Porirua community creates its own bank to beat loan sharks

A Porirua community group said members are contributing hundreds of thousands of dollars and breaking free from a devastating cycle of debt by creating their own pool of savings and interest-free loans.

It's a model that's been operating for decades, but experts say it's likely to become more common as daily life gets more expensive.

Ellen O'Dwyer reports as part of Pinch Point - an ongoing RNZ series about living with the cost of living.

Ruth Nonu found herself stuck in high-debt loans after her mother died, and after the end of a bad relationship with two young children.

"I arrived in Porirua eight years ago, broke, broken, in debt."

She said debt collection agencies were ringing her constantly.

"Unknown numbers, I wasn't answering it, I was isolating myself, in a place that I know no one anyway.

"So I was not reading confidential mail, I wasn't answering unknown numbers, and the debt just kept piling up, because the interest...it goes up," Nonu said.

She credits the Porirua Wealth Pool as one major reason her life turned around.

Staff at social agency Wesley Community Action decided to start the pool in 2019 as a way of taking back control of their money and building up savings.

Over six years, members have contributed $291,200 collectively, and loaned out just over $96,000.

Each person saves what they can on a weekly, fortnightly or monthly basis, and there's no minimum amount to contribute, Nonu said.

John Mu has been with the group from the beginning and is now one of its loan signatories.

He said it's taken some of the stress out of saving for him.

"I find it hard to save, with the money going in there, and I don't know it's going there, then I'm surprised I saved that much money after a couple of months."

Mu said the pool is founded on trust - it is essential that members know each other, and that it is only open to a small group of people.

He recommended his sister Catherine come on board.

"I was having a lot of trouble with money. For years, I didn't have a relationship with it. But I trust my brother, and... he said if you want a bit of support, come join.

"And it was non-judgmental, nobody puts anyone down, we have discussions, that is a safe space here."

The group's financial administrator, Bruce Anderson, said interest-free loans are a key aspect of the pool.

Each time a member asks for a loan, the pool is consulted and must agree on it, and if they have questions about the loan, they will discuss it together before granting it.

He said at any one time, there are varying amounts of money up to $19,000 in the pool - with money flowing in and out regularly.

Anderson said a savings pool is operating in Petone, too, though the reasons people need money differ.

He said people in Petone have tended to borrow money for "objects or projects", but are now needing the pool to make mortgage repayments.

Anderson said in Porirua, members take out loans for a range of reasons, including attending tangihanga, family emergencies, and daily expenses.

"Some of it's for basic hand-to-mouth stuff - scary, scary stuff - like I need $200 to do a repair to my car to get to work."

As they pay back the money loaned, they also contribute the same amount in savings, he said.

Savings pools likely to become more common - experts

Information from the Living Economies Trust estimates there are about 100 savings pools operating in New Zealand.

Anderson, whose background is in accountancy, said he expects these savings pools to become more popular as the cost-of-living crisis deepens.

"More and more people are going to be hanging on by their fingernails, more and more people are going to desperately need money for stuff, and things like savings pools are going to become more important because the system is simply people unfriendly - particularly for the bottom 60 percent of the population."

Sam Stubbs, co-founder of Kiwisaver provider Simplicity, agreed.

"I would assume almost certainly the number of these clubs will be growing, and people will be getting together to look after each other.

"Also, there's a younger generation of people who are much more tech savvy, and they're much more open-minded about what sort of financial institutions they get involved with."

Stubbs said banks had been withdrawing from personal loans for decades, leaving predatory high-interest lenders and people searching for affordable forms of credit.

He said the first microfinance bank, founded in Bangladesh in 1983, Grameen Bank, arose out of a savings club.

The temperament of these organisations was vastly different from that of a profit-making bank, trust, and the relatively small size of the clubs was critical.

"Most people would say depositing money and borrowing money is not a pleasant experience; this might be one that really is.

"People may be incentivised to do that because they genuinely enjoy what that money is doing, which is helping out people in times of maximum need."

Now a co-ordinator for the pool, Ruth Nonu, said the pool has given her and others financial security.

"It's really hard to talk about money, and it's really hard to talk about when you're in debt.

"The biggest change that I've seen from our wealth pool members is that they're learning, and they feel really proud when they hear about their savings."

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