Borrowing money is hard if you're poor. Chances are you've got a bad credit record, the banks won't touch you and second and third tier lenders charge many times the rates that homeowners can borrow at.
Step in microfinance. Small community organisations have always provided tiny loans at low or no interest to get people back on their feet.
In the past couple of years Kiwibank and BNZ have got behind the concept and a number of more formalised microfinance ventures have launched in partnership with organisations such as the Salvation Army and New Zealand Federation of Family Budgeting Services (NZFFBS).
Names such as Good Shepherd Microfinance, Nga Tangata Microfinance Trust, and others such as Just Dollars Trust, Aviva, Agape Budgeting Service, Angel Fund Wahine Putea, are providing small loans that really do save some people's bacon and keep them from the clutches of payday lenders.
These organisations typically provide NILs (no-interest loans) or low-interest loans often through local budget services. NZFFBS chief executive Raewyn Fox says budget services assess potential borrowers for their ability and intention to repay. To get a no-interest or low-interest loan clients also need to go through budgeting education to ensure they don't repeatedly find themselves in the same situation.
"The budget adviser will have worked with this person long enough to know they are reliable and genuine and able to make the repayments," says Fox. If the loans aren't paid back the whole system falls over.
The community ministries head of the Salvation Army, Pam Waugh, says the Good Shepherd Microfinance initiative, which is still in a pilot phase, has approved 134 low-interest Step Up loans at 6.99 per cent, a much lower rate than borrowers would pay elsewhere, and 64 interest-free NILs. Many of the NILs are provided to people who have exhausted their borrowing opportunities at Work and Income. Common reasons to borrow, says Waugh, are for car repairs or to buy BYODs - tablet or laptop computers - for children to use at school.
Many readers will have no need to borrow money to buy a fridge or get the car repaired. But some will want to give or lend to organisations that do as a way of helping the less fortunate.
Not all microfinance organisations need lending capital from the public. Kiwibank, for example, provides the loan finance for Nga Tangata and Aviva and BNZ has committed $10 million for loans to Good Shepherd, which is being run in conjunction with the Salvation Army and Ministry of Social Development.
A Kiwibank spokesman said the repayment rates have proved high at both of the lenders it supports, which means its capital is recycled and can be lent out to more borrowers.
There are ways that individuals can help with these life-changing loans. Some of the organisations, such as Nga Tangata and Just Dollars, take donations from the public. Donations are tax-deductible.
It's also possible to make ethical investments with Just Dollars and the Angel Fund. The latter has a pool of individuals and community groups who can donate or invest, although at no interest. The Angel Fund also operates a savings scheme for women who have paid off their loans and want to keep saving to accumulate an emergency fund. This adds to the funds it can lend.
To get a no-interest or low-interest loan clients also need budgeting education to ensure they don't repeatedly find themselves in the same situation.
There is a "but" and it's the weight of regulation microfinance trusts labour under. One said: "We already operate on a shoestring budget and the level of compliance we are held to (including but not limited to the Securities Act, Non-Bank Deposit Takers, the Anti Money Laundering/Countering Financing of Terrorism Act ) is onerous. In addition we have to meet compliance and reporting requirements from the Department of Internal Affairs, Reserve Bank and the Financial Markets Authority.
"We also are caught up with the new Financial Reporting Standards [even though] we operate at a level where we should be able to do simple format reporting. However, we have public accountability as people give us cash or assets to hold for them. This puts us into tier 1 full standards, which is geared to those who have over $30 million of annual expenses."
NZFFBS runs a small microfinance operation as well as being a partner in Nga Tangata. Fox says the federation has been waiting two years to hear back from the government about an application to be excluded from anti-money laundering laws. The intention of applying, says Fox, was to work out the methodology of getting an exemption and feed the information to other microfinance organisations, some of which are closing under the weight of regulation.
The NZFFBS first applied to the Department of Internal Affairs, which says the Ministry of Justice is now handling the application. The ministry said it couldn't "comment on cases in the system" to third parties.
The other big problem for microfinance organisations is funding administration costs. Most are run by volunteers. Even so, there are costs, and donors like to see their money going to loans, not administration. Nga Tangata was fortunate, says Fox, in that it has received administration funding from the JR McKenzie Trust and has support from a range of organisations including Presbyterian Support Northern and the Child Poverty Action Group. Members of those organisations donate time.
As well as local microfinance ventures Kiwis can also donate to overseas organisations. For example, Oxfam New Zealand offers Microfinance For A Woman gifts of $80 through its website. The money is lent to women to start micro businesses in countries such as Samoa.
Another option, says Jose George, general manager of Canstar, is Kiva Gift cards. Kiva lets individuals borrow as little as $25 to start a small business. That could be as simple as buying a kid goat, raising it and selling it at a profit, or to buy goods to resell.
Or Kiwis who want to donate to an organisation that provides loans abroad could look into ADC, which offers micro loans in Myanmar and Malawi. Likewise the Auckland Microfinance Initiative provides expertise to microfinance organisations here and overseas rather than lending. Its mission is to empower young people to make an impact through microfinance and gets most of its funds from membership fees, which come from university students and alumni.
Microfinance overseas has received some bad press, especially in India where poor locals were borrowing from more than one microfinance provider and finding themselves unable to service their loans.
Massey University's David Tripe, who researches the sector, says microfinance has proved an effective means to address financial inclusion in countries where only a low proportion of the population have access to finance and banking.
The Children's Commissioner said much the same in a 2013 report in which it concluded that microfinance was a way for low-income Kiwi families to achieve financial inclusion and increase their financial literacy.
In many countries, says Tripe, those without access to traditional banking are able to deposit small amounts of money with a microfinance organisation, which helps them and also enables the organisation to lend to others.
Most microfinance loans in this country are used for household items and other essential personal expenses. However, Good Shepherd and Just Dollars will lend for business or employment purposes. Just Dollars has lent to hundreds of Cantabrians for everything from set-up costs to tools and leases.