Alliance for Economic Inclusion (AEI)
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Alliance for Economic Inclusion (AEI) Baltimore, MD. Goals of the AEI Small Dollar Loan Program. Build good savings habits Improved credit-risk profiles/Establish personal credit history Eliminate a common source of personal stress Obtain personal financial education

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Goals of the aei small dollar loan program l.jpg
Goals of the AEI Small Dollar Loan Program

  • Build good savings habits

  • Improved credit-risk profiles/Establish personal credit history

  • Eliminate a common source of personal stress

  • Obtain personal financial education

  • Transition from higher cost to lower cost loans


Affordable small dollar loan guidelines l.jpg
Affordable Small-Dollar Loan Guidelines

  • Cost-effective, safe and sound.

  • Affordability

  • Underwriting.

  • Financial education and savings,

  • Community Reinvestment Act (CRA) credit

    .


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Features

  • Targeted to certain markets, such as military customers, employers, LMI customers, the underbanked, new Americans, or customers with a limited or non-existent credit history.

  • Developed to address the regulatory recommendation.

  • The goal is to enable insured institutions to profitably serve an underserved market while helping consumers avoid, or transition away from, reliance on high-cost debt.4


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CRA Consideration for Small-Dollar Loan Programs

  • Under interagency guidance, examiners may favorably consider small-dollar loan programs when evaluating the lending performance

  • The Federal banking agencies have emphasized that programs that transition borrowers from higher cost loans to lower cost loans are particularly responsive to community needs

  • Small-dollar loan programs may qualify for favorable consideration under the community development service criteria


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History

  • The Baltimore AEI was launched on May 1, 2007.

  • Currently has over 40 members.

  • Committees include the Asset Building, New Americans, & Research and Data Collection,

  • Collaborative small dollar loan program.

  • Baltimore Homeownership Preservation Coalition

  • Foundations participation


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Loan Program Model

The program has three (3) components:

  • Loan: Applicant can borrow a min. of $300 up to $1,000, repaid over 12 months at 17.99% APR

  • Savings: Borrower must include in each payment a minimum of $5 savings to be deposited in a savings account.

  • Match: After the loan is fully paid off, the total savings amount is matched with AEI funds on a 1-to-1 basis.

  • Financial Education: Borrower is required to attend two financial literacy classes offered by NHS of Baltimore free of charge.


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Foundation Support

  • Loan loss reserve

  • Focus groups

  • Check cashing/payday lending survey

  • Marketing assistance

  • Grants for payroll

  • Grants for loan pool


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Nonprofit Partner:Neighborhood Housing Services (NHS) of Baltimore

  • Existing Lending platform/underwriting/loan decision making

  • Chartered member of NeighborWorks America

  • Certified CDFI

  • Centrally located

  • Existing partnerships

  • Name recognition

  • History of community outreach

  • Providing Loan Loss Reserve


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Current Financial Partners

  • Suntrust Bank

  • Provident Bank

  • BB&T

  • Municipal Employees Credit Union

  • M&T Bank

  • Hamilton Federal Bank

  • Bank of America


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Issue to be Resolved

  • More Affordable Interest Rate

  • Maximum Saving Amount Qualified for Match

  • Loan repayment Schedule-monthly vs. biweekly

  • Limit on the number of loans a borrower can take

  • Bank Account Set up

  • Incentives for completing educational program

  • Collection and processing of cash payments


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