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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 really work for folks residing on low incomes in Calgary. The main focus associated with research is on working together 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 a charitable community economic developing company in Calgary that partners with individuals residing on low incomes to accomplish prosperity by providing development 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 aren’t able to gain access to safe and affordable short-term credit and find yourself making use of payday advances. Pay day loans are a kind of short-term credit that usually leads to a period of financial obligation. Payday advances are:
costly – rates of interest of as much as 600per cent whenever annualized
Geared to individuals residing on reduced incomes – Most clients earn lower than $30K and make use of loans for regular costs
In charge of producing debt traps – the customer that is average 8 loans each year
Growing being used – over $576 M had been loaned down by payday loan providers in Alberta into 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 don’t offer contending short-term credit at reduced rates of interest. a main explanation there are no options is the fact that finance institutions are not able to come up with a satisfactory economic return supplying little loans at affordable prices to raised danger customers. Based on interviews with senior retail bankers, economic help to https://maxloan.org/title-loans-nh/ cut back the chance element is recognized as essential to engage finance institutions in providing alternate financing to pay day loans.
Project Background:
Within the last couple of years, Momentum spent some time working to cut back the side effects that payday advances have actually on Calgarians residing on low incomes, making use of three strategies that are primary
Policy Advocacy: After Momentum’s policy that is public 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 particular, 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 places. Furthermore, 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 and also the increase associated with the money Store have actually worked with all the Haskayne School of Business to aid research and innovation on this issue. Especially, pupil situation competition happens to be underway.
Payday Lending Alternative Product Piloting: together with First Calgary Financial and an exclusive philanthropist, Momentum is piloting Cash Crunch, a pay day loan alternative item. Money Crunch provides a loan within 48 hours all the way to $1500 at 12per cent APR. Though demand for the mortgage has surpassed objectives, payment is gloomier than expected at around 70% (no write-offs up to now). The phase that is second of pilot is prepared for Q4 2015. This model that is current tough to scale because 100% of loans are guaranteed by an exclusive donor, yet it really is yielding important info that will inform future product design and lower the danger for any other lovers.
Standard bank Partnership analysis: during the summer 2015, Momentum begun to investigate other opportunities to offer options to payday advances. The study confirmed that no payday financing options are now available within main-stream banking institutions. a key choosing had been that the big, nationwide banking institutions are extremely not likely to present alternative, short-term onsumers for 2 key reasons: 1. Minimal sensed profitability because of the high-risk amount of the sort of loan portfolio 2. High quantities of financing automation and centralization which will allow it to be very hard to introduce a pilot for a scale that is regional. Due to the investigation, further research on alternate financing will concentrate on locally-based banking institutions.
In addition to the above task, Momentum has convened a little set of philanthropist leaders enthusiastic about the main topic of fair funding. They will have co-created a thought brief that details their reasoning to date that can easily be made open to project proponents.
Venture Goal:
The project objective is: to produce an inexpensive and scalable alternative pay day loan product.So that: individuals residing on lower-incomes can possibly prevent or leave a harmful financial obligation period and commence to create assets that lead them toward a sustainable livelihood.
All work through this project should consider two feasible alternative choices, with 80% of activity centered on 1st 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 deliver consumer that is short-term. Momentum anticipates a less role that is active solutions in this stream, though we might manage to behave as a broker between social responsible investors and alternate financing company operators.
Momentum will not assume it’s going to always have a job to relax and play in every prospective solutions.
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 help Momentum in responding to the concern above, by attaining two main goals.
Ecological Scan and Market Feasibility (roughly 20% of task): the objective of this goal would be to investigate the presence and success of other alternative lending models, therefore the feasibility of this two choices described above. Momentum’s present presumption that the most useful course ahead features a partnership with a lender, nonetheless it would like to make sure hardly any other viable alternative is over looked. Through this goal, the consultant is accountable to:
Confirm current Calgary market size and income information (if available) for traditional payday financing.
Conduct a higher level scan of payday financing alternatives currently provided in united states cities (eg BankOn, Van City Fair & Fast Loan, brand New begin Canada)
Offer a synopsis of short-term, low dollar value services and products are actually within the Calgary market with a certain focus on task that might be considered ‘in between’ main-stream fringe financing and conventional bank offerings. Use in scope online lending and some other financing that develops away from banking institutions.