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Ask for Proposals (RFP)
Overview: Momentum seeks a talented consultant to research, design and suggest sustainable, scalable alternate payday financing products that work for individuals living 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 reach success by providing development in economic literacy, abilities training, micro-lending and business development help. Our eyesight is: “Every individual may have a livelihood that is sustainable subscribe 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 find yourself utilizing payday advances. Pay day loans are a kind of short-term credit that frequently leads to a period of financial obligation. Payday advances are:
costly – interest levels of around 600per cent whenever annualized
Aiimed at individuals residing on reduced incomes – Many clients make lower than $30K and employ loans for regular costs
In charge of creating financial obligation traps – the customer that is average 8 loans each year
Growing being used – over $576 M had been loaned away by payday loan providers in Alberta when you look at the year that is previous. Nationally $2M individuals access a pay loan annually day
Concentrated in lower-income neighbourhoods – Example: over 25 fringe economic outlets are found in the Calgary neighbourhood of Greater Forest Lawn
Mainstream banking institutions usually do not offer contending short-term credit at reduced rates of interest. a reason that is primary are no alternatives is the fact that finance institutions aren’t able to build a sufficient monetary return supplying tiny loans at affordable rates to raised danger customers. In accordance with interviews with senior retail bankers, monetary help to cut back the danger element is known as required to engage banking institutions in supplying alternate financing to pay day loans.
Project Background:
Within the last couple of years, Momentum did to lessen the harmful effects that payday advances have actually on Calgarians living on low incomes, making use of three strategies that are primary
Policy Advocacy: After Momentum’s general public policy group published an insurance policy brief regarding the problem, significant news attention ended up being accomplished. 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 capabilities to control the expansion of payday financing areas. Furthermore, provider Alberta is undertaking overview of the lending that is payday in the Fair Trading Act. Momentum additionally 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 with all the Haskayne School of company to guide research and innovation on the subject. Especially, pupil situation competition is underway.
Payday Lending Alternative Product Piloting: together with First Calgary Financial and an exclusive philanthropist, Momentum is piloting Cash 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 objectives, payment is gloomier than expected at about 70% (no write-offs up to now). The 2nd stage for the pilot is prepared for Q4 2015. This model that is current tough 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 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 payday advances. The investigation confirmed that no payday financing alternatives are now available within main-stream banking institutions. an integral choosing ended up being that the big, nationwide banking institutions are visit here extremely not likely to give you alternative, short-term onsumers for just two key reasons: 1. minimal identified profitability because of the risky degree of the kind of loan portfolio 2. High degrees of financing automation and centralization which may allow it to be very hard to introduce a pilot for a local scale. Because of the study, further research on alternate financing will give attention to locally-based finance institutions.
As well as the above task, Momentum has convened a tiny set of philanthropist leaders thinking about the main topic of fair funding. They will have co-created a thought brief that details their reasoning to date which may be made open to project proponents.
Venture Goal:
The task objective is: to build up an inexpensive and scalable alternative pay day loan product.So that: individuals residing on lower-incomes can possibly prevent or leave a harmful debt period and commence to construct assets that lead them toward a livelihood that is sustainable.
All work through this task must look into two possible alternative options, 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 offer loan loss money, and
Social Business: A model that leverages ‘non-traditional’ finance institutions to give you short-term customer loans. Momentum anticipates a less role that is active solutions inside this flow, though we possibly may manage to act as an agent between social responsible investors and alternate lending company operators.
Momentum doesn’t assume it’s going to fundamentally have a task to try out in every possible solutions.
Design Question: 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 answering the question above, by attaining two main goals.
Ecological Scan and Market Feasibility (about 20% of task): the goal of this goal would be to investigate the presence and popularity of other lending that is alternative, in addition to feasibility associated with the two choices described above. Momentum’s current presumption that the path that is best ahead features a partnership with a lender, nevertheless it desires to guarantee hardly any other viable alternative is ignored. Through this goal, the consultant is accountable to:
Confirm current Calgary market size and earnings information (if available) for old-fashioned payday lending.
Conduct a level that is high 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 products already are within the Calgary market with a certain focus on activity that could be considered ‘in between’ mainstream fringe financing and conventional bank offerings. Use in scope lending that is online any kind of financing that develops away from finance institutions.