Payday loan alternatives are becoming more and more available
In perhaps the most unprecedented change, the Consolidated Appropriations Act of 2021, designed to provide financial assistance during the pandemic, included $ 3 billion specifically for the CDFI Fund, which provides financial assistance to CDFIs and institutions of minorities deposit (MDI). This amount almost equates to what the fund has received in total since its inception in 1994. âThere is a lot of public investment in mission-oriented institutions,â says Betty J. Rudolph, national director of development banking services. of minorities and communities to the Federal Deposit Insurance Corporation. .
Spurred on by the 2020 national race calculation, CDFIs and MDIs – institutions that are often also CDFIs but primarily serve minority communities and have minority leaders – have also attracted hundreds of millions of dollars from some of the most major technological and financial companies in the country. That includes Google ($ 180 million), Bank of America ($ 150 million), PayPal ($ 135 million), and Twitter ($ 100 million). In late 2020, philanthropist MacKenzie Scott made public her donation of more than $ 4.1 billion to 384 organizations, paying particular attention to those operating in communities with “low access to philanthropic capital”, including 32 CDFIs.
The influx of funds means that CDFIs will be able to reach and help more clients. âWe are focused on positioning them to use these new resources to build and grow, to better serve their customers and to create wealth in their communities,â says Rudolph.
In mid-June, the Treasury Department granted $ 1.25 billion in funding to 863 CDFI; 463 credit fund organizations received awards, as well as 244 credit unions.
Capital Good Fund, a Rhode Island CDFI, says it will have a transformative impact on its ability to provide personal and other unsecured loans to its clients. Unlike banks, which Capital Good Founder and CEO Andy Posner says examine pay stubs, credit reports and 1099s to determine an applicant’s eligibility for a loan, Capital Good assesses a banking history, takes into account letters from family or friends and takes into account immigrants who can be paid in cash. The entire process can be done on a smartphone in around 10 minutes, and decisions are made in two days. Small CDFI loans have an APR of 5%, with no application, origination, closing or late fees.
In April, the CDFI Fund opened applications for its new Small Dollar Loans (SDL) program, designed to compete with payday lenders. Under the program, up to $ 13.5 million will be distributed to certified CDFIs to create loans of up to $ 2,500, to be repaid in installments with payments reported to at least one credit bureau. The program aims to provide opportunities for unbanked and underbanked people who traditionally do not have access to the traditional financial system.