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Ask for Proposals (RFP)
Overview: Momentum seeks a consultant that is skilled research, design and suggest sustainable, scalable alternate payday financing products that work for individuals residing on low incomes in Calgary. The main focus regarding the research is on dealing with main-stream finance institutions. a consultant that is preferred have an understanding of and expertise in social finance.
Organization Background:
Momentum (www.momentum.org) is really A community that is charitable economic company in Calgary that lovers with individuals living on low incomes to attain success by providing development in monetary literacy, abilities training, micro-lending and company development help. Our vision is: “Every individual may have a sustainable livelihood and donate to their community.”
Problem Background:
Numerous Albertans residing on lower-incomes are not able to get into safe and affordable credit that is short-term wind up utilizing payday advances. Payday advances are a kind of short-term credit that frequently leads to a period of financial obligation. Pay day loans are:
costly – rates of interest all the way to 600per cent whenever annualized
Aiimed at individuals residing on reduced incomes – Many clients make lower than $30K and make use of loans for regular costs
Accountable for producing financial obligation traps – the customer that is average 8 loans each year
Growing being used – over $576 M ended up being loaned away by payday loan providers in Alberta when you look at the previous 12 months. Nationwide $2M individuals access a pay loan annually day
Concentrated in lower-income neighbourhoods – Example: over 25 fringe outlets that are financial found in the Calgary neighbourhood of Greater Forest Lawn
Mainstream banking institutions don’t offer contending short-term credit at reduced rates of interest. a main explanation there are no alternatives is the fact that banking institutions aren’t able to build a satisfactory economic return supplying tiny loans at affordable prices to raised danger customers. In accordance with interviews with senior retail bankers, economic help to lessen the danger factor is recognized as required to engage banking institutions in supplying alternate financing to pay day loans.
Project Background:
Within the last 2 yrs, Momentum spent some time working to cut back the harmful impacts that payday advances have actually on Calgarians residing on low incomes, making use of three strategies that are primary
Policy Advocacy: After Momentum’s general public policy group published a policy brief from the problem, significant news attention had been accomplished. This contributed to increased attention from policy manufacturers. In specific, a Notice of movement had been presented to Calgary City Council in 2014 that resulted into the populous town agreeing to leverage its company certification and land use abilities to suppress the expansion of payday financing places. Also, provider Alberta is undertaking overview of the lending that is payday in the Fair Trading Act. Momentum also supports a grassroots group called “Rise of this money Store” in Greater Forest Lawn. Momentum as well as the increase for the money Store have actually worked using the Haskayne School of company to guide research and innovation on the subject. Especially, pupil instance competition happens to be underway.
Payday Lending Alternative Product Piloting: together with First Calgary Financial and an exclusive philanthropist, Momentum is piloting money Crunch, a loan alternative product that is payday. Money Crunch provides that loan within 48 hours as high as $1500 at 12per cent APR. Though interest in the mortgage has surpassed expectations, payment is gloomier than anticipated at about 70% (no write-offs up to now). The phase that is second of pilot is planned for Q4 2015. This model that is current tough to measure because 100% of loans are secured by a personal donor, yet its yielding information that will inform future product design and reduce the danger for any other lovers.
Standard bank Partnership analysis: In summer time 2015, Momentum started to investigate other opportunities to give you options to pay day loans. The investigation confirmed that no payday financing options are now available within conventional financial institutions. a key choosing ended up being that the big, nationwide banking institutions are extremely not likely to give alternative, short-term onsumers for 2 key reasons: 1. Minimal observed profitability because of the high-risk standard of the sort of loan portfolio 2. tall amounts of financing automation and centralization which may ensure it is very hard to introduce a pilot on a scale that is regional. Due to the investigation, further research on alternate financing will concentrate on locally-based finance institutions.
As well as the activity that is above Momentum has convened a little set of philanthropist leaders thinking about the topic of fair financing. They’ve co-created a thought brief that details their reasoning to date and that can be made open to project proponents.
Venture Goal:
The task objective is: to produce a reasonable and scalable alternative cash advance product.So that: individuals residing on lower-incomes can possibly prevent or exit a harmful debt period and commence to construct assets that lead them toward a sustainable livelihood.
All work through this task must look into two alternative that is possible, with 80% of activity centered on the very first choice described below:
Mainstream lender Partnership: A partnership between Momentum, Financial Institution(s) and a philanthropic/government that is possible to deliver loan loss money, and
Personal Business: A model that leverages ‘non-traditional’ banking institutions to produce short-term customer loans. Momentum anticipates a less role that is active solutions in this flow, though we might have the ability to behave as an agent between social accountable investors and alternate financing company operators.
Momentum will not assume it’s going to always have a task to try out in every solutions that are potential.
Design Question: just just What product or program models are most readily useful in a position to attain the target above? Venture Scope: A consultant is needed to help Momentum in responding to the question above, by attaining two objectives that are primary.
Ecological Scan and Market Feasibility (about 20% of task): the goal of this goal is always to investigate the presence and success of other alternate lending models, crucial hyperlink and also the feasibility regarding the two options described above. Momentum’s present presumption that the path that is best ahead features a partnership by having a standard bank, nevertheless it desires to guarantee no other viable alternative is ignored. The consultant is responsible to within this objective
Confirm current Calgary market size and earnings information (if available) for mainstream lending that is payday.
Conduct a high level scan of payday financing options currently provided in united states cities (eg BankOn, Van City Fair & Fast Loan, brand New begin Canada)
Offer a synopsis of short-term, low buck value services and products seem to be into the Calgary market with a specific increased exposure of activity that could be considered ‘in between’ mainstream fringe financing and old-fashioned bank offerings. Use in scope lending that is online some other financing occurring outside of banking institutions.