Every year the Classy Awards recognize the most innovative and impactful social programs in the world. This blog series highlights each initiative and show the breadth of social innovation genius and passion by spotlighting each of the ten winners of the 2017 Classy Awards. This post presents Mission Asset Fund (MAF), a nonprofit organization on a mission to create a fair financial marketplace for hardworking families.
Mission Asset Fund: Lending Circles
At least 45 million people in the United States don’t have a credit history and therefore no access to affordable credit. Approximately 16 million adults don’t have access to a bank account. This means millions of people in the US cannot finance a car, buy a home, and save money. As a consequence, one in four families uses alternative financial services like check cashers and payday lenders, whose astronomical interest rates perpetuate poverty. Mission Asset Fund’s Lending Circles offers interest-free loans, financial training classes, and community to help people build and improve their credit.
Lending Circles provides zero-interest loans that help people build credit. How does it work? People lend and borrow with each other when bank loans aren’t an option. With technology and credit reporting, MAF’s Lending Circles formalizes this practice to help borrowers access zero-interest loans that help them build credit.
Zero-interest loans while building credit
MAF launched Lending Circles in 2008 in San Francisco’s Mission District inspired by “tandas”, an informal borrowing practice in the Mexican immigrant community. Today, nonprofits across the country have introduced MAF’s Lending Circles to their communities.
MAF describes the Lending Circle process on their website: Every participant starts by taking an online financial training class. Then, the six to twelve members meet in person to form the Lending Circle and collectively decide on the loan amount; for example, a group of 10 people might decide they each want a loan of $1,000. Each participant in the Lending Circle can have their own goal for the money, whether it’s paying off debt or paying for tuition.
Everyone in the Lending Circle makes the same monthly payment, ranging from $50 to $200, which MAF reports to the credit bureaus. The loan rotates monthly to a different participant: in the first month, one participant receives $1,000, and each month another member receives the total sum until everyone has gotten a chance. The program is proven to help participants establish credit histories for the first time and increase low scores.
Lending Circles Success Stories
People have used Lending Circles and saved money to start a business, obtain US citizenship or fulfill another dream they couldn’t have attained without MAF’s programs.
Take, for example, Leticia who joined her first Lending Circle in 2011 as she wanted to turn her life around after experiencing great misfortune. At the risk of losing her foster children after losing her home and steady income, Leticia needed to increase her credit score and chose to join a Lending Circle in her community in the Bay Area. MAF reports on their website that, “Because Leticia paid back her loans on time, she qualified for a $5000 microloan from Mission Asset Fund. This loan will help launch what will surely be the first of Leticia’s many food carts.”
Jesus is another MAF success story. Jesus was five years old when he immigrated to the U.S. with his parents. But when he was old enough to think about going to college, he realized that without his U.S. citizenship his future was uncertain. He wouldn’t be able to attend college. And his ability to find a job would be limited. Thankfully, he decided to take advantage of MAF’s Lending Circles for DREAMers, an affordable way to finance the cost of applying for Deferred Action for Childhood Arrivals (DACA).
When participants receive DACA, they will receive a work permit, become eligible for a Social Security number in the U.S., and obtain protection from deportation. Plus, they’ll have an improved credit score and financial savviness to help build a brighter future. MAF shares Jesus success story on their website: “Lending Circles for DREAMers helped Jesus finance the application and get him closer to his dream: to study law and give back to the immigrant community using his own experience.”
Every person has a gift
In the 2015 Annual Report, MAF founder and CEO José A. Quiñonez sums up the power of Lending Circles this way, “In Spanish we say, “cada quien tiene un don” or “every person has a gift.” Lending Circles brings to light what’s already good in people’s lives.”
And the numbers speak for themselves: In 2015 alone, Mission Asset Fund helped fund 2,367 social loans. That’s over 2.07 million US dollars in loans in one year, a 33% increase compared to the year prior. In the same year, MAF’s national network of Lending Circles providers grew from 31 to 53 nonprofit partners — ranging from LGBTQ organizations to business accelerators — across 17 states and Washington, DC.
To find out more about Mission Asset Fund, their projects and success stories, visit their website at missionassetfund.org.
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