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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 residing on low incomes in Calgary. The main focus associated with research is on working together with conventional 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 organization in Calgary that lovers with individuals residing on low incomes to quickly attain success by providing programming in monetary literacy, abilities training, micro-lending and company development help. Our eyesight is: “Every individual might have a livelihood that is sustainable subscribe to their community.”
Problem Background:
Numerous Albertans residing on lower-incomes are unable to gain access to safe and affordable short-term credit and find yourself making use of pay day loans. Pay day loans are a type of short-term credit that frequently leads to a period of financial obligation. Payday loans are:
costly – interest levels all the way to 600% whenever annualized
Geared to individuals residing on reduced incomes – Many clients make significantly less 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 had been loaned away by payday loan providers in Alberta when you look at the year that is previous. Nationwide $2M individuals access a pay loan annually day
Concentrated in lower-income neighbourhoods – Example: over 25 fringe monetary outlets are found in the Calgary neighbourhood of Greater Forest Lawn
Mainstream banking institutions usually do not offer contending credit that is short-term lower rates of interest. a primary explanation there are no options is the fact that banking institutions aren’t able to build a satisfactory monetary return supplying little loans at affordable prices to raised danger customers. Based on interviews with senior retail bankers, economic help to lessen the chance element is known as essential to engage banking institutions in supplying alternate financing to pay day loans.
Project Background:
Within the last couple of years, Momentum spent some time working to lessen the harmful results that payday advances have actually on Calgarians residing on low incomes, utilizing 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 had been accomplished. This contributed to attention that is increased policy manufacturers. In particular, a Notice of movement had been presented to Calgary City Council in 2014 that resulted into the town agreeing to leverage its company licensing and land usage abilities to control the expansion of payday lending places. Also, provider Alberta is undertaking overview of the payday lending legislation in the Fair Trading Act. Momentum additionally supports a grassroots group called “Rise of this money Store” in Greater Forest Lawn. Momentum plus the increase regarding the money Store have actually worked with all the Haskayne School of company to guide innovation and research on this issue. Particularly, a learning pupil instance 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 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 roughly 70% (no write-offs up to now). The phase that is second of pilot is prepared for Q4 online installment NM 2015. This model that is current hard to measure because 100% of loans are guaranteed by a personal donor, yet it really is yielding important info that will inform future product design and reduce the danger for any other lovers.
Standard bank Partnership Research: In summer time 2015, Momentum started to investigate other opportunities to deliver options to pay day loans. The study confirmed that no payday financing options are now available within main-stream finance institutions. a vital choosing ended up being that the big, nationwide banking institutions are very not likely to present alternative, short-term onsumers for just two key reasons: 1. minimal observed profitability as a result of high-risk amount of the sort of loan portfolio 2. High quantities of financing automation and centralization which may ensure it is very hard to introduce a pilot on a scale that is regional. As a consequence of the investigation, further research on alternate financing will concentrate on locally-based banking institutions.
Aside from the activity that is above Momentum has convened a little group of philanthropist leaders enthusiastic about the subject of fair financing. They’ve co-created a thought brief that details their reasoning to date that can be made open to project proponents.
Venture Goal:
The task objective is: to produce a reasonable and scalable alternative pay day loan product.So that: individuals residing on lower-incomes can possibly prevent or exit a harmful financial obligation period and start to create assets that lead them toward a livelihood that is sustainable.
All work in this particular project must look into two alternative that is possible, with 80% of activity dedicated to 1st choice described below:
Mainstream lender Partnership: A partnership between Momentum, Financial Institution(s) and a philanthropic/government that is possible to give loan loss money, and
Personal Business: A model that leverages ‘non-traditional’ finance institutions to offer consumer that is short-term. Momentum anticipates a less active part in solutions in this flow, though we might have the ability to become a broker between social accountable investors and alternate financing company operators.
Momentum will not assume it’s going to fundamentally have a task to relax and play in most possible solutions.
Design Question: exactly just What program or product models are well in a position to attain the goal above? Venture Scope: A consultant is needed to assist Momentum in responding to the concern above, by attaining two main goals.
Environmental Scan and Market Feasibility (about 20% of task): the goal of this goal would be to investigate the presence and success of other alternate lending models, therefore the feasibility of this two choices described above. Momentum’s present presumption that the path that is best ahead features a partnership having a lender, nonetheless it desires to guarantee no other viable alternative is over looked. 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 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 services and products are usually into the Calgary market with a specific increased exposure of task that could be considered ‘in between’ main-stream fringe financing and conventional bank offerings. Use in scope lending that is online every other financing that develops away from banking institutions.