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Bringing A
Strong Financial Foundation to Detroit

Sally Durdan

Too many people are trying to build a future on an unstable financial foundation. Detroit is a case in point.

A 2016 study by the Urban Institute shows that financial health is critical in promoting stability and resiliency in Detroit’s communities. However, many have difficulty achieving — or maintaining — financial health due to barriers to affordable credit, high levels of debt and poor credit history.

Sound financial health is the foundation on which strong families and communities are built. When this foundation is solid, the dream of owning a home, starting a business and building a nest egg can become a reality. That is why, as part of our model of investing in the key drivers of economic opportunity, JPMorgan Chase is supporting nonprofit partners that promote financial health, helping them scale their proven models and supporting efforts to identify and expand the reach of digital financial services.

An example of this strategy is our partnership with The Mission Asset Fund (MAF), a San Francisco-based nonprofit that is a pioneer in social lending. By formalizing the social lending model through a technology-based platform, MAF helps individuals who have been traditionally excluded from the financial system to gain access.

According to the Urban Institute, in Detroit:

68%
of residents have delinquent debt

19%
have healthy credit

66%
have a subprime or no credit score

Through a three-year, $1.5 million grant, JPMorgan Chase is helping MAF expand its Lending Circles program to several new cities, including Detroit. The success of MAF exemplifies how innovative technology solutions can be scaled to boost financial health around the world, helping to create a solid foundation that can make an enormous difference to families and communities.

A Model That Works

In the past, efforts to help individuals and families become more financially secure focused narrowly on financial literacy, which often meant attending an informational workshop or reading a brochure that explained the basics of finance. “When we started 10 years ago, the conventional wisdom was that poor people didn’t know enough, and we needed to teach them to change their ways,” said José Quiñonez, CEO of Mission Asset Fund.

Quiñonez didn’t agree with this limited assessment. Instead, he looked for the positive ways immigrant communities handled their finances. One thing he noticed was that they often came together to lend each other money. This was the idea behind MAF’s Lending Circles, a unique social lending product that draws on this cultural practice.

The premise of Lending Circles is straightforward: After taking an online financial training class, a participant can join a Lending Circle, which is comprised of six to 10 people. Together, they decide on an amount for their group loan. Every month, each member contributes a payment and takes turns receiving a zero-interest loan. By adding a promissory note and reporting to all three major credit bureaus, Lending Circles empowers participants to establish credit scores or improve damaged ones. For many, this is a first crucial step to their long-term financial goals.

“The financial lives of poor people are complex,” said Quiñonez. “Instead of looking at complexity and shying away from it, we can answer people with innovation and technology, delivering products that are true to their reality.”

Through JPMorgan Chase’s commitment, MAF is able to expand its technology-based Lending Circles platform to other organizations. Around the country, the platform is supporting 53 — and growing — nonprofit partners, with near-limitless capacity to accommodate future partners as the network expands.

One of these partners in Detroit is Southwest Solutions, which provides a wide range of community programs and services to Detroit residents, including financial coaching, entrepreneurial training and homebuyer counseling. Now Southwest Solutions has integrated Lending Circles into its program offerings, with the goal of helping its clients work toward greater financial stability.

THREE STEPS TO A LENDING CIRCLE

Lending Circles helps participants to establish credit scores or improve damaged ones.

Step 1:
Members take turns receiving zero-interest loans.

Step 2:
Each member contributes a payment each month.

Step 3:
Payments are reported to all three major credit bureaus.

“Too many Detroit residents have no credit history or very low credit ratings,” said Hector Hernandez, executive director of Southwest Solutions. “Lending Circles will enable our clients to build their credit so they can realize their long-term financial goals, such as becoming homeowners, entrepreneurs and college graduates.”

As MAF rapidly expands, it is learning the nuances of choosing impactful partners. JPMorgan Chase’s wide reach has helped open doors for the organization, and shows the value of strong collaborations: “Our model depends on trust and building relationships,” said Quiñonez. “It’s not about us setting up an office where we don’t know anybody. Chase has been that connection that has allowed us to expand. It’s been a team effort.”