Finance/Micro-Loan Programs

Micro-loans

This topic contains 18 replies, has 9 voices, and was last updated by  Irene Frechette 2 years, 6 months ago.

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  • #234

    Judith Coleman
    Participant

    This is my very first blog ever! Hopefully, I will do it correctly.

    My conference, SVdP of Corpus Christi Church in East Sandwich MA, was asked on several occasions to help with non-traditional Vincentian needs – car repairs, back taxes, tuition, etc. As trustees of the money donated to us, we were reluctant to grant we requests. We had heard of the payday loan program and decided to see if we could modify it to our purposes.

    The most difficult part of the process was to find a financial institution to partner with. Most banks told us that the cost to them to grant these loans was not worth the effort. Luckily we found a credit union that was looking for a community outreach program.

    To begin, our conference opened a $2,000 savings account – as New Englanders we are very fiscally cautious – a little over 2 years ago. When we found a suitable test case client, we notified the credit union of the person’s name, amount being borrowed and the monthly payment that would fit the client’s capacity to repay. Our contact person would go to the credit union and sign a guarantee for repayment in case of default on the client’s part. Then the client went to the credit union and filled out loan request forms like any other credit union customer. The loan request does not go to the loan committee and the client receives a check that day. The client is asked to open a checking or savings account with the credit union.

    To date we have put $14,500 into our savings account. We have made 6 loans totaling $5,200 and have almost $11,500 available to loan (we added $10,000 to the account in June). There have been no late payments by our clients and the clients are establishing/re-establishing their credit because the loans are in their name.

    So how do we decide who gets to take out a SVdP secured loan? The visiting Vincentian identifies a suitable candidate as defined as one who has the moral and financial ability to repay the loan – if they default, the balance of the loan comes out of our account. Our loan committee – 3 Vincentians with backgrounds in finance – looks at the recommendation and makes the final decision, often after posing a few questions to the visiting Vincentian. Once the okay is given, the process can be completed in a day or two.

    I hope this has been helpful. Please contact me if you have any questions. Judy Coleman

  • #323

    Joe Cooper
    Participant

    We are in the process of setting up a loan program as well and found a bank that would support us, but their checking account costs $5 per month unless the client has a minimum balance of $750 throughout the month. I would think that most of our clients wouldn’t qualify for the fee waiver, otherwise they wouldn’t be approaching us for help. There is a savings account that has no fee. Do you think that either the checking account or savings account would be a viable option?

  • #324

    Judith Coleman
    Participant

    The credit union we use actually said that they wanted the person borrowing the money to establish “an account” with them. Check to see if your financial institution will accept a savings account in lieu of a checking account. If so, have your client borrow an extra $50 or $100, suggesting that they try to add a little to that account each month.

    You might also that you ask your bank if they could/would waive the $5/month charge as the people you are introducing to them, more than likely, do not have a relationship with any other financial institution and could end up being a good customer of theirs in the future.

  • #325

    Andrew Wilson
    Keymaster

    This may be a silly question, but do you need the banks backing or are you able to be the finance company in this situation? With a fund balance like that, you could make a few small loans on your own. I see it similar to the Habitat for Humanity model where habitat is the finance company to the homeowner, and the homeowner is paying habitat back, no a bank (in most cases). There is an opportunity here for a little social innovation (see ashoka micro loans Click here for Ashoka Micro Finance) where your conference might be able to change a very minimal fee, but that fee would help replenish the fund itself.

    • #412

      Jack Murphy
      Participant

      Andrew,

      The Atlanta Archdiocesan Council took two years to find a financial institution to partner with. We have 74 conferences and wanted to have a partner that would cover as much territory we could without having to reinvent the wheel every time we brought on a new conference.
      We went to this great length so we could get people a relationship with a financial institution and back into the credit reporting system. We had the money to do the loans on our own, but that would have not helped them as much in the future as having a place to cash checks and to start working on their credit. Neither of these needs are on the front burner for most of the people I visit. However, it’s getting harder and harder to get back to self-sufficiency without a credit score and a place to bank.
      Hope that helps.

      • #445

        Andrew Wilson
        Keymaster

        Jack,
        Very helpful response, thank you!

  • #383

    Susan Megliola
    Participant

    Judith, your post has been very helpful. I am working with Joe Cooper in Santa Barbara District (CA) and have been using information from Belleville SVdP Council, IL. to model our LILLI (low interest loans for low income) program. We hope to start budget classes in January with small loans offered soon after.

  • #402

    Irene Frechette
    Moderator

    Here in Santa Barbara CA District Council, we are working on a micro loan program modeled after the LILLI (low interest loans for low income) program at the Belleville IL Council. Pat Hogrebe, Director, has developed and successfully run the program since 2009 in partnership with a Catholic Credit Union.

    When I was at National in Providence, I heard someone from Austin, TX say that they were offering micro loans within their Council District.
    In order to get the “blessing” from LA Council to proceed, they would like information on others offering loans.
    Blessings and thanks for your help,
    Susan Megliola

  • #403

    Irene Frechette
    Moderator

    This is a posting from Joleen in Austin, taken from an email
    Susan, yes the Austin Council has a very successful Predatory Loan Conversion program, PLCP, that we started in 2014. I am not the expert on this but I think that is different from a micro loan you mentioned.

    I am copying the folks who have were the brains behind the concept. Matt Pogor heads the committee and is primarily responsible for its success. Stacy Ehrlich is our Executive Director. Either of them will be a much more accurate resource for the nuts and bolts of starting the program than I am.

  • #404

    Irene Frechette
    Moderator

    Susan – just a quick note – I know that Atlanta just started a loan program modeled after Austin’s and Fort Worth has hosted Matt for a presentation and training with hopes to start in early 2016. Dallas has been doing an Austin-based program for about a year. We also have several Texas area organizations (non-Society) we have spoken to about the program but aren’t sure the status of implementation.

    Thanks, Stacy

    Stacy W. Ehrlich, CFRE
    Executive Director
    Society of St. Vincent de Paul
    – Diocesan Council of Austin

  • #405

    Judith Coleman
    Participant

    Our micro loan program is located on Cape Cod, an area not often associated with severe poverty or payday loans. Our poverty is the kind that sneaks up on a family, living paycheck to paycheck.

    Often our clients “learn” that you don’t have to pay a credit card off in full every month and the slide accelerates. We recently set a client up with a loan that paid off 2 credit cards that were charging in excess of 22% interest. The clients were timely in making the monthly minimum payments but making little progress. Thanks to the micro loan program our clients are paying $60/month less and will save more than $1,000 in interest charges the first year alone. By the way, these clients do have budgeting sense and found themselves in this position due to an unexpected family emergency which caused a loss of employment.

    I am sharing this to show that these loans can be used for more than just buying something or paying for repairs or training to assist clients.

  • #603

    Rozanne Veeser
    Participant

    Fort Worth District Council started the Pilot Program for the Mini-Loan Conversion Program on May 2, 2016.
    We see this as three objectives: 1) Move from a high interest loan to a low interest loan where the work is done by a participating financial institution and the Council provides collateral in a “shared secured account”. 2) Start a savings account for the borrower with their $5.00. 3) Provide financial coaching and budgeting help.
    Thanks to great help from both Austin (Matt Pogor, Stacy Erhlich, Katie Conyers) and Dallas (Joe Manogue, Mike Pazzaglini, Tom Crowe). We borrowed the forms from Austin and adapted a Power Point Presentation from Tom Crowe.
    We are talking to a small group of parish social outreach ministers, Catholic Charities professionals, and fellow Vincentians on May 19th. There may be a possibility of a collaboration in order to reach more of the community.

    Rozanne Veeser
    President
    Fort Worth Council

  • #604

    Tom Mulloy
    Participant

    Hey Roxanne and all,

    I am Tom Mulloy, the new National Director of Poverty Programs For the Society.

    Relative to your objective #3: the Consumer Financial Protection Bureau produces a lot of financial literacy resources for use by community groups. Check out their curriculum for front-line staff and volunteers: http://www.consumerfinance.gov/your-money-your-goals/

    Additionally, CFPB has tons of topic-specific materials in their “Adult Financial Literacy” section: http://www.consumerfinance.gov/adult-financial-education/

    Sorry if this is repetitive. Feel free to reach out with any questions.

    Tom
    tmulloy@svdpusa.org

    • #611

      Rozanne Veeser
      Participant

      Dear Tom,
      Yes, I checked out the CFPB website and found several
      very helpful items to download. Next week, I am talking to
      the Catholic Charities Financial Literacy person, Amanda,
      and also to Center for Transforming Lives person, Kim, to see
      what they provide and what they use. We are developing the
      financial coaching element during the Pilot Program so we are
      ready in October for all our conferences to join the program.
      Rozanne Veeser
      rosev74145@yahoo.com

  • #612

    Jack Murphy
    Participant

    Several years ago, our conference had a person who was certified in the FDIC financial literacy materials (https://www.fdic.gov/consumers/consumer/moneysmart/). We offered an 8 week program, on evenings in our church, complete we baby sitting. We partnered with the local community agency and send direct mail to hundreds of people that had received help from both our organizations over the years.
    The most we ever had was 8 participants and some weeks we had to cancel because no one came.
    We felt that location and duration might have been the problem. So, we boiled the 8 weeks down to the issues we thought were most important (based on the people we visited) and took it to the apartment complex where we wrote the most checks for rent assistance. The apartment manager was glad to help, since we helped her so often. She knocked on doors and mandated that some folks come.
    We did three modules, offered to small breakouts, with 20 minutes of material & 15 min. of discussion, and rotated all three groups. In 2.5 hours, on a weeknight, we spoke with 25 people, one of which said she was going to stop the bankruptcy filing she was working on. Her comment was “I guess I just need to buckle down and budget.”
    Just as in a home visit, the relations we might encourage, during a training like this, are just as important as budgeting tips and warnings about car title loans.
    Good luck,
    Jack
    jack.murphy@att.net

  • #672

    Bill Meath
    Participant

    We are contemplating a micro=loan program to compliment our Getting Ahead program. I have an appointment with a local bank who MAY be interested in cooperating with us. Who could I contact to discuss pitfalls, processes and administration? I would only need a short discussion to get a better understanding before the appt. w / bank.

    Thank you and God bless.

    • #673

      Susan Megliola
      Participant

      Santa Barbara District (LA, California) Council has a low interest loan program LILLI in it’s first pilot program year. Finding a lending partner was a huge challenge. No traditional banks or credit unions wanted to partner but we found a non-profit small business lending group who welcomed our project. WEV (Women’s Economic Ventures) in Santa Barbara are a US Treasury Certified Lender and can thereby give a positive credit score to our participants upon completion of their loan guaranteed by SB District SVdeP funds.
      Other programs have had success with credit unions but we did not and we searched for about a year before forming the WEV relationship with 3 loans funded easily.
      Prayers that you will have a good meeting with the bank and push ahead with this great opportunity for those we serve.
      Busan Megliola

    • #674

      Rozanne Veeser
      Participant

      My email is attached to the messages I posted earlier.
      Please email me with some questions and we can communicate
      about the Fort Worth program.
      Rozanne Veeser
      rosev74145@yahoo.com

  • #675

    Irene Frechette
    Moderator

    Judith Coleman in the NE Region, Fall River Diocese has experience with
    a micro-loan program. I will have her respond

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