|A Safe, Affordable, and Feasible Template for Small-Dollar Loans|
|Amount||$2,500 or less|
|Term||90 days or more|
|Annual Percentage Rate (APR)||36 percent or less|
|Fees||Low or none; origination and other upfront fees plus interest charged equate to APR of 36 percent or less|
|Underwriting||Streamlined with proof of identity, address, and income, and a credit report to determine loan amount and repayment ability; loan decision within 24 hours|
|Optional Features||Mandatory savings and financial education|
I’m really interested in working with a non-profit. I know I am drawn to women’s issues and i’m not bad with finances, so that’s a start. In 2008 there was a pilot program, which looked at how large corporate banks might be used to give small dollar loans. This would help replace the pay day lenders who essentially steal money from borrowers in need. Can you imagine paying 500% interest on a loan you used to pay your water bill? Neither can I.
One of the things I love most about the program is that it not only lowers the risk to the borrower, but it also provides financial literacy education. There have been so many times when I was volunteering in the community and felt like what we were doing was too temporary- because there was no education to support whomever we were helping once we were gone.
While listening to NPR I heard about a non-profit West End Neighborhood House. This group handles the paperwork and approval process of small loans with its program Loan Plus. While the bank, who participated in the FDIC pilot program, handles the actual loan itself. West End promotes self-sufficiency, something that I don’t think enough non-profits actually do for their recipients. You can also view the groups complete financial records on-line, which is legit. The organization has kept management costs below 12% for the past 15 years (1/3 of the national standard of 35% set by the Better Business Bureau). To put it into further perspective, 12% is on par with the United Way.
I wouldn’t know the first thing about approaching Bank of Oklahoma with a similar strategy to improve the financial literacy of it’s potential future patrons. BOK’s website is a little boring, but it doesn’t look like anything like this type of lending is going on once you get the personal loans page. Ideally I think you could join something like Mustard Seed, (except less about community organizing and with an open dialogue about its finances) and mix it with something like the Loan Plus program and throw in a little Francis Tuttle. Promoting self sufficiency, education, and skills for future success.
What is your favorite non-profit? Or an idea you have for something lacking in your community?