Mission Asset Fund
MAF’s Lending Circles program has received widespread national attention for its success in helping low income families gain access to capital, build financial capability, and increase access to low-cost loans for education, homes, and small business startup. To date, over 1,700 participants have made $1.7 million in social loans, resulting in a 99% repayment rate and under 1% in defaults. Because these loans have zero interest and zero fees, participants have saved an estimated $350,000. Average credit scores were raised by 49 points, often the difference between subprime and prime credit.
MAF was honored to receive the 2012 Bank of America Neighborhood Builders Award, 2012 Latino Leaders Maestro Award, 2012 Ashoka Fellowship, and 2013 James Irvine Foundation Leadership Award. Last year, our Executive Director Jose Quinonez was also appointed Chair of the Consumer Advisory Board for the Consumer Financial Protection Bureau.
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1 Submitted Idea
- 2013 Grants Challenge·🎉 Winner
Building on LAs Social Capital
In Los Angeles, tens of thousands of low-income residents live on the margins of California’s economy. They have no bank accounts, credit scores or any hope of getting conventional loans to buy cars, start businesses, or apply for citizenship. Even renting an apartment may be out of reach.
By working with two Los Angeles-based organizations, we propose propose to bring Lending Circles for Citizenship and the Security Deposit Loan Program for the first time to Southern California.
Mission Asset Fund (MAF), a nonprofit organization, provides a way out of the financial shadows by capitalizing on the hidden strengths of people living on the financial fringes: networks of friendships and commitments to helping one another. In a time-honored practice of cultures throughout the world, low-income people come together to provide each other with support simply by lending and borrowing money from each other. Through its Lending Circles Program, MAF formalizes these social loans and provides financial education to participants. It reports loan repayments to credit bureaus, building credit files that improve participants’ financial standing. Many members establish credit scores for the first time, while others rebuild damaged scores. Each year, 12 million Americans who turn to payday lenders for small, short-term loans each year end up paying $7.5 billion in fees and charges (The Pew Center). With a good credit score, participants are able to rent homes and apartments, access low-cost loans and avoid predatory lenders.
In just five years, MAF’s social lending models have helped 1,700 people in six U.S. states, with annual loan capital skyrocketing from $15,000 to $660,230. Under this proposal, MAF will bring two new programs to Los Angeles to help low-income residents open the doors to citizenship and stable housing.
WHY CITIZENSHIP? Citizenship is an asset that provides individuals the ability to earn more money, lower rates of poverty, and increase financial stability. Yet, in California alone, hundreds of thousands of people eligible for U.S. citizenship are deterred by the $680 fee required to submit the N-400 naturalization application. In 2011, MAF piloted the Lending Circles for Citizenship program with three Bay Area organizations. The program has already yielded successful results, with 39 citizenship checks submitted to the U.S. Department of Homeland Security and 14 citizenship applications approved.
WHY HOUSING? Securing a first apartment and coming up with a rent deposit often keeps homeless and foster youth hopping from couch to couch or sleeping on the streets. In response, MAF launched the Security Deposit Loan (SDL) program in 2012 to help ease their transition into the mainstream financial system. This innovative approach helps young people overcome their challenges by providing the means to pay for a security deposit on their first apartment through a credit-building loan.
TWO PROGRAMS, ONE CITY: MAF will expand these two models (Lending Circles for Citizenship and Security Deposit Loans) to Los Angeles, helping struggling people attain assets like citizenship and the ability to secure stable housing. Expansion will occur over one year by partnering with two community partners that serve economically excluded populations. MAF will help 50 people gain citizenship status through social loans, while another 50 people will use rent deposit loans to secure stable housing for their families. Participants will increase their credit scores and overall financial health because transactions will be reported to main credit bureaus.
Lending Circles for Citizenship will bring groups of people eligible for U.S. citizenship together to lend and borrow money to finance $510 to pay for their citizenship application fees. After they successfully work with legal services agencies to complete citizenship classes, each participant will receive a 25% match incentive ($170). All loans are secure, provided at 0% interest with $0 fees.
The Security Deposit Loan project will transform security deposits into a responsible financial product and a savings and credit-building opportunity for disadvantaged young people who struggle to obtain stable housing. In partnership with agencies providing transitional housing, young people will sign promissory notes and program agreements for security deposit vouchers accepted by these landlords. MAF will collect monthly payments from participants, and reports payment activity to credit bureaus. By the end of their graduation from transitional housing, participants will have saved enough for a security deposit on their next apartment, and they will have spent two years establishing positive credit histories and credit scores – assets they will need to get a new apartment.