Filene Research Institute has generated more than $100 million in loan volume and about $1 million in savings balances through its pilot program, “Accessible Financial Services Incubator,” which is designed to help under-banked Americans gain access to financial services, the company announced Feb. 10.
Filene collaborated with 42 credit unions over the last two years to test five financial products. The portfolio in the program included both lending and savings products and tested ease of use, consumer impact, financial viability and consumer demand for specific financial products.
“Mainstream financial institutions have often failed to help these vulnerable people gain access to affordable credit and other essential financial products,” Filene Chief Research Officer George Hofheimer said in a release. “We sought to find alternative financial products that better meet member needs but are also financially sustainable for credit unions.”
The Consumer Financial Protection Bureau (CFPB) also is trying to address the phenomenon of under-banked or unbanked consumers.
At a recent field hearing, CFPB Director Richard Cordray stated that the CFPB had sent letters to the CEOs of the top 25 banks to encourage them to adopt programs that offer deposit accounts that do not allow consumer to overdraw and incur fees.
The incubator program was possible because of a Ford Foundation grant for $700,000, which was distributed to Filene over a period of 30 months.
Two of the pilot products, “Borrow and Save” and “Non-Prime Auto Loans,” were selected to move to an advanced testing phase. Filene noted that more than $2.9 million was loaned through “Borrow and Save” during the pilot, with participating members saving approximately $900,000.
Established by the National Federation of Community Development Credit Unions, the “Borrow and Save” product provides a small-dollar loan with a built-in savings component that allows consumers to “self-fund” emergency expenses instead of borrowing money. Ninety-four percent of pilot participants stated within a survey that “Borrow and Save” helped in an emergency.
The “Non-Prime Auto Loans” product, which was created by The National Credit Union Foundation, helps lenders offer and manage fairly priced non-prime auto loans to consumers who lack reliable transportation.
During the pilot program, $101 million was loaned across 10 credit unions with an average interest rate of 11.47 percent. Considering that the average borrower credit score was 581, the rates were lower than what most of these consumers would have received elsewhere, Filene stated.