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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

Banks Are Allowed To Compete With Pay Day Lenders

Posted by Wendell Brock on Wed, Jun 20, 2007

The FDIC wrote some guidelines which will allow and encourage banks to offer "small dollar loans" to consumers in an effort to help them compete with pay day lenders and other businesses that offer these types of loans.


The Federal Deposit Insurance Corporation (FDIC) today issued final guidelines to state nonmember banks encouraging them to offer affordable small-dollar loan products and to promote these products to their customers. FDIC-supervised institutions that offer products which comply with consumer protection laws, and are structured in a responsible, safe and sound manner, may receive favorable consideration under the Community Reinvestment Act (CRA).


"Despite the tremendous demand for small-dollar, unsecured loans, most products available in the market come at a high cost to consumers," said FDIC Chairman Sheila C. Bair. "Banks have the tools and infrastructure to create products meeting this need that are beneficial to both the banks and their customers."

Key features of a preferred small-dollar lending program include:

  • Loan amounts of up to $1,000;
  • Amortization periods longer than a single pay cycle and up to 36 months for closed-end credit, or minimum payments that reduce principal (i.e., do not result in negative amortization) for open-end credit;
  • Annual percentage rates (APR) below 36 percent;
  • No prepayment penalties;
  • Origination and/or maintenance fees limited to the amount necessary to cover actual costs; and
  • An automatic savings component.


Topics: FDIC, Pay Day Loans, Small Dollar Loans, Bank Policies

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