Leadership / Operations / Products & Services / Strategy / Jul 15 '16
Reaching Minority Households: A Call To Action!
I sat down with Adam Lee, Filene's Incubator Director, to follow up on the blog post he wrote last week about the ongoing payday lending proposed regulations debate, to go a bit deeper into the issue. I wanted to know what impact Filene’s work with the Reaching Minority Households Incubator and the 5 programs we’re testing with credit unions is having on un- and underbanked populations, which our research has shown disproportionately skews toward African American and Hispanic households. Here’s what I learned.
Holly: What is Filene’s Reaching Minority Households Incubator?
Adam: The Incubator is where Filene tests ideas, products and programs designed to meet unmet consumer needs. We test those ideas in the real world, then share the results of our testing with Filene’s members in the broader marketplace. The goal is to bring the best ideas to the marketplace where they can make a real difference and positive impact in the lives of consumers and all communities.
The Reaching Minority Households incubator stems from Filene’s research in which we’ve discovered there is a deep financial service access gap concentrated within minority households. In the process of conducting this research, we identified 5 of the most promising programs that we believe can help close the financial service access gap; and we're working with credit unions and other financial institutions to test these programs in their daily operations. What we’re trying to find out is the desirability and scale of these programs for a broader marketplace.
H: What are you keeping an eye on in the debate over the proposed payday lending regulations?
A: In addition to the issues I discussed in the last week’s blog post, the one common denominator in all sides of the debate is that there really is a tremendous need for short term credit products. There’s no question about that at all. And simply, the most financially vulnerable populations need access to that credit to help make ends meet while at the same time preventing them from going deeper into debt.
I hope the tone will shift from an “us versus them” debate to a more collaborative discussion—as I said before, all stakeholders agree there is a great consumer need for short term credit that should not put consumers in an endless debt cycle, but rather help them get out of debt.
Now is the right time to have that collaboration. At the end of the day I really believe there is common ground to do what’s right for the most financially vulnerable populations and I really hope that that becomes the overarching tagline that emerges in the debate over the next couple months.
H: I’m in. What should we know and do next?
A: Financial institutions need to know there are solutions out there in the marketplace that other credit unions and banks already have in place to meet that tremendous consumer need for short term credit; solutions that operate within existing rules and are flexible enough to meet the changing regulatory conditions we face right now.
If credit unions need to a place to start, Filene has a lot of great opportunities to try right now to test some of these promising and innovative products.
This is a call to action – let’s not wait to make a positive impact in the lives of consumers that really need our help the most.
H: What is one program or opportunity you’re really excited about?
A: One that I’m most excited about is the Community Microfinance Small Business Lending opportunity.
What it does is combine a small loan with education and marketing services that really enables a prospective small business owner to be successful. It’s not just giving someone money--it enables them to use that money in the smartest way possible, through business education courses that can focus on business planning, marketing, budgeting--all the tools a small business owner needs to be successful. It addresses the holistic needs of a small business owner.
What’s even more exciting is the potential community development impact of this program. The product originator, Alterna Savings Credit Union, reported that over 60% of loan recipients hired another person in their community. That’s a tremendous opportunity to multiply that impact by putting more dollars out in the community for making these small businesses successful.
H: What’s the potential impact of all of this for the underbanked population?
A: Another thing I’ve learned from the social and community services sectors is the tremendous financial stress that families are under right now. By putting these products in the hands of consumers to help them get out of debt and help reduce their financial stress, they can drastically reduce negative health consequences that come with being under duress all the time from managing their finances and other difficult financial situations.
There’s no mistake that credit unions are absolutely critical--an essential piece of the puzzle--in trying to solve poverty and bring people out of poverty.
H: What do you want credit unions reading this to do right now?
A: We need your support, credit unions! We’re still actively looking for credit union testers to join this exciting program—to try it out and help us understand the potential for not only credit unions but the impact on the communities they serve—that’s an essential part of the research and I’m really excited about the promise that a lot of these products have.
For the full-length interview with Adam, hit play now on our most recent Filene Fill-In Podcast:
*Our research and a recent FDIC survey of 40,998 households estimates that 34 million households in the United States are unbanked or underbanked. These challenges are especially difficult for many minority households. The FDIC survey found 54% of black and 46% of Hispanic households to be un- or underbanked, well above the national average of 28%.