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Funding for Building Financial Capability services through Budget 2020

In Budget 2020, the Government invested $39.2 million over four years in Building Financial Capability (BFC) services. The investment is to address cost pressures; support more sustainable BFC services; respond to the additional demand of individuals and families/whānau who are expected to need help from BFC services as a result of the economic impact of COVID-19; and expand specialist debt solution services while a national service is developed.

The investment includes:

  • $9.7 million over four years to recognise the increasing costs of delivering BFC services and address immediate cost pressures to assist with continued delivery of BFC services.
  • $25.2 million over two years, as part of the Covid Response and Recovery Fund (CRRF), to support BFC services to become more financially sustainable and respond more readily to increased demand resulting from COVID-19.
  • $4.3 million over two years as part of the CRRF for the expansion of specialist debt solution services to address problem debt, including specialist debt support and debt consolidation loans or help with variations to high-cost loans.

The need for increased funding

The investment acknowledges the need for increased funding to:

  • Enable the strengths-based and whānau-centred model of BFC services, and
  • Support recruitment, retention and professional development of a skilled workforce to deliver services.

BFC services are seeing individuals and families/whānau who are facing increased complexity of hardship and debt. The next two years will be especially critical due to the expected increase in hardship as a result of the COVID-19 economic downturn. BFC services are likely to see a new cohort of people and families in the recovery from COVID-19, who may not have experienced hardship or needed government support before. It is likely there will also be an increase in debt-spirals and insolvencies, putting more pressure on people and exacerbating any family violence and/or mental health issues.

Factsheets on the funding through Budget 2020 can be found here. Information on the breakdown and allocation of funding is provided below.

High level breakdown of Budget 2020 funding

The table below illustrates the breakdown of Budget 2020 investment in BFC services across four years. This is all new funding.

($m)

20/21

21/22

22/23

23/24

Total

Cost pressure funding

2.425

2.425

2.425

2.425

9.700

CRRF: supporting sustainable services and increased demand

11.402

13.810

0.000

0.000

25.212

CRRF: expanding specialist debt services

1.681

1.981

0.000

0.000

3.662

Service design and implementation

0.330

0.330

0.000

0.000

0.660

15.838

18.546

2.425

2.425

39.234

Please note funding for service design and implementation in the above table is MSD departmental funding, to support the development of national debt solutions service. The remaining Budget 2020 funding is for service delivery.

Allocation of funding by service

The investment through Budget 2020 includes funding for the following services:

  • Financial Mentoring – one-to-one support empowering people to achieve their goals, including reducing debt, and making connections to support.
  • MoneyMates – peer-led support for people to learn and share together as a group.
  • BFC Plus (Kahukura service) – intensive support for people who are hard to reach or with complex needs.
  • Micro-finance services – affordable credit for people at risk of unsustainable debt and hardship.*
  • Specialist debt solution services – specialist debt support to develop ethical debt restructuring and repayment agreements between debtors and creditors, and debt consolidation loans or help with variations to high-cost loans.*

*Additional funding for micro-finance services and specialist debt solution services are funded through the CRRF.

Current allocation

All cost pressure funding and $5.7 million of the CRRF funding for sustainable services and increased demand has been allocated to support the sustainability of Financial Mentoring, MoneyMates and BFC Plus services. This is applied as an increase in rates to these services. The remaining $5.7 million of this funding will be allocated to support workforce development for these services and address demand, including for micro-finance services.

The allocation of Budget 2020 funding for BFC services in 2020/21 is as follows:

BFC service ($m)

Cost pressure

CRRF

Total

Financial Mentoring / MoneyMates

2.170

5.590

7.760

BFC Plus (Kahukura service)

0.255

0.150

0.405

Micro-finance services

-

TBC

TBC

Specialist debt solution services

-

2.011

2.011

Total

2.425

7.751

10.176

Allocation of the remaining funding

To determine the allocation of the remaining CRRF funding for sustainable services and increased demand in 2020/21, between July and September 2020 MSD will engage with FinCap on how to best meet training expectations and address demand. Together we will continue to monitor the impacts of COVID-19 and finalise an allocation approach for the remaining funding.

The approach to BFC services and allocation of funding from 1 July 2021 onwards will be decided over the next 12 months as we develop and implement the commissioning strategy for BFC services.

MSD is committed to working with FinCap and the sector to develop and implement the commissioning strategy. To be kept informed as this work progresses, please subscribe to the MSD BFC sector update.

If you have any questions, please email the BFC team: Financial_Capability@msd.govt.nz.

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