Filene Incubator Call for Credit Union Testers 2016

REACHING MINORITY HOUSEHOLDS WITH COMMUNITY MICROFINANCE SMALL BUSINESS LENDING Filene Incubator Call for Credit Union Testers 2016

MEET THE FILENE AND ALTERNA SAVINGS TEAM Andrew Downin Managing Director, Innovation Filene Research Institute Corlinda Wooden Project Manager Filene Research Institute Susan Henry Manager, Community Investments Alterna Savings Credit Union

AVAILABLE ON FILENE.ORG THE RESEARCH

REACHING MINORITY HOUSEHOLDS THE NEED IS GREAT

REACHING MINORITY HOUSEHOLDS WE CAN LEARN FROM CREDIT UNIONS

REACHING MINORITY HOUSEHOLDS SUSTAINABILITY IS POSSIBLE

TESTING THE SOLUTIONS FIVE PRODUCTS SELECTED 15 products and programs were submitted in late 2015 Five were selected with input from our Advisory Panel Data Mined Auto Loans Community Microfinance Non-Citizen Lending Payday Payoff QCash Credit unions like yours will now be the proving ground for these in-market products which have already had success at the local level Our goal is to understand desirability, feasibility, viability, and potential for greater market impact

Alterna Savings Credit Union Microfinance Program Products Program Process Transforming & Changing lives

ALTERNA SAVINGS HISTORY Credit Union Microfinance Program 100 years history of cooperative financing in community Serving over 110,000 + members 23 branches (Ontario) We operate in the province of Ontario (Greater Toronto Area, Ottawa region, Kingston, Pembroke and North Bay) Began in 2000 Partnered with Calemadow (non-profit organization) and then took over its Community Micro Loan Fund One of the largest Microfinance Programs in Ontario We ve provided over $3.6 million dollars in micro loans to over 700 individuals Copyright (C) 2016 Filene Research Ins?tute

WHY MICROFINANCE? ACCESS TO AFFORDABLE FINANCIAL SERVICES BARRIERS Large banks perceive micro-borrowers as investment risks Large banks think small loans are not profitable Some micro-borrowers have income near poverty line and lack stable cash flow; these individuals are usually unemployed, disabled, recent immigrants, women or youth Limited to no credit history Microfinance businesses are sometimes socially business oriented and are misunderstood by mainstream financial institutions

TARGET GROUPS ENTREPRENEURIAL POSSIBILITIES Monique Durant, Mondu Floral Design: Micro borrower and member since 2003 Toronto Tool Library: Micro borrower and since 2012 Leslie Morris, Your Signature Look: Micro borrower and Member Since 2006 Alison Gledhill, Grace Design: Micro borrower and member since 2012 Panagiotis Tsiriotakis, Acropolis Organics: Micro borrower and member since 2003 Women Entrepreneurs Social Entrepreneurs Social Enterprise Skilled Professionals and Trades Working Poor/Low Wage Earners Minority Entrepreneurs Copyright (C) 2016 Filene Research Ins?tute

PROCESS ALTERNA SAVINGS MICROFINANCE PROGRAM LEARNING (ECOSYSTEMS) LOOP Bridging social and financial benefits, with significant feedback from members Peter Scott Mdes, SFI, OCAD University, 2015 Copyright (C) 2016 Filene Research Ins?tute

PROCESS WORKFLOW Community outreach Intake interview Application Lender due diligence Lender underwrites Employment and Training Centres Business Development Centres Newcomer Centres Community Agencies Borrowers present their business plan They are assessed on their character, commitment & skill set Discussion about their money management knowledge Completion of loan application form & questionnaire Business Plan Cash flow projections Business registration References 7 days to complete Review of all documents Assessment of business plan & cash flow projections Follow up references Credit bureau and property check Credit officer underwrites and presents recommend for approval Community investment manager approve loans up to $25,000

PROCESS PROGRAM DETAILS Alterna s general policy and guidelines allows for Microfinance loans to be booked under both its retail and commercial departments Micro loans are between $1,000 to $25,000 Loan criteria depends on the amount of the loan, type of business structure, beacon score and other specifications Interest rates from prime +2 to prime 6% Administration fee $100 Repayment terms range from 1 to 5 years Loan payments are scheduled monthly Repayment rate at 96%

PROGRAM WHAT MAKES THIS PROGRAM UNIQUE? Education and relationship are key strategic approaches Financial planning Community Microfinance Product & Service Innovation Wrap-around assistants help to bridge financing and social In-branch promotion 1. Income builder loans 2. Working women business loans 3. Skills professional and trades loans 4. Social impact entrepreneurship loans Networking Business coaching seminars Copyright (C) 2016 Filene Research Ins?tute

MEMBER EDUCATION FINANCIAL LITERACY THROUGH NETWORKING CAFÉS & SEMINARS" In-house education: Money management Banking basics (for the underbanked) Budget basics 101 Credit basics ABC Savings basics Collaboration with industry experts: Relationship & competency building Marketing Taxation Sales Media awareness Success stories Coaching

PROGRAM DEMONSTRABLE COMMUNITY & CREDIT UNION BENEFITS " Measuring impact at 3 levels: Micro. Meso, Macro 2009 Increased income ($1-$10,000) Improved socioeconomic status Primary bank users (35%) 67% promoted Alterna s services to others Creation of new jobs (62% hired workers) 50% reduction in government assistance Unincorporated business paid 30% on income earned 62% women 2012 New Borrower Increased income ($5-$23,000) No drastic change in socioeconomic status Primary bank users (100%) 75% promoted Alterna s services to others 25% hired permanent workers 75% on a part-time basis 75% reduction in government assistance Tax payments remained unchanged 89% women Copyright (C) 2016 Filene Research Ins?tute

CHALLENGES & OPPORTUNITIES BUSINESS MODEL CANVAS (BMC) " An Intrapreneurship approach to Microfinance Program, within an organization structure Copyright (C) 2016 Filene Research Ins?tute

COMMUNITY MACRO ECOSYSTEM PARTNERS Women s Empowerment Impact Investing Concern for Environment Community Impact Social Innovation Financial Well Being Poverty Alleviation Youth Engagement Copyright (C) 2016 Filene Research Ins?tute

MESO CORPORATE BENCH STRENGTHS PARTNERSHIP Community Loan Fund Partners Ottawa Community Loan Fund Access Community Capital Fund (ACCF) Youth Micro Loan Program Rise Asset Development Community MicroSkills Development Centre (MicroSkills) Catapult Microloan Fund Carrot Cache Community Foundation for Kingston & Area

PRODUCTS & SERVICES WHERE DO PRODUCT & SERVICE DEVELOPMENT OPPORTUNITIES START? Organizational Leadership Organization by-in and internal champions Alignment with organization s strategic mandate Alignment with internal departments Alignment with external partners Microfinance Relationship Building Current and new members Community organizations Education institutions Governments Copyright (C) 2016 Filene Research Ins?tute

AWARDS & GRANTS SPECIAL RECOGNITION FOR SOCIAL IMPACT ON COMMUNITIES 2012 MicroSkills Corporate Spirit Award from the Community MicroSkills Development Centre 2012 National Credit Union Community Economic Development Award from Credit Union Central of Canada Toronto, ON November 13, 2015 Alterna first Canadian company to achieve $300K Microfinance grant from Whole Planet Foundation Outstanding Corporate Achievement Award in 2016 from Ontario Credit Union Foundation

YOUR PARTICIPATION IS CRITICAL CALL FOR CREDIT UNIONS Filene will select a group of credit unions to pilot test the products refined in the incubator. We re asking credit unions to: Demonstrate the ability to incorporate emerging products into its operations and systematically pilot their features over a period of 18 months Offer the product on a pilot basis to at least 200 of your members Document pilot-test results in accordance with the research protocol and guidelines Provide insightful commentary on the strengths, weaknesses, opportunities, and threats (SWOT) along with recommendations at the granular, operational level around pilot products

WHAT S IN IT FOR YOU? BENEFITS OF TESTING For your credit union Early-stage participation in products that may benefit minority households Access to experienced Filene staff and development/marketing resources Implementation and testing experience that can be applied to future initiatives Strengthened relationships with your members For the industry Collaborative product testing at scale for a broad impact on underserved households Sharing of best practices between locally successful credit unions and other institutions nationwide For your members New access to fairly priced products and services Greater likelihood of long-term financial security Potential for a more positive impression of your credit union

TAKE ACTION READY TO TEST? Let us know you are interested in testing by filling out a brief notice of interest The NOI link will be e-mailed to you If you have questions please let us know Please submit interest by May 13 We look forward to you being a part of this important work!

QUESTIONS

THANK YOU! Andrew Downin andrewd@filene.org 608.661.3746 Corlinda Wooden corlindaw@filene.org 503.998.6213 Susan Henry susan.henry@alterna.ca 416.213.7965 ext. 3419