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Bank On A Great Opportunity

Posted by Wendell Brock on Wed, Oct 13, 2010

Friends,

As many of you know I have been serving as the Executive Director of CREED – the Center of Resources for Economic Education and Development these past several years.  This year we have done some exciting things with the help of our board and many of you. 

We have shipped over 1000 humanitarian school kits to children in need so they can continue their education in Haiti and Belize, and we are preparing a shipment to Uganda.  We helped start a micro business in Uganda at an orphanage – we provided the funds to start a pultry business, we helped build a chicken coop stocked with baby chicks and feed.  This chicken coop, which will hold 500 chickens, will help provide enough money in the future to send the 27 children to school as well as help them have more food to eat.  We are starting a micro-business lending project in Belize which will provide small dollar loans to several micro business owners, after approval of the borrower’s business plan and education training.

We now have a very unique opportunity: Just Give, a non-profit company, which offers non-profits such as CREED and thousands of other non-profits an easy way to donate on line, is offering a matching gift to celebrate their 10 year anniversary.  For each donation of at least $10.00 they will send us an additional $10.00.  This offer is only for donation made up to October 20th.

A school kit cost $10.00.  So for every ten dollars donated we can send two children to school instead of one!  The micro business loans will be about $400-$500 each; we are working towards four loans per month in the next 12 months.

Please make your donation by following the following link and then filling in the boxes with the following information as shown below:

www.justgive.org/10years (this special link MUST be used for the matching funds)

CREED

McKinney

TEXAS

75071

Tax ID: 87-0586965

The web page should look something like this below:

Charity Name or Keyword

City

State

Zip Code

Tax ID / EIN

 

On behalf of CREED and the growing number of people we serve, we thank you very much your support, it is GREATLY APPRECIATED.  And we wish you the best as we press forward during these difficult times to strengthen families and homes, through self-reliance.

Thank you,

Wendell Brock
Executive Director, CREED

Please join me in sending more children to school and also help finance a micro-business with a small donation.

CREED is a registered 501(c)3 nonprofit and all donations are tax deductible.

Topics: Bank, Small Dollar Loans, Loans, market opportunity, CREED

Small-dollar Loan -- Pilot Study Results Are In

Posted by Wendell Brock on Wed, Jul 07, 2010

Creation of Safe, Affordable and Feasible Template for Small-Dollar Loans

Small-dollar loan pilot

The Small-dollar Loan Pilot Project was a study to find if it is profitable for banks to offer small-dollar loans to their customers. Small-dollar loans were created as an option to expensive payday loans, or heavy fee-based overdraft programs.  This study opened up opportunities for small-dollar loans to be more affordable.    

Small-dollar loans have created a way to maintain associations with current costumers and opportunities to attract unbanked new customers.

Goals: The main goal the FDIC had in mind for small-dollar loans was for banks to create long-lasting relationships with their customers using the product of small-dollar loans. Many banks had another goal in mind in addition to the FDIC’s goal. Some banks wanted to become more profitable by producing the product while other banks produced the product to create more goodwill in their community. 

Where and how the study started: The FDIC found 28 volunteer banks with total assets from $28 million to nearly $10 billion to use the new product, offering of small-dollar loans. All were found in 450 offices in 27 states. Now, in the pilot study there have been over 34,400 small-dollar loans that represent a balance of $40.2 million. 

Template for small-dollar loans: Loans are given with an amount of $2,500 or less, with a term of 90 days or more. The Annual Percentage Rate is 36 percent or less depending on the circumstances of the borrower. There are little to no fees and, underwriting follows with proof of identity, address, income, and credit report to decide the loan amount and the ability to pay. The loan decision will usually take less than 24 hours. There are also additional optional features of mandatory savings and financial education.  

Long loan term success: Studies found that having a longer loan term increased the amount of success in small-dollar loans. This allowed the customer to recover from any financial emergency by going through a few pay check cycles before it was time to start paying the loan back.  Liberty Bank in New Orleans, Louisiana offered loan terms to 6 months in order to avoid continuously renewed “treadmill” loans.  The pilot decided that a minimum loan term of 90 days would prove to be feasible.

Often the bank will require the customer to place a minimum of ten percent of the loan in a savings account that becomes available when the loan is paid off.

Delinquencies: In 2009 the delinquency rates by quarter for small dollar loans were 6.2 in the fourth, 5.7 in the third, 5.2 in the second, and 4.3 in the first.

How to be most successful when producing small-dollar loans: The FDIC is reporting that the participating banks have found much success through small-dollar loans. But the most success came from long term support from the bank’s board, and the senior management. It is critically important to have strong support coming from senior management.

The small-dollar loan pilot has proven to be a great addition to bank’s loan portfolio, the FDIC hopes that it will spread to banks outside the pilot.

Profitability may depend on location: The FDIC has found the most successful programs are in banks located in communities with a high population of low- and moderate-income, military, or immigrant households. Banks in rural areas that did not have many other financial service providers also saw feasibility because of the low amount of competition.

Improving performance: Automatic repayments are a way to improve performance for all products not just the small-dollar loans.

 

 

Topics: Bank, FDIC, banks, Pay Day Loans, Banking, Bank Risks, Small Dollar Loans, Bank Executives, Loans, market opportunity, bank customers, Bank Asset

Talk Shop with the FDIC: Open Meeting to Discuss Unbanked Customers

Posted by Wendell Brock on Tue, Feb 03, 2009

The FDIC Advisory Committee on Economic Inclusion (ComE-IN) will hold a public meeting this week to discuss ways that the banking community can reach out to currently underserved households. The meeting will be held on February 5, 2009, between 8:30 a.m. and 4:00 p.m. in the FDIC Board Room; it will also be viewable via webcast at http://www.vodium.com/goto/fdic/advisorycommittee.asp.

 

The topic of underserved or “unbanked” customers has been a prominent discussion point in the banking industry for several years. These are individuals or households that rely on non-banking institutions, such as check-cashing stores or even retailers, to conduct regular monetary transactions. Generally, these unbanked customers absorb considerably higher transaction costs than if they maintained a traditional depositor relationship with a bank.

 

Sizeable market opportunity

The Center for Financial Services Innovation estimates that there are nearly 10 million unbanked households, spending roughly $13 billion per year on non-bank financial transactions. Clearly, this represents a sizeable market opportunity for traditional banks. Unfortunately, understanding how to reach these customers with a compelling service offering continues to be something of an unsolved mystery.

 

Research indicates that many of the unbanked group have previously had traditional banking relationships. At some point, these individuals became disgruntled with the banking system and chose to leave it voluntarily. Key Bank learned this in 2004 through a series of focus groups—respondents indicated they’d had bad experiences with banks, often involving high fees for minor transactions.

 

A research report based on the PaymentDynamics 2007 Preferred Payments Study makes a similar conclusion, but adds that the unbanked group is not one homogenous demographic, but “a collection of smaller segments, each with its own unique demographics and financial characteristics.” That conclusion supports the notion that effectively pursuing unbanked households as a customer segment demands a multifaceted approach. The PaymentDynamics report is available here: http://www.edgardunn.com/uploads/100030_english/100243.pdf.

 

Reaching out, improving access

Both the banks and unbanked consumers stand to benefit from the development of products and services that will appeal to this customer group. The customers will save money on their financial transactions and begin moving down a more traditional path of wealth-building. Banks will enjoy a larger customer base, and many of those new customers can be directed into conventional banking services over time. The challenge lies in creating products and services that meet the bank’s profit hurdles while addressing the needs and lifestyles of this customer group.

 

To learn more about this underserved market and the role it will play in the banking industry going forward, log-on to the FDIC Advisory Committee meeting webcast on Thursday. Scheduled discussions will include an overview of the FDIC’s Unbanked Survey and a review of the banking industry’s successful efforts to date in reaching the unbanked customer.

Topics: FDIC, market opportunity, unbaked, public meeting, FDIC Advisory Committee

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