Filene Research Institute announced it has generated more than $100 million in loan volume and about $1 million in savings balances through pilot programs that seeks to help under-banked Americans gain access to financial services.
Over the past two years Filene has collaborated with 42 credit unions to test five financial products through its "Accessible Financial Services Incubator," which is designed to find solutions to the growing phenomenon of Americans who have no access to financial services.
The program was possible due to a Ford Foundation grant for $700,000, which was distributed to Filene over a period of 30 months.
The portfolio in the program included both lending and savings products.
The incubator, Filene noted, tests the "ease of use, consumer impact, financial viability, and consumer demand" for specific financial products.
"Mainstream financial institutions have often failed to help these vulnerable people gain access to affordable credit and other essential financial products," said George Hofheimer, chief research officer for Filene. "We sought to find alternative financial products that better meet member needs but are also financially sustainable for credit unions."
Two of the pilot products, "Borrow and Save" and "Non-Prime Auto Loans," were selected to move to an advanced testing phase based on each product's consumer impact, ease of use/implementation, marketplace demand, and positive return on investment.
Filene noted more than $2.9 million was loaned through "Borrow and Save" during the pilot, with participating members saving approximately $900,000.
Established by the National Federation of Community Development Credit Unions, "Borrow and Save" increases consumers' economic security by providing an affordable small-dollar loan with a payment term that makes sense for them. A built-in savings component also enables consumers to "self-fund" emergency expenses instead of borrowing money. Ninety-four percent of pilot participants surveyed agreed that "Borrow and Save" helped in an emergency.
The other product "Non-Prime Auto Loans" — created by The National Credit Union Foundation — helps lenders offer and manage fairly priced non-prime auto loans to consumers who lack reliable transportation.
During the pilot program, $101 million was lent across ten credit unions with an average interest rate of 11.47%. Considering that the average borrower credit score was 581, the rates were lower than what most of these consumers would have received elsewhere, Filene stated.
"Both 'Borrow and Save' and 'Non-Prime Auto Loans' are ready for broad in-market use," said Andrew Downin, managing director of innovation for Filene. "Each program is poised to have tremendous consumer impact, but we first need mainstream financial institutions to implement them."