Low-income individuals in the United States face extraordinary financial challenges: 54 million people do not have credit scores. Without access to affordable products and services offered in the financial mainstream, these people are often forced to rely on payday lending sources.
Financially secure households lead to more prosperous, thriving communities with better workers, more engaged parents, better homeowners and more active community members. Increasing access to the financial mainstream not only provides hard working people with new opportunities, but also boosts the national economy and provides a foundation for a stronger future.
Janis Bowdler, Senior Program Director, Global Philanthropy, JPMorgan Chase & Co., recently spoke with José Quiñonez, Chief Executive Officer of Mission Asset Fund (MAF), a nonprofit with a national program that creates pathways for low-income families to enter the financial mainstream by helping them save money and build credit histories.
Q: What access do low-income families in the United States have to the financial mainstream?
José Quiñonez: Very little. A recent study found that low-income families on average spend $2,412 a year on fees for alternative financial solutions like payday lenders and check cashers. Extremely low-income families are paying 23.5% of their family income on debt payments alone.
To put it simply, without access to mainstream financial products, low-income families cannot build their financial security. They cannot fulfill their financial dreams. They cannot build better and brighter lives.
Q: Why is building credit so important?
José Quiñonez: Having a good credit score is like having a good reputation. Without a credit history you may not get a loan to start a business, buy a car or buy a home. Sometimes you can’t even get a job or rent an apartment. You simply can’t do much.
Q: Tell us about Mission Asset Fund as an example of a program that helps low-income individuals gain access to the financial mainstream.
José Quiñonez: MAF is a nonprofit organization located in San Francisco’s Mission District. Since the day we were founded, we have been dedicated to helping low-income families and communities build credit history and reduce high-cost debt so they can build brighter futures. We do it because we recognize that everybody has something of worth and we create programs to help everyone build on what they have – no matter how small.
Q: How does the Lending Circles Program help make this goal a reality?
José Quiñonez: The Lending Circles Program builds on a time-honored practice common all over the world. Without access to banks and financial services, small communities of people come together and pool their resources. Lending Circles is a social loan program where people lend and borrow money from each other on a rotating basis. Offered at zero-interest and zero fees, MAF services these loans and reports the payment activity to the credit bureaus.