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Alliance for Economic Inclusion (AEI) Baltimore, MD

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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Alliance for Economic Inclusion (AEI) Baltimore, MD

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  1. Alliance for Economic Inclusion (AEI) Baltimore, MD

  2. 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

  3. Affordable Small-Dollar Loan Guidelines • Cost-effective, safe and sound. • Affordability • Underwriting. • Financial education and savings, • Community Reinvestment Act (CRA) credit .

  4. 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

  5. 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

  6. 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

  7. 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.

  8. Foundation Support • Loan loss reserve • Focus groups • Check cashing/payday lending survey • Marketing assistance • Grants for payroll • Grants for loan pool

  9. 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

  10. Current Financial Partners • Suntrust Bank • Provident Bank • BB&T • Municipal Employees Credit Union • M&T Bank • Hamilton Federal Bank • Bank of America

  11. 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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