Scaling Socially-Responsible Lending Capacity
In the United States, 47% of the population report living paycheck to paycheck. Currently, 40 million American households and 106 million individuals are “under-banked,” and use non-bank financial service providers as their primary means of accessing credit. The Payday Loan industry in the US has grown into a multi-billion dollar business, and charges up to 400% interest to borrow money for small dollar loan emergencies. For many borrowers, the need for multiple short-term, small-dollar, high-interest loans could be alleviated by gaining access to a mid-term, mid-dollar, low-interest loan.
The Business of Good Foundation is working with Emerge Workplace Solutions to create a social innovation to help millions of underbanked individuals establish and build credit scores and access the full array of financial services that mainstream lenders offer. Emerge Workplace Solutions built an alternative lending platform that can be brought to scale and have a multi-billion dollar positive impact each year on the assets of people who now only have access to higher priced services. At its core, Emerge is a technology platform and innovative risk profiling model that integrates seamlessly with online bank loan application protocols and employer payroll service provider data files and software, and is marketed as an employer benefit program both directly and through payroll service providers.
The research shows great potential for a nationally branded employer-sponsored loan program with national corporate bank and payroll service company collaboration. Using online approvals, a proprietary risk profiling algorithm, and voluntary payroll deductions over a fixed term, loans can be originated and underwritten at very reasonable interest rates and at faster speeds than non-bank financial service alternatives. Emerge Workplace Solutions' employer-based loans and financial education is designed to help front-line workers emerge from financial debt traps and build positive credit. As added benefit, borrowers can also access financial literacy training online and obtain financial crisis counseling by phone. The ultimate goal of The Business of Good Foundation and Emerge Workplace Solutions is to solve the severe liquidity problem faced by borrowers of small dollar loans and open the doors of financial choice to the underbanked.