gaining employment. For

these individuals, not falling into greater financial hardship or stress is a positive outcome.

To take this into account, positive changes in outcomes for the NILS respondents were thus classified as when they

experienced, due to a NILS loan:

• Improvements in outcomes; or

• Stability in outcomes: achieving stability in outcomes refers to an individual who, in the absence of a NILS

loan, would have experienced a worsening in outcomes. (Appendices E, F and G contain descriptions of the

method used to calculate changes in outcomes).

Stories that are reflective of a typical NILS loan experience are used throughout the chapter. These stories were

identified through the analysis of case studies that providers submitted as part of the Half Yearly Statistical Report

(July to December 2012). The stories are fictional.

46

Changes in the (1) financial capabilities, (2) economic – cost savings, (3) economic – financial independence, and

(4) social and health outcome constructs were used to determine the number of respondents who experienced an

overall improvement, stabilisation or worsening in outcomes15. Respondents who:

• experienced an overall improvement across the four outcome constructs experienced a net improvement in

total outcomes.

• experienced an overall worsening across the four outcome constructs experienced a net worsening in total

outcomes.

• would have experienced an overall worsening across the four outcome constructs in the absence of NILS but

due to NILS experienced no change across the four outcome constructs, were classified as “stabilised”.

Due to a NILS loan:

• 82 % (510) of the 710 NILS respondents experienced a net improvement in outcomes.

• 7% (47) of the respondents experienced a stabilisation in outcomes.

• Only 2% (6) of the respondents experienced a net worsening in outcomes.

The different shades of colour in Figure 7-5 represent the varying degrees to which respondents experienced an

improvement or a worsening in net outcomes. Darker shades represent a more significant change in outcome.

Improved Stablised Worsened

82%

7%

2%

Undertake further exploration to understand why some types of recipient are more likely to experience an

improvement, stabilisation, or worsening in outcomes due to a NILS loan.

15 Fringe credit use was excluded from the net outcome construct, as the fringe lender outcome only applied to 250 respondents, namely, those who

used fringe lenders in the past.

with drug and alcohol issues, recently had her three children removed from her

for child protection purposes. Leanne is now the sole carer of the children. Her rather

small house is not set up for the additional household members and Leanne needs a double

bunk and a single bed to accommodate them. She had a low-income job at the local supermarket

before taking on the children but had to quit because she needed to be at home during the day to look

after the youngest child who is not yet in school. She has limited savings and is worried about using them to

buy the beds in case she needs the money for an emergency. She is also unused to having a larger household to

manage on a Centrelink income and this has made budgeting difficult.

Leanne approaches the local community organisation and is referred to Emergency Relief to help with some of

the unexpected increases in her living costs. She enquires about beds and is referred to the NILS program run by

a larger organisation in the town. Leanne is well-organised and has all her paperwork for the application as well

as multiple quotes for the beds. She finds the budget conversation very helpful as she was struggling to manage.

While they cannot see any room in the budget for her NILS loan repayments, the worker notices that Leanne is not

claiming all the benefits she is entitled to. She is referred on to Centrelink and, once this is in process, her increased

income allows her loan to be approved.

Leanne is relieved to have the beds and be able to provide a place to sleep for her grandchildren while still

retaining the savings she has for an emergency. The budgeting process has helped her feel more in control of the

situation and she feels confident that the family will be able to manage.

* Fictitious client, but based on the review of the case studies and developed to represent a typical NILS success story.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 47

48

Leanne’s story presents an insight into how the NILS loan plays a role in improving the financial capabilities of

people through the financial conversation. By requiring applicants to think about their household expenditure, they

can better understand how money is being spent in their home and where savings can be made. For some NILS

loan applicants, this may be the first time they have considered their household expenditure in any detail. They may

also better understand the drawbacks of other less appropriate financial products that they may have used.

Financial capability refers to an individual’s ability to keep track of finances, plan ahead, choose financial products

and stay informed, and their perceived level of financial control (ANZ, 2011)

The financial capabilities outcome incorporated five dimensions:

• Following a budget

• Paying bills on time

• Saving money from pay or government income

• Maintaining an emergency savings fund and

• Comparison shopping or looking for bargains.

The NILS loan was hypothesised to improve the financial capabilities of its recipients as they are required to

complete a household budget task during the loan interview and are encouraged to comparison shop to obtain the

best quote for their NILS item. However, their ability to engage in some financial management practices such as

saving money might also decrease due to their NILS loan repayments. Changes in the five dimensions were used to

determine respondents’ net change in financial capabilities.

Due to a NILS loan:

• 25% (18) of the respondents were prevented from experiencing a worsening in their financial capabilities.

In Figure 7-6, darker shades represent a more significant improvement or worsening in the financial capabilities

outcome construct.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 49

Improved Stablised Worsened

47%

25%

4%

Figure 7‑7 contains the NILS respondents’ changes in the financial capabilities dimensions.

• More than a quarter of respondents followed a budget (27%) and comparison-shopped (25%) more often due

to receiving a NILS loan.

• Fewer respondents experienced positive changes in the other dimensions, namely, paying bills on time (16%),

saving money (14%) and maintaining an emergency savings fund (8%).

Follows a budget Pays bills on time Saves money Maintains

emergency fund

Comparison shop

0

10

20

30

40

50

60

70

80

2% 2%

65%

4%

27%

2% 1%

77%

4%

16%

5%

3%

72%

5%

14%

9%

3%

78%

2%

8%

1% 0%

60%

13%

25%

Worsened, not due to NILS Worsened, due to NILS

Improved, not due to NILS Improved, due to NILS Stayed the same

50

Undertake further exploration into why some NILS clients experience a worsening in financial capabilities –

regardless of whether attributed to a NILS loan or not – to improve this outcome. The emergence of personal

financial management tools for the financially included and innovations through MoneySmart16 could be replicated

to help those on low incomes to manage their finances.

Kathy’s story provides insights into how obtaining a NILS item and referrals resulting from the financial

conversation, can result in a realisable cost saving, in this case the household food bill.

• The use of goods rental services is as prevalent and predatory as fringe credit.

The purchase of an essential item through a NILS loan can generate cost savings. For example, a fridge allows

perishable food to be purchased in bulk and stored longer, which decreases food bills; replacing an energy

inefficient appliance with an efficient one decreases utility bills; and purchasing a washing machine can divert

recipients from laundromat or goods rental services (Ayres-Wearne & Palafox, 2005). However the acquisition of a

fridge when the NILS recipient had none prior will increase utility bills.

The cost savings construct considered four dimensions:

1. Food bill

2. Utility bills (e.g. power and water)

3. Spending on services, such as laundromats and internet services and

4. Spending on goods rental schemes.

16 Examples of methods and innovations in managing finances can be found at the MoneySmart website https://www.moneysmart.gov.au/

ten. Kathy’s partner struggled with alcohol abuse and Kathy left with her

children after an incident of domestic violence. After living in emergency housing

provided by the local women’s service provider, the family has now been found public rental

place. Kathy has managed to save money to pay rent in advance and the service provider has

offered some basic second-hand furniture such as beds, but the family still needs a fridge. She considers

getting a ‘payday’ loan to buy one second-hand.

Kathy’s younger sister has taken out a NILS loan before and lets her know about the local NILS program. Kathy

contacts the NILS worker and her application is organised. Kathy’s sister also attends the interview to support her

and it is shown that Kathy has been managing well on a tight budget. However, household food costs are an issue.

Kathy is therefore referred on to the local food program which provides groceries at below supermarket prices. The

NILS worker also knows that Kathy will be able to purchase perishable food in bulk once she has a fridge. Another

barrier is that Kathy has only just moved into her current address.

Kathy’s loan is approved by the Loan Assessment Committee who take into account the special circumstances

surrounding Kathy’s length of time at her address. The worker helps Kathy select a fridge that is energy efficient

and it is delivered to the family’s new home.

Due to the NILS loan and the process, the family are now able to eat more fresh food, improving their health. They

are also saving money as they are able to buy and store larger quantities of food. Kathy feels a greater level of

self-confidence, having managed to get everything together for the application. She also has an improved sense of

self-esteem because she feels that she can properly provide for her family.

* Fictitious client, but based on the review of the case studies and developed to represent a typical NILS success story.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 51

Changes in the four dimensions were used to determine respondents’ net change in cost savings due to a NILS loan:

• An additional 4.5% (32) of the respondents achieved stability in their cost savings.

In Figure 7-8, darker shades represent a more significant increase or decrease in the cost savings outcome construct.

Increased Stablised Decreased

33%

4.5%

5%

Additional analysis identified that older respondents (50 and above) experienced significantly lower cost savings

compared to the 25-to-34 year old group because they were more likely to purchase essential white goods when

they had none prior to their NILS loan. Respondents with a lower fortnightly income (between the $500 and $999)

also experienced lower cost savings than those earning over $1500 per fortnight.

Figure 7‑9 contains changes in respondents’ cost savings dimensions. Due to the NILS loan, 16% (111) of the NILS

respondents experienced cost savings through reducing their spending on services such as laundromats and

reducing their use of goods rental schemes. These results suggest that the use of goods rentals services is an issue

among the NILS respondents and that the NILS might provide an affordable alternative. Also utility and food bills

decreased for 14% (99) and 9% (62) of the NILS respondents respectively.

52

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 53

Food bills Utility bills Spending on services Spending on goods

rental schemes

Worsened, not due to NILS Worsened, due to NILS

Improved, not due to NILS Improved, due to NILS Stayed the same

0

10

20

30

40

50

60

70

80

15%

5%

67%

4%

9%

26%

3%

52%

5%

14%

6%

2%

72%

3%

16%

2% 2%

77%

4%

16%

Survey respondents described how the NILS helped to achieve cost savings, for example:

A small proportion of respondents experienced higher utility costs (3%) and food bills (6%), and increased their

spending on services (2%) and goods rental schemes 2%) due to receipt of a NILS loan.

Explore whether the use of goods rental services is as prevalent and predatory as fringe credit and deepen

understanding of the types of NILS clients and situations where a goods rental is a preferred alternative.

The NILS loan recipients who find it difficult to cope with financial stress might rely on family and friends or

Centrelink Advances for cash or use Emergency Relief for vouchers. Obtaining a NILS loan can lead to greater

financial independence for NILS recipients by providing them with an alternative source of credit.

The financial independence construct considered respondents’ reliance on three dimensions:

• Family and friends

• Emergency Relief and

• Centrelink Advances.

Changes in the three dimensions were used to determine the net change in respondents’ financial independence,

due to the NILS loan.

Due to a NILS loan:

• 46% (327) of the 710 NILS respondents experienced a net improvement in financial independence.

• .01% (1) respondent achieved stability in financial independence.

• 2% (15) of the respondents reported a net worsening in their financial independence.

Darker shades in Figure 7-10 represent a more significant improvement or worsening in the financial independence

outcome construct.

54

Increased Stablised Decreased

46%

0.1% 2%

Respondents who held a mortgage were significantly less likely than respondents who rented privately or through

public housing to experience an improvement in financial independence.

Figure 7‑11 contains changes in respondents’ financial independence dimensions. Of the 710 respondents, 244

(34%) reduced their reliance on family and friends due to their NILS loan. Respondents also reduced their reliance

on Emergency Relief (29%) and to a lesser extent, Centrelink Advances (14%).

Reliance on family and friends Reliance on Emergency Relief Reliance on Centrelink advances

0

10

20

30

40

50

60

70

80

2% 3%

52%

8%

34%

2% 1%

56%

12%

29%

1% 1%

78%

6%

14%

Worsened, not due to NILS Worsened, due to NILS

Improved, not due to NILS Improved, due to NILS Stayed the same

Survey respondents described the positive impact of financial independence of accessing a NILS loan to

participate in society:

purchase a computer).

a share house).

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 55

Fringe credit is often associated with predatory lending practices such as high interest rates and hidden charges.

Since the NILS loan is not a direct substitute for fringe loans, there is uncertainty about the viability of the NILS

loan as an alternative to fringe credit (The Australian Government, Treasury, 2012)

• 42% (105) of the 250 respondents who had obtained fringe credit in the past either stopped or reduced their use

of fringe credit due to the NILS loan.

• However 2 respondents (1%) increased their use of fringe credit due to their NILS loan.

The survey results suggest that the NILS loan can be an alternative to fringe credit. Namely, due to a NILS loan:

• 42% (105) of the 250 NILS respondents who used fringe credit in the past either stopped or reduced their use

of fringe credit.

• 3% (2) of the respondents increased their use of fringe credit17.

• The net savings from not accessing fringe loans due to the NILS loan was $69,40818.

Survey respondents illustrated the different ways in which the NILS loan provided an alternative to fringe credit:

in WA, used her NILS loan to pay for a motor-vehicle related expense).

her NILS loan to purchase furniture).

Figure 7‑13 further shows respondents’ change in use of fringe credit after receiving a NILS loan. 42% (105) stopped

or reduced their use due to receiving the NILS loan. 36% (20) of the 55 respondents who continued to borrow

from fringe lenders increased their reliance on fringe credit; however 90% (18) of the 20 NILS respondents did not

attribute it to the NILS loan.

Further investigate the role of the NILS loan in deterring individuals from using fringe credit and goods rental

schemes. Investigate whether there is a causal relationship between the NILS loan and a reduction in the need for

fringe credit and goods rental schemes.

17 CSI further analysed the two respondents who increased their use of fringe lenders due to the NILS. There were no characteristics that differentiated

them from the rest of the sample population.

18 Refer to Appendix H for a working of net savings from not accessing fringe loans due to NILS.

56

providers in the past

since receiving a NILS loan

receiving a NILS loan

due to a

NILS loan

due to other

factors

their use

due to

a NILS

loan

due to

a NILS

loan

due to

other

factors

due to

other

factors

their use

25

borrowed

the same

death two years ago, she has been quite lonely and her severe arthritis does not

allow her to leave the house often. She feels isolated from the outside world and has

become quite depressed. A local woman drives Faith to church every Sunday and suggests

that Faith could consider getting a television to provide entertainment and keep her connected

with the outside world. However, Faith does not have any savings and feels she can’t afford a television.

Faith finds information on the NILS loan in a community newsletter mailed by the local faith-based organisation

connected to her church. She likes the idea that it is a loan rather than a hand-out and contacts the NILS worker to

apply. The woman who provides Faith with transport drives her to the interview, although it proves difficult at first

to agree a time suitable for everyone. Once at the interview it becomes clear that Faith struggles with managing

her money and that she has a direct debit to a charity that she had been unaware was not a one-off payment.

The NILS worker helps her contact the charity and cancels the regular donation and Faith can now afford the

repayments on the loan.

Faith receives her TV and is delighted with it. Not only does it keep her entertained but she is now up-to-date with

current affairs and feels part of the community. Furthermore, she is given a topic to talk about when ringing her

younger sister and she feels that their relationship has improved because of this. The lady who drives her to church

also comes in and watches part of a show with her. Faith’s sense of isolation is reduced and she feels much less

depressed.

Five months after receiving the NILS loan, Faith passes away with part of the loan still to be repaid. However, her

quality of life in her last few months was dramatically improved by the NILS loan.

* Fictitious client, but based on the review of the case studies.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 57

As illustrated in Faith’s story, the NILS loan generates significant social and health outcomes for recipients. In this

example, Faith experiences an improvement in her quality of life in the last few months of her life. Her feelings of

isolation and depression are reduced and she increases her social contact. The survey results supported the theory

that the NILS loan has significant social and health benefits in a number of areas.

this change to the NILS loan.

Previous evaluation studies of the NILS loan showed that the purchase of an item through the NILS corresponds

to positive health and social outcomes, particularly on quality of life and self-esteem (Mouy, 2010). Studies also

suggest that having a financial conversation during the loan application process and even completing the NILS loan

process, has positive effects on recipients’ mental and emotional wellbeing (Brackertz, 2012).

The social and health outcome construct contained seven dimensions:

• Standard of living

• Stress and anxiety level

• Confidence in achievements in life

• General confidence and self-esteem

• Physical health, such as tiredness, backache or other physical pain

• Personal relationships and

• Participation in social activities, such as organisations, volunteer activities, sporting clubs.

The findings from the seven dimensions were used to determine the net change in social and health outcomes of

respondents, due to the NILS loan.

Due to a NILS loan:

• 73% (522) of the NILS respondents experienced net improvement in social and health outcomes.

• 3% (22) of the respondents were prevented from experiencing a net worsening in social and health outcomes.

• 1% (7) of the respondents experienced a net worsening in social and health outcomes.

In Figure 7-14, darker shades represent a more significant improvement or worsening in the social and health

outcome construct.

58

Improved Stablised Worsened

73%

3%

1%

Figure 7‑15 contains changes in respondents’ social and health dimensions due to a NILS loan. A large proportion

of respondents reported a positive change in their standard of living (52%), stress and anxiety level (43%) and

confidence in their achievements in life (42%). A further 247 respondents (35%) experienced an increase in general

confidence and self-esteem. To a lesser extent, respondents reported an improvement in physical health (16%),

personal relationships (16%) and participation in community (14%).

Standard

of living

Stress and

anxiety

Confidence in

achievments

in life

General

confidence and

self-esteem

Physical

health

Personal

relationships

Participation in

social activities

Worsened, not due to NILS Worsened, due to NILS

Improved, not due to NILS Improved, due to NILS Stayed the same

0%

10%

20%

30%

40%

50%

60%

70%

80%

3

1

40

4

52

7

1

47

2

43

3

0

48

7

42

3

0

58

4

35

15

0

64

5

16

5

0

75

5

16

6

1

72

7

14

A number of survey respondents explained the positive social outcomes as a result of receiving a NILS loan:

a fridge for the family).

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 59

disability support, used her NILS loan to purchase a computer).

support, used her NILS loan for a motor vehicle-related expense).

Very few NILS respondents reported a negative change in any of the dimensions due to the NILS loan (1% for

standard of living, stress and anxiety, and participation in social activities, and 0% in all other dimensions).

7.4 Financial exclusion - impact of the NILS loan

For most respondents the NILS loan did not provide a conduit to financial inclusion based on the product definition:

• 76% of NILS respondents’ financial inclusion status stayed the same since receiving a NILS loan.

• More than half of all respondents reported that due to costs they did not own financial products.

Connolly et al, (2011) defines financial exclusion as a “lack [of] access to appropriate and affordable financial

services and products – the key services and products are a transaction account, general insurance and a moderate

amount of credit” where ownership of a credit card is a proxy for the latter. The definition suggests that there are

two components to the financial exclusion definition; a products-based definition (ownership of the three products)

and a characteristics-based definition (affordable and appropriate). In Australia, the provision of microfinance is

often seen as a means of helping individuals become more financially included.

The NILS survey captured the financial inclusion status of the respondents before and after the receipt of a NILS

loan. The findings presented in Figure 10-16 shows that most respondents’ financial inclusion status did not change

after the receipt of a NILS loan (76%). Since receiving a NILS loan:

• 7% of respondents’ financial inclusion status improved;

• 17% of respondents’ financial inclusion status worsened.19

Improved Stablised Worsened

Figure 7‑17 shows that after the receipt of a NILS loan, fewer respondents owned a credit card, vehicle insurance

and home contents insurance. The possession of a transaction account, which is a requirement to obtain

government allowance, slightly increased after the receipt of NILS.

19 Note that it is unclear whether the changes in respondents’ financial inclusion status were linked to the receipt of a NILS loan.

60

Transaction Account Credit Card Home contents insurance Vehicle insurance,

excluding 3rd party

Pre NILS

Post NILS

As part of the survey, respondents who did not own the key financial products were asked why they did not own

them20. More than half reported that it was too expensive to do so (Table 7‑3)21.

Do not own the product Do not own the product due to cost

Vehicle insurance*

*Only include respondents who currently

own a working vehicle.

185 160

In addition to not owning a credit card due to cost exclusion, some respondents did not want a credit card or

believed that it would not be appropriate (e.g. credit cards can get you into trouble; unsuccessful application due

to poor credit record). Figure 7‑18 contains the reasons for not owning a credit card.

Overall, the results reported here suggest that the NILS loan is not a direct conduit to financial inclusion and that

a product-ownership approach to defining financial exclusion might not be appropriate for low-income individuals

using non-mainstream financial products.

However, the findings from Section 7.2 shows that the NILS loan can still provide a pathway to the outcomes

financial inclusion seeks to achieve, and so in this sense, is a successful program.

20 General insurance was separated into home contents insurance and vehicle insurance to take into account the fact that not all respondents owned

a car. Respondents only had to hold one type of insurance for the purposes of measuring their level of financial inclusion.

21 Note that more than one reason for not owning the financial product or service could be nominated.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 61

That the level of credit card ownership by those on low incomes is further explored in the next formulation of the

NAB/ CSI Financial Exclusion indicator to deepen understanding of the nature of financial exclusion and pathways

to financial inclusion.

The reduction in ownership of home contents and vehicle insurance may be putting assets at risk. It is therefore

recommended that the risks associated with non-insurance and under insurance are raised in financial

conversations with the NILS clients and consideration is given to the development of affordable insurance products

for the NILS clients to minimise these risks.

The loan delivery process varies across states and providers. However elements of best practice worthy of

replication were identified where the loan delivery process contributed to some positive changes in respondents’

outcomes.

In particular:

• There were some more positive outcomes where the NILS providers were more flexible with the loan

selection criteria (although there was no distinct relationship between the lower risk NILS respondents and

improvements in outcomes).

• Respondents who received supporting services in addition to a NILS loan were more likely to experience

improvements in outcomes than recipients who did not.

The NILS loan is rarely viewed as a stand-alone product; rather, it is viewed as a “program” comprising a number of

key elements or as one of many “tools” in the toolbox providers use to address the needs of their clients. Therefore,

as part of the outcome evaluation, an exploratory process and network analysis was undertaken through which

correlations between the loan delivery process and respondents’ outcomes were identified.

This section explores the relationship between two aspects of the loan delivery process and the NILS respondent’s

outcomes. To better understand the way in which the NILS provider can influence the benefits that a NILS loan

provides, CSI consulted nine NILS representatives from four governance structures (see section 2.3.1). The opinions

of the representatives, in addition to the results from the telephone survey of the 710 NILS recipients, were drawn

upon to inform the processes we considered. The NILS loan processes that were considered are:

differences affect recipient outcomes?

experience improvements in outcomes than recipients who only receive a NILS loan?

It is important to reiterate that the process and network analysis was exploratory and the findings provide

useful insights but are suggestive at best. Namely, CSI only analysed four governance structures in two states

and interviewed a small selection of provider organisations, and so their opinions cannot be generalised to the

entire NILS network. Causal links between the loan delivery process and improvements in outcomes could not be

established because other variables that might have influenced outcomes, could not be controlled.

• There is variability in the eligibility process with the NILS providers using subtle differences in terms of criteria.

• The NILS network “self-organises” to refer NILS loan applicants to providers who can meet their needs.

The process and network analysis revealed insights into the assessment of the eligibility of the NILS loan applicants,

including a range of different practices. Some NILS providers have guidelines relating to specific client types such

as those on New Start or those experiencing domestic violence. This variability means that the NILS applicants are

referred to another NILS provider on the basis of either client eligibility or specific purpose of the program.

22 Please note that the process evaluation and network analysis was exploratory and the findings provide useful insights but are suggestive at best.

Due to limitations in the scope of analysis, causal links between the loan delivery process and improvements in outcomes could not be established

62

Providers sometimes consider the “eligibility criteria” a device to screen out “risky” applicants. Risky applicants are

those who are more likely to incur financial hardship from taking out a NILS loan due to its repayments and who

are subsequently more likely to default on the loan. Depending on the level of risk the provider is willing to incur,

the eligibility criteria can be tighter or looser.

To illustrate, a provider might believe an applicant who has lived at the same residence for more than six months

is less likely to experience financial hardship from making loan repayments than an applicant in transient housing.

The provider might thus stipulate that applicants must live at the same residence for at least six months to qualify

for the NILS loan. However, another provider might counter that riskier applicants are more likely to experience

positive outcomes than less risky applicants. For example, the NILS loan applicants who live in transient housing

are more likely to be refused access to mainstream services, including credit, than applicants who have lived at

the same address for six months or more. They will thus appreciate and benefit more from the NILS loan than

others applicants. Indeed, this might explain why some providers embed exceptions to the six month residential

requirement (for example, victims of domestic violence); use a three month residential requirement; or waive the

residential requirement entirely.

The relationship between the rigidity of the eligibility criteria and respondents’ outcomes is presented in Table

7‑4. Less rigid eligibility criteria imply that the provider is more likely to approve riskier applicants. The residential

requirement was used to determine the rigidity of the eligibility criteria as follows.

Respondents who received their NILS loan from providers with23:

• no residential requirement were grouped in Category 1

• a three month residential requirement were grouped in Category 2

• a six month residential requirement but allowing for exceptions, were grouped in Category 3

• a six month residential requirement with no exceptions, were grouped in Category 4.

For each category, the percentages that are reported in Table 7‑4 were calculated by determining the difference

between the proportion of those surveyed NILS clients who experienced a net improvement in each outcome

construct (categorised by the rigidity of the eligibility criteria), and the corresponding proportion of the entire

sample population from the telephone survey. Positive and higher scores indicate that respondents from the

relevant category were more likely to experience improvements in outcomes than the general population, while

negative and lower scores indicate that respondents from the relevant category were less likely to experience

improvements in outcomes than the general population24.

Category Financial

Capabilities Cost Savings Financial

Independence Social and health

The findings suggest that there is no correlation between riskiness and improvements in outcomes for the NILS

respondents from the survey. In other words, risky respondents were just as likely to experience improvements in

outcomes as less risky respondents.

The different loan eligibility criteria should be formally recognised so that potential NILS loan applicants can be

directed to those NILS providers best able to meet their needs.

Although these findings have been generated from exploratory analysis, the learning in relation to eligibility and

risk should be included in the training of the NILS staff.

23 CSI was unable to include all provider organisations that participated in the survey in this analysis, as not all policies and procedures manuals were

available.

24 For working out, refer to Appendices E, F and G.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 63

Respondents who received supporting services in addition to the NILS loan were more likely to experience

improvements in outcomes than the NILS loan recipients who did not.

It is routinely claimed that an organisation that provides a greater breadth of services is better able to meet a

client’s complex needs than an organisation that provides only one service (Provan & Milward, 1995). This was

reflected in the opinions of the NILS providers CSI engaged with – they explained that the NILS loan is only one

component in a toolkit of many. As such, the NILS loan is sometimes delivered concurrently with other services

such as financial counselling, Home Energy Saving Scheme (HESS), Emergency Relief, Foodbanks and food

vouchers. This is because the NILS loan recipients often have underlying issues of which not being able to access

credit is a manifestation, and so require a suite of services and programs to help solve their underlying issues.

Though the NILS providers are only required to have a “financial conversation” with the NILS loan recipients during

the loan process, 15% of the NILS respondents reported they received complementary services such as financial

management and counselling, in addition to their NILS loan as illustrated in Table 7-5.

Additional services received No. %

The hypothesis that the NILS loan respondents who also received supporting services were more likely to

experience improvement in outcomes than respondents who only received a NILS loan was tested. Specifically, the

proportion of respondents who did or did not receive additional services and experienced an improvement along

the four outcome constructs (Table 7-6) was compared to the proportion of the entire sample that experienced an

improvement along the four outcome constructs from the telephone survey25.

Financial

Capabilities Cost Savings Financial

Independence

Social and

health

For all outcomes, respondents who received a NILS loan and supporting services were more likely to experience

improvements in outcomes than the overall sample population, particularly for the financial capabilities and cost

savings outcomes. Respondents who only received a NILS loan were less likely to experience improvements in

outcomes than the overall population, though this effect was not large. One survey respondent explained the

benefits and value of receiving additional assistance through the loan process:

used her NILS loan to purchase furniture).

Further investigate the types of additional services provided in-house or through partners and as part of the loan

delivery process, and their specific impact on recipients’ outcomes. Good practice should be emulated and where

possible standardised across the NILS network.

25 Refer to Appendix I for calculations and workings.

64

Changes in outcomes due to the NILS loans were quantified in a social and economic impact model. The findings

from the model suggest that:

• For every dollar invested in a NILS loan, $1.59 worth of social and economic value was created.

• For the 710 respondents, over a three-year period a total of $1,063,010 of economic and social benefit was

created at a cost of $668,000. A net benefit of $395,000.

• The rate of social return varies for each loan purpose type. The purchase of a fridge with a NILS loan generated

the greatest return ($2.45 per dollar invested).

8.1 Summary of findings from the social and economic impact model

The social and economic impact model valued the material outcomes experienced by the 710 NILS survey

respondents and the costs associated with the provision of the loans. The material benefits experienced by

respondents were categorised as either economic or social. The costs of providing the loans included direct

and indirect expenses to the respondents, the loan providers and the program sponsors. Figure 8‑1 contains the

material costs and benefits components considered in the model.

For the 710 NILS loan respondents27:

• $830,900 worth of economic benefit and $232,110 worth of social and health benefits were expected to

be generated over a three-year period. This represents a total of $1,063,010 in value created for 710 loan

recipients at an average of $1,497 per client.

• The cost of providing NILS to 710 recipients was valued at $668,000, averaging at $941 per recipient.

• This means that for the 710 recipients, a net benefit of $395,000 was created.

Therefore, for every dollar invested in a NILS loan, $1.59 worth of social and economic value was created.

However, almost 10% ($63,000) of the value of the inputs incurred no actual financial cost, specifically relating to

the opportunity cost of the use of capital (5.9% - $39,600) and use of volunteer time (3.5% - $23,600). If the value

of these input items are removed from the calculations, the social return on the real input costs would increase

from $1.59 to $1.76.

26 A breakdown of the benefits experienced by item type and alternatives faced by recipients can be found in Appendix J

27 All figures were tested for sensitivity and the social and economic return ranged from $1.37 at worst to $1.84 at best.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 65

Economic

benefits

• Asset

building

• Cost

savings

• Employment

Impacts

Social benefits

• Reduction in

stress and anxiety

• Improvements in

self-confidence

• Improvements in

independence

Costs

• Government and

other investment in

the program

• Cost of capital

(including write-offs

and the opportunity

cost of lending the

funds at commercial

rates).

• Depreciation of

asset’s value.

• Costs to providers

(e.g. overhead and

staff costs).

• Cost of volunteer time

+ - =

Equally, almost two-thirds (63% - $352,000) of the value of the inputs related to government funding - $202,000

from Federal Government and $151,000 from State governments.

Overall Government therefore achieved a social return of $3.02 for each dollar of funding provided – the Federal

Government achieveing a social return of $5.27 for each dollar of funding provided, and the state governments

combined achieving a social return of $7.06 for each dollar of funding provided.

8.2 Social and Economic Return by Item Purchased

The rate of social and economic return differed according to the item purchased using the NILS loan, as shown in

Figure 8‑2. Based on the model:

• The purchase of a fridge generated the greatest return of $2.45 per dollar invested, closely followed by the

washing machine.

• The dryer, electrical goods and furniture returned more than double the value of the investment.

• Motor vehicle-related purposes, computer and education, and medical-related and other purposes generated

a negative return. We could not quantify the value generated by medical-related loans in preventing further

deterioration in health. As such, not all the social and economic value created by medical-related items was

captured.

Fridge Washing

Machine

Dryer and

Electrical

Goods

Furniture

Motor

Vehicle

related

Computer and

Education

related

Medical

related

and other

0.25

0.00

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

2.75

$AUD

The findings reflect the lifecycle of the benefits generated by the NILS products. Namely, the purchase of a fridge

or electrical good generates immediate benefits, whereas computers and education most likely takes more than

the three-year timeframe that was considered in the model to generate positive value.

66

The findings from the outcomes evaluation demonstrate that the No Interest Loan Scheme (NILS) improved the

lives of many of its recipients. In particular, the receipt of the essential good or service helped mitigate financial

hardship through generating cost savings and improved the quality of life, health and mental wellbeing of the

survey respondents. Three outcome constructs were considered in the outcomes evaluation – financial capabilities,

economic and social and health outcomes. The key results from the outcome evaluation are:

respondents were living under the poverty line and 55% were severely financially excluded. In addition, 48%

of all respondents were unable to improve their economic situation through finding employment due to

physical disability and/or age.

improvement in outcomes. Most significantly, 74% of respondents experienced a net improvement in social

and health outcomes.

Due to the NILS, 105 respondents stopped or reduced their use of fringe credit and 111 respondents reduced

their use of rent-to-own services.

that for every dollar invested in NILS, a social and economic return of $1.59 is created. The NILS item that

generated the most impact is the fridge, which generates a social and economic return of $2.45 for every

dollar invested.

If increasing social impact is a goal of the NILS, Good Shepherd Microfinance should design and implement

strategies to increase the number of individuals who access the NILS and maximise the amount of impact

generated per loan.

The evaluation provides strong evidence for program expansion as most respondents (82%) experienced

improvements in outcomes due to NILS. Based on the market analysis, in 2013 it is estimated that overall 345,002

households have a demand for a NILS loan. However, only 21,114 NILS loans were delivered in the 2012 financial year.

On this basis, only 6% of the demand was met in 2012.

Conduct further market analysis and other research on barriers and incentives to understand why NILS only meets

a small percentage of the market. Develop strategies and projections based on these strategies to expand the NILS.

Promote NILS and invest in research and innovation to ensure that NILS achieves its long-term goals.

This growth could include a combination of:

• A continuation of the organic growth through the expansion of activities of existing partners, including

centralised, franchise and independent organisations that have the capacity and infrastructure.

• Investment in state centralised systems where it is possible to demonstrate an appropriate balance between

efficiency and effectiveness.

• Place-based investment into locations where there is evidence of unmet need or targeting recipient segments

where there is unmet need.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 67

Due to the design features of the NILS, in terms of both product and delivery (time) service, it may not meet the

demand for credit for some individuals that are eligible for the NILS loan. These individuals may choose alternative

options including going without or accessing credit through other providers such as fringe lenders or rent-to-buy

schemes.

• Explore the potential to meet unmet demand specifically in relation to refining and enhancing the design of

the NILS in terms of both the loan product and the delivery process. Two areas with potential are: streamlining

the NILS process so that cash can be made available quicker; expanding access to loans online to remove

components of the competitive advantage of fringe lenders.

The NILS loan eligibility criteria, including the residential requirement, may prevent some potential recipients from

receiving a NILS loan. However, the application of eligibility criteria varies.

• Assess the merits of refining the eligibility criteria to widen access without unduly increasing risk.

• The NILS loan amount restricts its use. Expenses such as housing repairs or motor vehicle repairs/rego may

exceed the maximum NILS loan amount permitted for the NILS, which may cause individuals to turn to other

forms of credit if they are eligible, or to fringe products to cover higher cost items.

• Assess the merits of increasing the maximum NILS loan amount for those who can afford their NILS

repayments but may not be eligible or be able to afford a StepUP loan. This work should be conducted in

collaboration with the NILS network of providers to ensure a consistent understanding of the client needs and

to ensure a standardised policy.

• Recipients can only hold one NILS loan at a time. Households that face further cash flow problems or financial

crises might need to source alternative forms of credit such as fringe products or financial assistance such as

Emergency Relief to help meet their needs.

• Assess the merits of providing top-up loans for those NILS clients with a good track record in order to reduce

the possibility of them using fringe products or Emergency Relief.

In addition to increasing the reach of the NILS, increasing the value created per loan is an essential part of

expanding the impact of the NILS. Currently, the NILS loan generates a positive rate of return of $1.59 for every

dollar invested in the program. Therefore, to ensure that the rate of return increases, further exploration is needed

to understand who is less likely to receive positive outcomes from the NILS and to identify ways to improve their

outcomes.

• Conduct further research to understand why the NILS loan is less beneficial for some individuals and to devise

ways to cater for them.

• In particular, further research into those who experience a worsening or no change in outcomes could lead to

the development of some profiling criteria to identify those clients who are:

- Likely to achieve positive outcomes

- At risk of negative outcomes

- On a pathway to financial inclusion through StepUP/AddsUP

- Defined as in poverty where the NILS loan provides the basis for stability but not improvement.

Explore why some NILS clients experience a worsening in financial capabilities – regardless of whether attributed

to the NILS loan or not – to improve this outcome. The emergence of personal financial management tools for the

financially included and innovations through MoneySmart28 could be replicated to help those on low incomes to

manage their finances.

28 Examples of methods and innovations in managing finances can be found at the MoneySmart website https://www.moneysmart.gov.au/

68

While low-income, financially excluded individuals concern the government with the increasing use of fringe credit,

the results from this evaluation suggest that these individuals are also susceptible to using goods rental services.

The survey results suggest that the NILS loan is an affordable alternative to both fringe credit and goods rental.

Assess whether the use of goods rental services is as prevalent and predatory as fringe credit and deepen

understanding of the types of the NILS clients and situations where good rental is a preferred alternative.

Investigate the role of the NILS loan in deterring individuals from using fringe credit and goods rental schemes. This

should include further work to assess whether there is a causal relationship between a NILS loan and a reduction in

the need for fringe credit and goods rental schemes.

Further explore the level of credit card ownership by those on low incomes in the next formulation of the NAB/CSI

Financial Exclusion indicator to deepen understanding of the nature of financial exclusion and pathways to financial

inclusion for those on low incomes.

The reduction in ownership of home contents and vehicle insurance may be putting assets at risk. It is therefore

recommended that the risks associated with non-insurance and under-insurance are raised in financial

conversations with NILS clients and that further research is also conducted to fully understand and assist the

development of affordable insurance products for low income clients, as it is recognised that there are considerable

economic challenges for insurers to develop suitable insurance products for low income clients.

The study has revealed a wide variety of governance structures relating to both the NILS operations at a state level

and individual NILS providers. The process and network analysis revealed numerous elements of best practice that

could be shared across the NILS network.

The research has also revealed the importance of support services in achieving positive outcomes for the NILS clients.

Identify, define, and codify the different NILS governance structures. Further research can subsequently be

conducted to understand whether they affect recipients’ outcomes in order to identify and replicate best practice

across the NILS network.

The exploratory research has revealed both costs and benefits relating to centralised state and centralised

organisation systems. Further investigate the merits of these systems. In particular, the merits of case management

systems should be assessed.

Where identified, good practice should be standardised across the NILS network.

Investigate the types of additional services provided in-house and as part of the NILS loan delivery process and

their specific impact on recipients’ outcomes. Good practice should be standardised across the NILS network.

Establish a diagnostic tool for the NILS providers to provide an assessment of quality to support the ongoing

impact and performance of the NILS network. This tool could include a full range of metrics and key performance

indicators relating to inputs, processes, quality, outputs and outcome. The metrics could focus on key aspects such

as recipient satisfaction measures, innovations and entrepreneurship within the NILS network. Examples of such

metrics are contained in Table 9-1

A standardised diagnostic tool in addition to rigorous data insights could create a stronger picture of ‘best

practice’ across the NILS network and help with decision making processes on a program and state level, such as

disbursement of capital, training needs and innovation.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 69

Stage Indicator

Name Description Rationale Measures

Initial

Enquiry

Breadth of

outreach

The breadth of

outreach is concerned

with the proportion of

demand for a NILS loan

that is currently met

Potentially provide

grounds for scaling up

the program

* Demand met = Active loans

/ Demand for a NILS loan

* Demand met = Active loans

/ Demand for NILS

outreach

The depth of outreach

investigates the

demographics of the

client group

Establish whether the

people who potentially

need it the most are

being reached

* Eligibility requirements

* Demographics

Loan

Approval

Spillage Spillage measures the

number of people that

drop out at the various

stages of the loan

process

Identify potential

reasons why clients drop

out - clients may choose

to opt out because the

process is too lengthy

* Show up ratio = Interviews

conducted / Interviews

booked

* Cheques drawn /

Loans approved

* Interview waiting time

(days) = Time between

interview booking & interview

* Notification waiting time

(days) = Time between

submitting loan documents &

notification of loan outcome

Efficiency Evaluates how

efficiently case

workers allocate their

time

Due to capacity

constraints, areas of

inefficiencies in the

process which may

lead to a wastage of

resources (time, etc…)

or duplication of effort,

need to be identified

and eliminated

* Loan approvals / Interviews

conducted

* Loan approval / Loans

assessed by LAC

Final Meeting

Loan

Repayment

Portfolio

quality

Consider the rates

of arrears and loans

written-off during the

period

Loan collection has

proved to be a strong

proxy for general

competence

Evaluate the riskiness

of the program (at the

site level)

* Currently not paying ratio =

Loans currently not paying /

Number of active loans

* Write-off ratio = Loans

written-off ($) during

period / Average gross loan

portfolio ($) during period

70

Data and information management is important to the functioning and performance monitoring of the NILS

network. Ongoing high-quality monitoring and measurement across the NILS network is needed to identify where

approaches are more or less successful. This is pertinent, as CSI’s analysis of the July to December 2012 NILS Half

Yearly Statistical Report (HYSR) raised some concerns regarding the quality of the data collected.

Strengthening the data collection and reporting processes will ensure better quality data and analysis reliability. In

addition, further specific training and support to the NILS providers will assist them in the data collection process

and demonstrate the benefits of effective information management.

It is understood that many of these issues have been addressed in the latest round of the GSM data collection for

the statistical report, however due to the large scale of the NILS operations and the prospects of expansion, NILS

will require sustained efforts in data collection and training.

Conclusion

This report represents the first nation-wide quantitative outcome evaluation of the No Interest Loan Scheme (NILS)

since its launch in 1981 by the Good Shepherd Sisters. Over the last 32 years, the Good Shepherd Microfinance NILS

has experienced significant growth, providing over 125,000 individuals with access to fair and affordable credit

through a network of 257 community-based providers across Australia.

The findings suggest that the effect of the NILS on the lives of Australia’s most vulnerable and marginalised is

significant. That is, a NILS loan does appear to significantly impact on financially excluded Australians, specifically

improving their financial capabilities and economic, social and health outcomes.

NILS has already made a major contribution to the wellbeing of society. However for Good Shepherd Microfinance

and its partners to expand their impact access, further research is required to consider who and where to target

and what practices correspond to greater impacts.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 71

Consultancy, for Demos and Esmée Fairbairn Foundation.

Victoria, Brotherhood of St Laurence and Foresters Community Finance.

and Marketing, RMIT University. PhD Thesis

South Wales, for the National Australia Bank.

Social Impact (CSI) - University of New South Wales, for the National Australia Bank.

Studies, Melbourne, Victoria.

Caledonian University.

Microfinance, Victoria.

Policy Press.

Policy Unit, The University of Queensland, Brisbane.

Quarter 2013. The University of Melbourne.

72

Mott Foundation.

York: Harper Collins.

Department.

United Nations Department of Economic and Social Affairs and the United Nations Capital Development Fund

Children and Youth Services Review 32(11): 1488-1496.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 73

Appendix A: Market Analysis – Determining affordability

Two data sources were used to determine the number of individuals able to afford a NILS loan: The Melbourne

Institute’s Henderson Poverty Line Report (June 2010, to make comparable with other 2009-10 data) and ABS

Household Expenditure Survey (2011).

The Melbourne Institute’s Henderson Poverty Line Report provided information on income by allowance or pension

type and household composition. From the ABS Household Expenditure Survey (2009-10), we obtained the

average household expenditure and used the equalising factor to determine the expenditure per individual. This

expenditure level was then multiplied by the number of people in a household eligible for a NILS loan to determine

the gross expenditure of that household. The gross expenditure was then compared to the income figures obtained

from the Henderson Poverty Line Report.

For those households which were marginally unable to afford a NILS loan using the original expected household

expenditure based on the survey, spending on three items was removed from their expenditure: overseas

holidays (a luxury item), spending on credit card interest (for which they would not be eligible), and spending

on whitegoods (which is obviously replaced by the NILS loan). This led to some households having an adjusted

expenditure.

The percentage of households in each household composition category that could be expected to afford the

repayments on a NILS loan was determined by examining the difference between income and expenditure

factoring in NILS repayments. Those households with an income equal to, or almost equal to, their expenditure

were determined as having around a 50 per cent chance of being able to afford a NILS loan. Household types with

a gross income substantially higher than their expenditure, were determined as having a 90 per cent chance of

being able to afford a NILS loan. Household types with a gross income substantially lower than their expenditure,

were determined as having a 10 per cent chance of being able to afford a NILS loan. Table A-1 provides a

breakdown of the household types, income, expenditure and proportions of eligible households in Australia.

74

Household

and payment

type

Income

($/wk)

Expenditure

($/wk)

NILS loan

($/wk)

Remainder

($/wk)

No. of eligible

households

% able to afford

No. eligible

households able

to afford

% needing a

NILS loan in a

single year

No. households

needing a NILS loan

in a single year

Single – 4 children

or more

791.00 745.38 11.92 33.70 37,631 79% 29,899 27% 8,043

Couple – 4 children

or more

884.20 828.79 11.92 43.49 133,517 90% 120,166 27% 32,325

Total 2,552,658 1,282,534 345,003

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 75

Appendix B: The NILS Survey Questions

No. Question Responses

1. SECTION: NILS information

1.1 How many NILS loans have you received in total?

1.3 What is the primary use of your {current} NILS

loan?

Fridge; Washing machine; Dryer; Electrical good;

Furniture; Motor-vehicle repairs/rego; Computer;

Education; Medical related; Other

1.4 How do you make repayments for your {current}

NILS loan?

Centrepay; Direct debit from your bank account;

Other

1.5 What other services have you received as a result

of your contact with the NILS worker?

Financial management; Language support;

Counselling (general, e.g. personal; family);

Employment and training; Rental and housing

support; Health services.

2. SECTION: Financial Inclusion

2.1.1A Do you currently own a transaction account? Yes; No

2.1.1B Why not? It is too difficult to visit the bank branch; You

are unable to provide identity documents;

You already access an account through family

member; It is too expensive; You do not want

the product; You do not understand how a

transaction account works; Other

2.1.1C Prior to receiving your {current} NILS loan, did

you own a transaction account?

Yes; No

2.1.2A Do you currently own a credit card? Yes; No

2.1.2B Why not? You have tried but have been unsuccessful due to

poor credit record; You have tried but have been

unsuccessful due to income; You have tried but

have been unsuccessful due to inability to provide

documents; It is too expensive; You do not want

the product; You do not understand how a credit

card works; Other

2.1.2C Prior to receiving your {current} NILS loan, did

you own a credit card?

Yes; No

2.1.3A Do you currently own home contents insurance? Yes; No

2.1.3B Why not? You don’t see the value of insurance; You have

tried but have been unsuccessful in applying; It

is too expensive; You do not want the product;

You do not trust insurance products; You do not

understand how home contents insurance works;

Other

2.1.3C Prior to receiving your {current} NILS loan, did

you own home contents insurance?

Yes; No

2.1.4A Do you currently own vehicle insurance, excluding

third party?

Yes; No

2.1.4B Why not? You do not own a vehicle; You don’t see the

value of insurance; You have tried but have been

unsuccessful in applying; It is too expensive;

You do not want the product; You do not trust

insurance products; You do not understand how

vehicle insurance works; Other

76

2.1.4C Prior to receiving your {current} NILS loan, did

you own vehicle insurance, excluding third party?

Yes; No

2.2.1A Have you had, or do you currently have a StepUP

loan?

Yes; No

2.2.1B Are you aware of StepUP loans? Yes; No

3 SECTION: Economic Outcomes

Employment

3.1 What is your current employment status? Employed; Not employed and seeking work; Not

employed and not seeking work.

3.2 On what basis are you currently employed? Full-time; Part-time; Casual

3.3 What is preventing you from gaining

employment?

A full-time parent; A full-time carer of an elderly

person or person with a disability; A student;

Retired; Unable to work due to a disability and/or

health issue; Other.

3.4 Before receiving your {current} NILS loan, what

was your employment status?

Employed; Not employed and seeking work; Not

employed and not seeking work.

3.5 On what basis were you employed? Full-time; Part-time; Casual

3.6 To what extent did NILS contribute to the change

in your employment status?

To no extent; To some extent; To a great extent

3.7 Compared to before receiving your NILS loan,

how satisfied are you with your employment and

income?

Less satisfied; About the same; More satisfied.

3.8 To what extent did NILS contribute to your

change in satisfaction with your employment and

income?

To no extent; To some extent; To a great extent

Cost Savings

3.9 Have you ever borrowed from a fringe lender or a

pawn broker?

Yes; No

3.10 Since receiving your {current} NILS loan, have you

borrowed from a fringe lender or a pawn broker?

Yes; No

3.11 How many times have you borrowed from a fringe

lender or pawn broker in the past three months?

Once; Twice; Three times; Four times or more

3.12 Before receiving your {current} NILS loan, how

many times do you think you borrowed from a

fringe lender or pawn broker over a typical three

month period?

Once; Twice; Three times; Four times or more; Did

not borrow from a fringe lender before receiving

NILS

3.13 To what extent did NILS contribute to your

change in use of fringe lenders or pawn brokers?

To no extent; To some extent; To a great extent

3.14 How did NILS contribute to this change in use of

fringe lenders or pawn brokers?

Reduced cost of living; Better able to plan and/

or budget; Repayments increased cost of living;

Other increased costs associated with NILS item/

service (e.g. increased power use); Increased

income; Other.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 77

3.15 Have you experienced any of the following as a

result of receiving your {current} NILS loan?

Better able to save money through bulk buying food

Experienced a decrease in electricity cost due to

using a more efficient appliance.

Stopped using Laundromats

Reduced use of rent-to-own goods

Saved money from reduced transportation costs

None of the above

Other

3.16 Compared to before you received your {current}

NILS loan…

3.16.1 Has your food bill… Increased; Stayed the same; Decreased

3.16.2 Did NILS contribute to this change? To no extent; To some extent; To a great extent

3.16.3 Have your utility bills (e.g. power and water)… Increased; Stayed the same; Decreased

3.16.4 Did NILS contribute to this change? To no extent; To some extent; To a great extent

3.16.5 Has your spending on services such as

Laundromats, internet services or medical services…

Increased; Stayed the same; Decreased

3.16.6 Did NILS contribute to this change? To no extent; To some extent; To a great extent

3.16.7 Has your spending on rent-to-own items… Increased; Stayed the same; Decreased

3.16.8 Did NILS contribute to this change? To no extent; To some extent; To a great extent

4 SECTION: Quality of life

4.1 Had you not received the NILS loan to purchase

your good or service, how would you have

managed?

Rent the item; Use a faulty item; Use a family or

friend’s item; Use public amenities; Go without;

Unsure; Other

On a scale from 1 to 10, where 10 indicates that

you are most satisfied, and 1 indicates that you

are least satisfied, how satisfied are you with:

4.2 Your standard of living 1; 2; 3; 4; 5; 6; 7; 8; 9; 10; Don’t know;

Don’t understand

4.3 Your physical health 1; 2; 3; 4; 5; 6; 7; 8; 9; 10; Don’t know;

Don’t understand

4.4 What you are currently achieving in life? 1; 2; 3; 4; 5; 6; 7; 8; 9; 10; Don’t know;

Don’t understand

4.5 Your personal relationships? 1; 2; 3; 4; 5; 6; 7; 8; 9; 10; Don’t know;

Don’t understand

4.6 Feeling part of your community? 1; 2; 3; 4; 5; 6; 7; 8; 9; 10; Don’t know;

Don’t understand

Financial benefits from good

4.7 Compared to before you received your {current}

NILS loan…

4.7.1A Do you ask for financial assistance from family

and friends

More often; about the same; less often

4.7.1B Did NILS contribute to this change? To no extent; To some extent; To a great extent

4.7.2A Do you use emergency relief More often; about the same; less often

4.7.2B Did NILS contribute to this change? To no extent; To some extent; To a great extent

4.7.3A Do you apply for centre link advances More often; about the same; less often

4.7.3B Did NILS contribute to this change? To no extent; To some extent; To a great extent

78

Mental benefits from good

4.8.1A Has your standard of living: Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.8.1B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

4.8.2A Has your stress and anxiety levels: Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.8.2B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

4.8.3A Has your confidence in what you are achieving in life Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.8.3B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

4.8.4A Has your general confidence and self-esteem: Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.8.4B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

Physical benefits from good

4.9.1A Has your physical health, such as tiredness,

backache, or other physical pain:

Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.9.1B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

Social inclusion benefits from good

4.10.1A Has your personal relationships Significantly worsened; Worsened; Stayed the

same; Improved; Significantly improved

4.10.1B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

4.10.2A Has your participation in social activities, such

as community organisations, volunteer activities,

sporting clubs

Significantly decreased; Decreased; Stayed the

same; Increased; Significantly increased

4.10.2B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5. SECTION: Financial capabilities outcomes

Financial management

5.1 Compared to before you received your {current}

NILS loan, do you:

5.1.1A Follow a budget Less often; About the same; More often.

5.1.1B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5.1.2A Pay more than the minimum payment required by

a credit card or loan provider.

Less often; About the same; More often.

5.1.2B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5.1.3A Pay your bills on time. Less often; About the same; More often.

5.1.3B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5.1.4A Save money from your pay or government income. Less often; About the same; More often.

5.1.4B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5.1.5A Maintain an emergency savings fund. Less often; About the same; More often.

5.1.5B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

5.1.7A Comparison shop or look for bargains Less often; About the same; More often.

5.1.7B Did NILS contribute to this change? To no extent; To some extent; To a great extent.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 79

Financial confidence

5.2 Please indicate how much you agree with the

following sentences

5.2.1A “I feel confident applying for a loan from a bank

or credit union.”

Strongly disagree; Disagree; Neither disagree nor

agree; Agree; Strongly agree.

5.2.1B “Before receiving my {current} NILS loan, I felt

confident applying for a loan from a bank or

credit union.”

Strongly disagree; Disagree; Neither disagree nor

agree; Agree; Strongly agree.

5.2.2A “I feel confident applying for a credit card from a

bank or credit union.”

Strongly disagree; Disagree; Neither disagree nor

agree; Agree; Strongly agree.

5.2.2B “Before receiving my {current} NILS loan, I felt

confident applying for a credit card from a bank

or credit union.”

Strongly disagree; Disagree; Neither disagree nor

agree; Agree; Strongly agree.

Financial stability

5.4.2 Do you feel that your current financial situation is Very poor; Poor; Fair; Good; Very good

5.4.1 Compared to this time last year, do you feel that

your financial situation is:

Significantly worse off; Worse off; No change;

Better; Significantly better

5.4.3 How stable do you think your current financial

position is?

Very unstable, Unstable; Stable; Very stable;

Unsure.

5.4.4 How confident are you that your financial position

will still be stable at this time next year?

Very unconfident; Unconfident; Confident; Very

confident; Unsure.

6. SECTION: Background information

6.1 Are you male or female? Male; Female

6.2 What is your current age?

6.3 Do you identify as an Aboriginal or Torres Strait

Islander? You do not need to respond to this question.

Yes; No; Refused

6.4 Where were you born? Australia; An English-speaking country not

Australia; A non-English-speaking country.

6.5 What is the primary language spoken at home? English; Other.

6.6 Which description best fits your household? Lone person household; Couple family without

dependents; Couple family with dependents;

Single-parent family with dependents; Group

(share) household; Other

6.7 How many dependents do you have?

6.8 What is the tenancy type for your dwelling? Own outright; Mortgage; Renting privately; Renting

through public housing; Living with family; Boarding

or share house; Temporary residence or hostel.

6.9 What is your highest level of education? Year 9 or below; Year 10 or equivalent; Year 12

or equivalent; TAFE Certificate I, II or III; TAFE

Certificate IV or Diploma; Bachelor’s degree;

Postgraduate degree.

6.10. Which of these do you currently receive? NewStart allowance; Age pension; Carer payment

and/or allowance; Disability support payments;

Youth allowance, Austudy or ABSTUDY; Child

support payments; Parenting payment; Widow

allowance; FTBA; Other; None

6.11. What is your main source of income? Self-employed; Waged; Government benefits

80

6.12. What is your current personal income per fortnight?

This includes income from government benefits.

6.13. Before receiving your {current} NILS loan, what

was your personal income per fortnight? This

includes income from government benefits

Appendix C: NILS loan and other credit products comparison

Total repayment figures in Table C-1 are based on the assumption that the client takes out a $930 loan and repays

it fortnightly over a 12-month period. The client never falls in arrears, fully repays the loan, and uses a credit card as

if it was a term loan.

Segment Segment Additional

Fee(s)* Interest p.a. Total Interest Total

Repayment

Late Payment

Fee

Government

Credit

Centrelink

Advance

payment

$0 0% $0 $940 $0

Community

Credit

NILS $0 0% $0 $930 $0

StepUP $0 3.99% $37.1 $967.10 $0

Fair Finance

1 year term**

- 35% $325.50 $1,255.50 -

principal

application

fee

48% $446.40 $1562.40 Not available

Nimble

payday loan^

20% of

principal

application

fee

48%**** $446.40 $1562.40 $7/day

Mainstream

Private

Credit

St George

Vertigo

$55/year 13.24% $123.13 $1,108.13 $9

ANZ low

rate*****

$58/year 12.99% $129.90 $1,187.90 $20

NAB low rate

credit card

$59/year 13.99% $130.11 $1,119.11 $5

* Does not include fees that do not directly accrue to the credit provider, e.g., payment handling fees.

** Information on the additional and late payment fees not readily available

*** If the client notifies the institution about not being able to meet the repayment, the fees are $15

**** Maximum loan length is 50 days. Interest only applies to the principal

***** Minimum loan amount is $1,000

^ Payday products arguably appeal to a different market. For example, Banks et al (2012:32) find that borrowers often use payday lenders and/or

apply for short-term loans in Australia to “meet regular, weekly-type needs and expenses”. StepUP loan clients, in contrast, cannot use the funds on

everyday household items, and bills.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 81

Table C-2 provides a breakdown of rental costs for a selection of eligible items for a NILS loan. For the cost

calculation a 36-month rental term was used, as this is the shortened period for the end of rental purchase,

notwithstanding that the standard rental term is 18 months.

Item Item

value Item rental % of

value Details

36 mths = $2644

$1 purchase of

similar item* at

end of 36 months.

Purchase: http://www.harveynorman.com.au/samsung-511lwhite-

fridge.html

Rent-to-own: http://www.radio-rentals.com.au/rent-trybuy/

Kitchen/Refrigerators/511L-Top-Mount-Fridge-White

Washing

machine

$678 $10.95/wk over 36

mths = $1708

Purchase: http://www.harveynorman.com.au/fisher-paykel-

7kg-wash-smart-washing-machine.html

Rent-to-own: http://www.radio-rentals.com.au/rent-trybuy/

Laundry/Washers/Top-Load-Washing-Machine-7kg

mths = $1396

$1 purchase of

similar item at end

of 36 months.

Purchase: http://www.harveynorman.com.au/simpson-kgclothes-

dryer-4465.html?CAWELAID=1527173783&gclid=C

KHApsPH0bkCFYtgpQodpjAAnA

Rent-to-own: http://www.radio-rentals.com.au/rent-trybuy/

Laundry/Dryers/Clothes-Dryer-5Kg

over 36 mths

= $2488

$1 purchase of

similar item at end

of 36 months.

Purchase: http://www.binglee.com.au/lg-42ln5400-42-

106cm-full-hd-led-lcd-tv

Rent-to-own: http://www.radio-rentals.com.au/rent-trybuy/

Home-Entertainment/LCD-3D-Smart-TV/42---106cm-

-FULL-HD-LCD-TVp://www.radio-rentals.com.au/rent-trybuy/

Laundry/Dryers/Clothes-Dryer-5Kg

mths = $2956

$1 purchase of

similar item at end

of 36 months.

Purchase: http://www.acerstore.com.au/acer/store/index.

php/aspire-v5-571pg-73538g1tmass.html

Rent-to-own: http://www.radio-rentals.com.au/rent-trybuy/

Computer---Office/Notebooks/Aspire-Notebook---

Mid

$2990

$120/wk over 12

mths = $6240

May accept

purchase offers as

low as $1 at end of

term.

209%-

357%

minimum

Purchase: http://www.carsguide.com.au/buy-a-car?makes=

494&models=4294965350&yearFrom=1997&yearTo=1997

Rent-to-own: http://uownrentals1-px.rtrk.com.au/Our-Cars/

Ford/Ford-344/

* Item is similar to the one rented in age, dimension and features (Radio Rentals website FAQs: http://www.radio-rentals.com.au/rental-information/

faqs/#1). It is not clear if the item will be the same brand, quality and energy star rating.

82

Appendix D: Survey Respondent Demographics

Table D-1 contains a full breakdown of the demographic characteristics of the NILS survey respondents.

NILS survey (N = 710)

Gender

Age

18-24 5.8

25-34 26.1

35-44 26.9

45-54 22.5

55-64 13.5

65+ 5.2

Origin of borrower

Non-Indigenous 82.7

Indigenous 16.8

Refused 0.6

Place of birth

Australia 87.6

English speaking country, not Australia 8.7

Non-English speaking country 3.7

Primary language spoken at home

English 98.6

Other 1.4

Housing Type

Lone person household 28.6

Couple family without dependents 4.9

Couple family with dependents 10.6

Single parent family with dependents 42.8

Group/share household 9.0

Other 4.1

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 83

Number of dependents

1 40.3

2 29.1

3 14.8

4 10.4

5 3.4

6 1.6

7 0.3

8 0.3

Tenancy type

Own outright 4.4

Mortgage 4.9

Renting privately 38.2

Renting – public housing 46.8

Living with family 2.8

Boarding or share house 2.7

Temporary residence/hostel 0.3

Education: Highest Level reached

Year 9 21.3

Year 10 30.4

Year 12 14.1

TAFE certificate I, II or III 15.1

TAFE certificate IV or diploma 11.5

Bachelor’s degree 5.8

Postgraduate degree 1.8

Government benefits

Newstart allowance 17.3

Age pension 4.9

Carer payment and/or allowance 12.4

Disability support payments 38.0

Youth allowance 0.8

Austudy or ABStudy 2.5

Child support payments 13.9

Parenting payment 30.3

Widow allowance 0.7

Family Tax Benefit A 45.6

Other 3.9

None 0.7

84

Main source of income

Self employed 0.4

Waged 8.0

Government benefits 91.5

Employment status

Employed 15.4

Not employed and seeking work 20.7

Not employed and not seeking work 63.9

Income bracket

$0-$499 7.4

$500-$999 59.3

$1000-$1499 24.9

$1500+ 8.4

Appendix E: Calculating the net change in the dimensions for the financial

capabilities, cost savings, financial independence, and social and health

outcomes constructs

situation improved, stayed the same or worsened. If they reported a positive or negative change, they were also

asked to what extent the change was due to the receipt of a NILS loan.

For example, to calculate the net change in the financial capabilities outcome, respondents were asked whether

they engaged in the following activities more often, about the same or less often:

• Follow a budget

• Pay bills on time

• Save money

• Maintain an emergency fund

• Comparison shop

For those who reported “more often” or “less often”, we asked them whether the change was due to the NILS loan

to “a great extent”, to “some extent” or to “no extent”.

construct. If they reported an improvement in the dimension and attributed it to the NILS loan, they were allocated

a score of 2. If they reported an improvement in the dimension and did not attribute it to the NILS loan, they were

allocated a score of 1. If they reported a worsening in the dimension and attributed it to NILS, they were allocated

a score of -1. If they reported a worsening in the dimension and did not attribute it to the NILS loan, they were

allocated a score of -2. Respondents who reported experiencing no change in the dimensions were allocated a

score of 0.

For example, consider the “follow a budget” dimension below. If the respondent followed a budget more often

but did not attribute it to the NILS loan, they were assigned a value of 1. If they followed a budget more often and

attributed it to some extent to the NILS, loan they were assigned a value of 2.29

respondents who experienced an improvement or worsening due to the NILS loan, stayed the same, or experienced

an improvement or worsening not due to the NILS loan.

29 Note that the reason for capturing whether the change in practice was due to the NILS to “some extent” and to a “great extent” was to make the

social and economic impact model more nuanced. These nuances did not have to be captured when we reported on the survey results.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 85

Appendix F: Calculating the net improvement or worsening due to NILS in

financial capabilities, cost savings, financial independence, and social and

health outcomes constructs

For the purpose of calculating net improvement or worsening due to a NILS loan, respondents were allocated a

score of -1, 0, or 1 on each dimension that makes up the outcome construct. If they reported an improvement in

the dimension and attributed it to the NILS loan, they were allocated a score of 1. If they reported a worsening

in the dimension and attributed it to the NILS loan, they were allocated a score of -1. All other respondents were

allocated a score of 0 (this includes respondents who experienced a change in the dimension, but did not attribute

the change to the NILS loan). The scores from each dimension were aggregated to calculate the net change in

the outcome construct. Table F‑1 for example, illustrates how the net change in financial capabilities would be

calculated for a respondent. The net score is the sum of the value assigned to each dimension. In our example, the

net score equals 2 (1 + 0 – 1 + 1 + 1 = 2).

Follows a

budget

Pays bills

on time

Saves

money

Maintains

emergency

fund

Comparison

shops Net Score

More often

due to the

NILS loan

X X X

Less often

due to the

NILS loan

X

Since there are five dimensions in the financial capabilities construct, the potential scores range between 5 and -5.

Respondents with a score of 0 either experienced no change in the outcome due to the NILS loan or remained the

same. These respondents were not reported on. A score greater than 0 indicates that the respondent experienced

in the outcome. The closer the score is to 5, the greater the extent of improvement in financial capabilities. The

closer the score is to -5, the greater the extent of worsening in financial capabilities. This variation in the extent of

improvement or worsening is represented in Tables, 7.5, 7.9 and 7.11 by the different shades; the darker the shade,

the greater the extent of improvement or worsening.

In the example above, the net score of 2 indicates that the respondent experienced a net improvement in the

financial capabilities outcome.

Appendix G: Calculating the number of respondents who experienced stability

in outcomes due to the NILS

The design of the survey instrument allowed us to disentangle changes in outcomes that were attributed to the

the NILS loan (net changes in outcomes considered changes that were due, and not due, to the NILS loan).

The following steps were adopted to determine the respondents who, in the absence of NILS, would have

experienced a negative change in outcomes, but instead experienced no change in outcomes due to the NILS loan

(i.e., financial capabilities, economic – cost savings, economic – financial independence, and social outcomes).

changes that occurred due to NILS, and the changes that occurred due to reasons other than the NILS loan).

The individuals identified in Step 3 are those who would have experienced a worsening in outcomes, had not they

received NILS.

86

Appendix H: Calculating expected savings from reductions in fringe lending

The phone survey captured the number of times the NILS respondents borrowed from fringe credit providers in a

typical 3-month period prior to, and after the receipt of the NILS loan. Respondents were also asked to determine

the extent to which this change was due to the NILS loan.

1. For respondents who stopped or decreased their use of fringe credit and attributed this change to the NILS loan, the

difference between the number of times they accessed fringe credit before and after the NILS loan was calculated.

Over a 3-month period, 244 fringe loans were not taken out due to the NILS loan. This equates to 976 loans per year.

The expected savings were calculated based on the following assumptions:

• Average amount of a payday loan of $300 (Banks,2012)

• Establishment fee of 20% of the principal (MoneySmart, 2013)

• Monthly interest of 4% (MoneySmart, 2013)

• Average term of 30 days

The total fees and interest per loan was calculated to be $72. Thus, the total expected savings generated by the

976 fringe loans not taken out was $70,272 (976 multiplied by $72).

However, 2 respondents increased their use of fringe lenders due to NILS and accessed an aggregated total of 3

additional loans over a 3-month period. This equates to 12 loans per year. The total expected cost of these loans,

using the above assumptions, was estimated to be $864.

The net savings from not accessing fringe loans due to the receipt of NILS was consequently $69,408.

Appendix I: Calculating deviations

the NILS loan was calculated.

in the outcome construct, by the total number of respondents:

outcome due to NILS was calculated.

an improvement in outcome, by the total number of respondents in the segment.

For example, the segment proportion of respondents who received supporting services, in addition to the NILS

loan, and who experienced an improvement in an outcome was calculated as follows:

For the process evaluation and network analysis, the segments considered were: the eligibility criteria imposed

by NILS providers; whether or not NILS recipients received additional supporting services; and the governance

structure in which the NILS recipient received their loan.

experienced an improvement in outcomes “segment proportion”, and the proportion of the total sample that

experienced an improvement in outcomes “sample proportion” was calculated. This was expressed as a percentage

of the total sample proportion, to obtain the “deviation” figure.

The deviation is the difference between the population and segment averages, expressed as a percentage of the

population average. A deviation of 25, for example, indicates that the proportion of recipients who experienced an

improvement in outcomes in the specified segment is 25% above the sample’s average.

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 87

Appendix J: Social and Economic Outcomes

Table J‑1 provides a breakdown of the benefits experienced by each item type and also the potential alternatives

faced by the NILS loan recipients, had the NILS loan not been available. These outcomes and alternatives were

developed through the literature review and stakeholder engagement process with Good Shepherd Microfinance.

Purpose type Potential outcomes experienced

- Savings on grocery bill through bulk-buying perishable food and less

waste

- Savings or increased spending on utilities

Savings on use of Laundromat services

Savings or increased spending on utilities

Motor-vehicle

Repairs/rego

Employment

Avoidance of fines/penalties from driving unregistered/un-roadworthy

vehicle

Savings on public transport

Spending on fuel from driving rather than using public transport

Savings on fuel through repairs improving efficiency of car

Improvement in personal relationships

Increased self-esteem and confidence

Alternative faced Potential outcomes experienced

Reduction in stress and anxiety

Savings on fringe credit for other purposes

Savings on grocery bill (food doesn’t spoil)

Savings on utility bills

Savings on fuel

88

An Outcomes Evaluation of the Good Shepherd Microfinance’s No Interest Loan Scheme (NILS) 89

Improvement in personal relationships (no burden of dependency)

Increased spending on fuel

Increased spending on utilities

Increased spending on fuel

Increased spending on utilities

Increased spending on fuel

Employment

Avoidance of fines/penalties

Improved health (not included as no notable attributed change)

Increased self-esteem and confidence

Within the social and economic model, on an outcome-by-outcome basis, some outcomes generated considerably

more value per loan than others. The asset-building and quality of life outcome generated the most value ($553),

followed by the savings generated by avoiding renting the item ($401) and reduction in stress and anxiety ($313).

While savings on public transport was valued at $136 per person, this was more than offset by an increased spending

on fuel (-$163). Savings on fringe credit costs of $97 (over three years) per recipient could be attributed to the NILS

loan, while the NILS loan also generated economic value through employment of an average of $65 per person.

Outcome Value per loan ($)

90

Report Availability

This report is available on the following websites:

www.goodshepherdmicrofinance.org.au

www.csi.edu.au

www.nab.com.au/microfinanceresearch

Contact

Stephen Bennett, the Centre for Social Impact,

Ph: (02) 8936 0901 or email s.bennett@unsw.edu.au

Dr Gillian McILwain, Manager Research and Policy,

Good Shepherd Microfinance, ph: (03) 9495 9644

or email gmcilwain@gsmicrofinance.org.au

Citation

Bennett, S. Georgouras, M. Hems, L. Marjolin, A. and

Centre for Social Impact (CSI), University of New

South Wales, for Good Shepherd Microfinance

ISBN

978-0-9875848-1-6

Ground Floor

192 – 198 High Street

Northcote

Victoria 3070

T +61 3 9495 9600

F +61 3 9495 9699

E info@gsmicrofinance.org.au

goodshepherdmicrofinance.org.au