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Request Proposals (RFP)
Overview: Momentum seeks a consultant that is skilled research, design and suggest sustainable, scalable alternate payday financing products that really work for folks residing on low incomes in Calgary. The main focus for the research is on working together with main-stream institutions that are financial. 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 residing on low incomes to quickly attain success by providing development in monetary literacy, abilities training, micro-lending and company development help. Our eyesight is: “Every individual might have a sustainable livelihood and donate to their community.”
Issue Background:
Many Albertans residing on lower-incomes are not able to get into safe and affordable short-term credit and wind up utilizing payday advances. Pay day loans are a kind of short-term credit that usually leads to a period of financial obligation. Pay day loans are:
costly – rates of interest all the way to 600per cent whenever annualized
Geared to individuals residing on lower incomes – Many clients make significantly less than $30K and make use of loans for regular costs
Accountable for producing financial obligation traps – the average client gets 8 loans each year
Growing being used – over $576 M had been loaned away by payday loan providers in Alberta into the past 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 usually do not offer contending credit that is short-term reduced interest levels. a reason that is primary are no options is the fact that finance institutions aren’t able to come up with a satisfactory monetary return supplying tiny loans at affordable prices to raised danger customers. Based on interviews with senior retail bankers, monetary help to lessen the chance element is known as required to engage finance institutions in providing alternate financing to payday advances.
Project Background:
Within the last 2 yrs, Momentum spent some time working to lessen the side effects that payday advances have actually on Calgarians residing on low incomes, utilizing three primary techniques:
Policy Advocacy: After Momentum’s policy that is public published an insurance policy brief from the problem, significant news attention had been achieved. This contributed to attention that is increased policy manufacturers. In specific, a Notice of movement ended up being presented to Calgary City Council in 2014 that resulted within the populous town agreeing to leverage its company certification and land usage abilities to control the expansion of payday financing areas. Also, provider Alberta is undertaking overview of the lending that is payday in the Fair Trading Act. Momentum additionally supports a group that is grassroots “Rise for the money Store” in Greater Forest Lawn. Momentum while the Rise associated with money Store have worked because of the Haskayne School of company to guide innovation and research on the subject. Particularly, pupil situation competition happens to be underway.
Payday Lending Alternative Product Piloting: together with First Calgary Financial and a personal philanthropist, Momentum is piloting money Crunch, a pay day loan alternative item. Money Crunch offers that loan within 48 hours as much as $1500 at 12per cent APR. Though interest in the mortgage has surpassed objectives, payment is gloomier than expected at about 70% (no write-offs up to now). The 2nd stage associated with the pilot is prepared for Q4 2015. This model that is current hard to measure because 100% of loans are guaranteed by an exclusive donor, yet it really is yielding important info that can inform future product design and lower the danger for any other lovers.
Lender Partnership analysis: during the summer 2015, Momentum begun to investigate other opportunities to offer options to payday advances. The study confirmed that no lending that is payday are available within conventional finance institutions. an integral choosing ended up being that the big, nationwide banking institutions are highly not likely to deliver alternative, short-term onsumers for just two key reasons: 1. Minimal recognized profitability because of the high-risk standard of the sort of loan portfolio 2. tall degrees of financing automation and centralization which will ensure it is very difficult to introduce a pilot on a scale that is regional. As a consequence of the investigation, further investigation on alternate financing will give attention to locally-based banking institutions.
Besides the activity that is above Momentum has convened a little group of philanthropist leaders thinking about the topic of fair financing. They will have co-created a thought brief that details their thinking to date which are often made offered to project proponents.
Venture Goal:
The task goal is: to build up a reasonable and scalable alternative pay day loan product.So that: individuals residing on lower-incomes can avoid or exit a harmful financial obligation period and commence to construct assets that lead them toward a livelihood that is sustainable.
All work through this project must look into two feasible alternative choices, with 80% of activity dedicated to the very first choice described below:
Mainstream lender Partnership: A partnership between Momentum, Financial Institution(s) and a philanthropic/government that is possible to produce loan loss money, and
Personal Business: A model that leverages ‘non-traditional’ banking institutions to give short-term customer loans. Momentum anticipates a less role that is active solutions through this flow, though we might manage to act as a brokerage between social accountable investors and alternate financing company operators.
Momentum will not assume it will probably fundamentally have a task to try out in most solutions that are potential.
Design Question: exactly just just What system or item models would be best in a position to attain the target above? Venture Scope: A consultant is needed to assist Momentum in responding to the question above, by achieving two main objectives.
Ecological Scan and Market Feasibility (about 20% of task): the goal of this goal is always to investigate the existence and popularity of other alternate lending models, additionally the feasibility of car title loan MS this two choices described above. Momentum’s present presumption that the path that is best ahead includes a partnership with a lender, nevertheless it would like to guarantee no other viable alternative is over looked. In this goal, the consultant is accountable to:
Confirm current Calgary market size and earnings information (if available) for mainstream payday financing.
Conduct a higher level scan of payday financing options currently offered in united states cities (eg BankOn, Van City Fair & Fast Loan, brand brand New Start Canada)
Offer a summary of short-term, low buck value products seem to be into the Calgary market with a certain emphasis on task that might be considered ‘in between’ main-stream fringe financing and conventional bank offerings. Use in scope lending that is online any kind of financing occurring outside of banking institutions.