This new idea has the potential to release the poor from the chains of payday loans and their related low credit scores.
After his father was slain and his mother succumbed to cancer, Quionez was moved to the United States, where he grew up. He and his five siblings were divided up among relatives they hardly knew and instructed to blend in and not do anything that would draw attention to their illegitimate status as citizens of the United States. You can apply for you media equipment with some lenders, more about Citrus.
As CEO of Mission Asset Fund, an organization that helps low-income immigrants who labor and live in the informal sector and whose invisible status impedes their economic possibilities, Quionez is aiding people like himself.
Quionez started areing Circles in San Francisco’s Mission District. Each month, a different individual obtains a loan from a group of people who each proa a particular amount of money. This continues until everyone has a loan. Payments are reported to the credit agencies. Each more is charged charges. Circles are not a new idea, but Quionez has expanded on an informal economic practice to allow individuals more financial autonomy. To reward “a track record of remarkable performance,” he was awarded the $625,000 MacArthur fellowship for his efforts.
All around the United States, there are Lending Circles partners. The approach has been implemented in 17 states plus DC.
We discussed Lending Circles, the MacArthur Foundation Award, immigration, and how his experience motivated him to assist others.
You have said that financial education is not the problem without diminishing low-income individuals. What do you mean by that?
Society as a whole seems to believe that poverty is the fault of the poor. We believe that they are the only ones to blame for the current state of affairs since they are the ones who are making all of the wrong decisions. Because of this, our ideas are based on it.
Even the word “financial literacy” is meant to dispel the notion that impoverished people are financially illiterate that they lack the knowledge necessary to make sound financial decisions. We presume they don’t know how to handle their money or construct a budget; all we need to do is teach them. We already have the power dynamic of “us rescuing them” in place when we engage individuals with this concept in mind.
In general, I believe society assumes that poverty is the fault of impoverished people… As a result, we develop solutions in line with this concept.”
People in my neighborhood are pretty financially savvy, especially those who have just arrived from other countries. Because of their expertise in exchange rates, they are much superior to the rest of us. Many of them handle the finances of many families in various countries while using different currencies.
Impoverished people aren’t as broken as we think they are, and I’m trying to dispel the idea that they are. Using this technique, we can serve individuals more quickly and effectively while not degrading them. We’re developing around this principle.
How can you deal with low-income individuals without decreasing their worth? “
We discovered that there is a strong heritage of individuals joining together and lending and paying each other money in metropolitan areas. This is referred to as a “rotating credit association” in the academic community. It’s known as tandas in Mexico and used in Africa, and it’s been happening for millennia around the globe.
The activity is being recognized for what it is, an informal money activity. We’re merely putting it in writing so that we can report it to the credit reporting agencies. We’re helping folks improve their credit ratings by doing that. As we work to improve our credit ratings, we’re allowing ourselves access to financial markets that we wouldn’t otherwise have.
These lending circles are no different from going to a bank and getting a loan to borrow money and repaying it. One is more formal than the other. There is an informal one.
In the same way, you and I go to the bank and take out a loan. These lending circles do the same thing. Paying back is the same behavior. For example, one is documented or reported to credit bureaus, while the other is informal. It’s not being spoken about in the media. Except for the individuals involved, no one is keeping track of it.
What they’re doing is remarkable. Poverty-stricken individuals band together to pool their resources and borrow from one another. Conventional wisdom tells us they shouldn’t have anything.
We’re helping students establish their credit ratings by formalizing them, which they need to be effective economic participants. A credit score is a must-have for everyone. A credit report is required. While still preserving their history, we’re leveraging it as a type of bridge to enter the mainstream financial sector. Quite the contrary, we’re praising it and saying, “Wow, that’s amazing. To build on it, let’s do it.”
When you started Lending Circles, how did you get started?
I had the lofty objective of enhancing the financial well-being of the Mission District’s immigrant population. What’s the secret to this? Another financial literacy lesson was recommended, and thorough cleaning of all materials. We said, That isn’t going to happen.
How can you aid needy folks who lack bank accounts and have no credit history? So we had to address these two significant obstacles head-on. Adults, especially those with families and multiple professions, might be difficult to engage because of their hectic schedules. Is there a way to persuade them to come to your aid? With this in mind, we set out to create a platform that would benefit those on the fringes of society who are also struggling financially.
When we saw that they were already lending circles, we came up with the notion of building on that and making it even better. A new idea was born, and by formalizing it and reporting to the credit bureaus (which is what we did), we could harness their full potential. Lending Circles have been a part of our business since 2008. As a result, we expanded the program throughout the nation by working with other nonprofit groups, who will now be able to provide it to their local communities. At the same time, we take care of the loan servicing.
Have other low-income populations caught it, or is it still mainly affecting immigrants?
As far as we were concerned, it would only work with Latino migrants. There is, however, no one who owns the concept of people working together to aid one another. It’s something that we’ve all done. In San Francisco, one of our partners works with the LGBT center, which predominantly serves the city’s white LGBT population. Because of their strong feeling of belonging, cohesiveness, and social capital, the program is functioning effectively with them as well.
Are Lending Circles expanding at a rapid rate?
We’ve loaned out a total of $6.2 million.” In 2015, we lent more than 6,300 people money. In one year, we closed 2,300 loans.
Our first lending circle consisted of four persons in 2008. The first three were family members, and the fourth was a journalist who was eager to capture the procedure. There was an initial group financing each other $800 each month at $200 per person. We have recently exceeded the $6.2 million mark in loan volume for September.
In 2015, we lent more than 6,300 people money. One year, we closed 2,300 loans. Because of our collaborations and the wide range of organizations with whom we collaborate, we’ve been able to increase our ability to disburse loans every year.
Are people entering lending groups to avoid utilizing alternative financial services, such as payday loans, or are they already using informal lending circles?
We’re well-stocked. Some customers join our program because they wish to use zero-interest loans to refinance high-cost debts, such as credit cards, payday loans, or vehicle title loans. To go forward, people must have the ability to fix their financial situation.
For others, it’s an incentive to save money in preparation for a down payment on a home or vehicle or even simply as a reserve for a rainy day. They commit to putting $100 down each month and saving it for whatever reason.
After all, it is their money, and we have no intention of restricting what they may do with it. As for those who claim they need a credit score boost because they just foreclosed on their home or had issues with their credit history sometime in the past, we help them with that.
In addition, have you noticed that many individuals who have established good credit choose to stay with the loan industry even after receiving a credit card?
Participants added two trade lines to their credit reports in the first 12 to 14 months. When you open a new tradeline, open a new credit card, or take out a new loan. We see this as a sign of success since it indicates that they have gained access to widely used items about which they are writing.
As a result, they get credit cards, and some of them may stop participating in lending circles after the first one, which we believe is OK. Our customers return to us for a second and third loan cycle of roughly 25% to 30%. Also, ten to fifteen percent of borrowers complete a third or fourth round of financing.
Those with two or three lending circles assist us with the novices, so we don’t stop it. When someone enters a lending circle and says, “Oh yeah, I’ve done this for the previous two or three years,” it eases the tension.
30% of our consumers… move from a credit score of zero to 600 within 10 to 12 months…
About 30% of our customers start with a zero credit score, which means they have no credit history or report to show for their efforts. That’s a 100-150 points rise in only 10-12 months. Strangely, this is not unusual. Before joining our lending circles, people who have a credit score see their scores rise by roughly 19 to 20 points. The average rise in credit scores is 168 points when taken.
Are you ready to go forward at this point?
That’s a significant question that hasn’t been answered yet. I believe there is much more to learn and understand about lending circles and the program. As a result, we want to show that there are better ways to engage low-income communities and that we can support them more efficiently and effectively without making fun of them.
However, I believe that what we’ve discovered about loan circles is still something that has to be explored more. As an example, why do we have such a high default rate? In what manner is it possible for us to be paid back so lavishly by our customers? This is a lesson we can all take away from it, in my opinion. When it happens, I’m hoping we can use it as an example of how to engage the poor better. Because, given the present state of affairs, I believe that’s not good for anybody.
According to your “Innovations Case Narrative,” your mother died at the age of 20 due to poverty. Is there anything you’ve done differently as a result?
The realization that my mother had died due to our financial inability came to me when I was 20 years old.
Poverty is a human construct, which brought it into perspective for me. We can eliminate poverty. My mother’s death was not caused by God’s displeasing with us or punishing her for being this or that. Consequently, I was able to see that there was a structural problem that led to my mother’s death due to the economic conditions of the time. This helped me focus on “This is the beast that I must battle,” and it was a relief when I did.
SPEAKING UP WOULD HAVE DRASTICALLY LIMITED MY ABILITY TO CONTRIBUTE because I was illegal and had been trained to be quiet and avoid attention. If I hadn’t received amnesty in 1986, I wouldn’t have been able to ultimately grow as a human being or a productive member of our society.
So, too, I believe, can be said for the millions of individuals who have been compelled to hide or live in dread in our nation at this moment in time. Immigration reform has the potential to be a game-changer, benefiting not just the affected people but the whole nation. When it doesn’t happen, I believe we lose strength every day.
We’d want to hear if there is anything more you’d like our audience to know.
I’m pretty grateful for the award and the attention, and it’s rare for somebody like myself to get such a high level of recognition. This does not occur.
In actuality, it’s a tribute to the resourcefulness of the poor and their ability to adapt and prosper despite their circumstances. Because it’s not about me or my job; instead, we’re highlighting what individuals are already doing to survive and flourish in their daily lives. We also need a new narrative about immigration since the current one is deplorable.
There is a misconception that we are here to rape, plunder, or do whatever else people claim we are doing. I hope that this award, this recognition, will help us tell a new story about our experiences in the United States and our contributions to the nation.