Dutch city wants to forgive debts of 40 poor families, but finds it difficult to find volunteers

Dutch city wants to forgive debts of 40 poor families, but finds it difficult to find volunteers

Arnhem is trying out the social experiment to find out what it means in practice to give households with debts a new start

In Dutch the word is debt means both ‘debt’ and ‘debt’ and that says a lot about how many in society feel, especially towards those who fail to meet their financial obligations. A Dutch city called Arnhemis however willing to try something new with a daring experiment that the debt forgiveness for 40 to 60 of the poorest local families only to see whether this will encourage the beneficiaries to improve their economic situation.

The experiment, which focuses on the low-income neighborhood of Immerloo II in Arnhem, started in April and has a time frame of two years. The essence of the experiment is actually quite simple: households are given the opportunity to all their debts taken over by the city without any expectations in return.

Surprisingly, however, the enthusiasm from low-income families has not been as great as expected, despite the unique opportunity for them to turn their lives around. So far, only 10 families have signed up for the trial, although discussions are underway to recruit more volunteers.

Breaking the debt spiral

The municipality of Arnhem justifies its project with the argument that people who build up a lot of debt and end up in a suicidal situation can no longer get out of it. impose additional costs on the larger society, such as the higher medical and social costs associated with chronic poverty.

The experiment, however, costs the taxpayer nothing. The €700,000 budget used to buy up the families’ debts was raised through charities. The city’s social services department found that major creditors, such as utility companies and insurance companies, are willing to give a discount if they can receive a lump sum, which is how Arnhem has agreed to pay on behalf of the debtors.

Why then is the interest rate of the debtors themselves so low? It is said to have to do with reduced trust and increased distrust of institutional authority.

The reluctance could also be linked to a recent childcare allowance scandal, in which thousands of people were accused of fraud and forced to pay back thousands of euros even though they had done nothing wrong.

People in debt may have become too accustomed to the idea that nothing in this life comes without conditions, and so this attitude carries over to the otherwise groundbreaking initiative.

To qualify for debt restructuring, families must owe a large amount, have more than one creditor and have children. Other Dutch cities are reportedly following the Arnhem trial with interest and, if successful, it could form the basis for a new approach to combating poverty.