The Unbanked

Yesterday I heard a broadcast on NPR about the unbanked and read it again in the Seattle Times today.  In it the FDIC recommends to banks that "poorer Americans could be good customers, and their numbers are growing." 

This took me right back to a time nearly two years ago where I was walking in the woods and came across some papers.  I looked them over to see if they were important and was shocked at what I found.  First thing I noticed was a stack of expired lottery tickets and then a pawn ticket as well as a receipt from Aurora Loans.  What was so shocking was the terms of the loans.  Bear in mind that this is what is charged to people who have very limited income, no credit and dream that a lottery ticket will be their way out of poverty.

For the pawn shop (for which a set of golf clubs was left) the loan amounted to $60 with an upfront cost of $14.75.  That is a apr of 136.88% - not a mystery since it's listed right on the paperwork.  In order to retrieve the clubs, the owner would have to pay $77.50 in 30 days or $80.25 in 60.  If the clubs are not retrieved within 60 days they still have to pay the interest of $20.25 and lose the rights to reclaim the property.

As shocking as those terms are, they paled in comparison to Aurora Loans which financed $40 with a $19.75 finance charge (a %200.24 apr)!  This loan has been secured due to the "pledged goods" of a .22 rifle.  Since the maturity date is 90 days, if the loan is repaid within 30 days the finance charge drops to $15.25 but the kicker is that if it's not repaid within 90 days, the loan will need to be rewritten for another $19.75.  It doesn't take a financial wizard to figure out that a person desperate for money can get caught and drown in debt very quickly.

This underscored for me the importance of microfinance (which Muhammad Yunis first began with Grameen banks in India).  Microfinance has had success with the poorest of the poor around the world, some of whom pool together their resources and then make loans to each other.  It is very empowering for many reasons but one in part is the self respect that comes with handling moderate funds and paying them back with a reasonable interest rate.  I've wondered, in the past two years, whether or not this is something that communities of faith should be doing for one another.  When I was in Rwanda in 2010, I heard of a group of women who microfinanced themselves to a combined networth of $800,000.  Talk about being empowered!  Contrast that with overseas organizations that continually look to America to meet all their financial needs.  Contrast that also to the single mom trapped in the vicious cycle of poverty who's been told time and again that she'll never amount to anything.  I think the time is now for the people of God to come together and help people find their inherent giftedness by God.  We need to quit playing god to the people who come to us for help and lead them to the One who made them and sees them as the "unrepeatable miracles" that they are.  We need to ask them what their strengths are and what they think they need.  And this can only happen in the context of an equal relationship - one where both parties kneel before the gracious God who loves and has given each of us all that we have.  They need this and so do we.