Fianna Fáil has criticised the coalition's announcement of a new loan scheme from credit unions and post offices to help people avoid moneylenders.

A range of agencies like St Vincent de Paul and the Money Advice and Budgeting Service (MABS) are set to work on the scheme, which it is hoped could begin in September.

The Personal Microcredit Scheme is being spearheaded by the Department of Social Protection.

It will see loans - of an average of €500 - being approved 'within an hour', with just a few checks on people's credit background.

The money will be rolled out through post offices and credit unions around the country.

Interest rates of up to 12% will be applied to the loans - which compares to rates of up to 188% on loans from some private firms.

A source has told the Irish Independent that the aim is to take moneylenders 'out of the loop', and provide 'hassle-free loans' to low and middle-income families.

The announcement came this morning from the Department of Social Protection - just hours before Fianna Fáil tables a Dáil debate accusing the coalition of having no clear policy to support credit unions.

Finance spokesperson Michael McGrath says any support for credit unions and local post offices is to be welcomed, but suggests the Government has undermined the role of credit unions during their current term:

But the Minister of State responsible for the scheme has defended it - saying it is a vital tool to help people avoid huge interest rates.

Kevin Humphreys has also dismissed claims that the State should not be lending to individual people:

The Money Advice and Budgeting Service is supporting the programme. Spokesman Michael Culloty says people will be able to access funds easily when they go to a credit union: