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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 work for individuals residing on low incomes in Calgary. The main focus regarding the research is on working together with main-stream banking institutions. a favored consultant will have an understanding of and experience with social finance.

Organization Background:

Momentum (www.momentum.org) is just a charitable community financial developing company in Calgary that lovers with individuals residing on low incomes to obtain success by providing development in economic literacy, abilities training, micro-lending and company development help. Our eyesight is: “Every individual might have a sustainable livelihood and subscribe to their community.”

Problem Background:

Numerous Albertans residing on lower-incomes aren’t able to get into safe and affordable short-term credit and wind up making use of payday advances. Pay day loans are a type of short-term credit that usually leads to a period of debt. Pay day loans are:

costly – rates of interest all the way to 600per cent when annualized

Geared to individuals residing on reduced incomes – Many clients make not as much as $30K and make use of loans for regular costs

In charge of producing financial obligation 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 when you look at the year that is previous. Nationwide $2M people 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 financial institutions try not to provide contending credit that is short-term reduced rates of interest. a reason that is primary are no alternatives is banking institutions are not able to come up with a sufficient monetary return providing tiny loans at affordable prices to raised risk customers. Based on interviews with senior retail bankers, economic help to lessen the chance element is regarded as essential to engage banking institutions in supplying alternate financing to payday advances.

Project Background:

Within the last 2 yrs, 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 main techniques:

Policy Advocacy: After Momentum’s policy that is public published an insurance policy brief in the problem, significant news attention ended up being accomplished. This contributed to increased attention from policy manufacturers. In specific, a Notice of movement ended up being presented to Calgary City Council in 2014 that resulted within the populous city agreeing to leverage its company certification and land usage capabilities to suppress the expansion of payday financing places. Furthermore, provider Alberta is undertaking overview of the payday lending legislation in the Fair Trading Act. Momentum additionally supports a group that is grassroots “Rise of this money Store” in Greater Forest Lawn. Momentum while the increase associated with money Store have actually worked utilizing the Haskayne School of company to guide innovation and research on this issue. Especially, pupil case competition is underway.

Payday Lending Alternative Product Piloting: together with First Calgary Financial and a personal philanthropist, Momentum is piloting money Crunch, a pay day loan alternative item. Money Crunch offers that loan within 48 hours all the way to $1500 at 12% APR. Though interest in 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 measure because 100% of loans are secured by a personal donor, yet it really is yielding information that will inform future product design and reduce the danger for any other lovers.

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Standard bank Partnership analysis: during the summer 2015, Momentum started to investigate other opportunities to deliver options to payday advances. The study confirmed that no payday financing alternatives are now available within conventional banking institutions. an integral choosing ended up being that the big, nationwide banking institutions are extremely not likely to give you alternative, short-term onsumers for just two key reasons: 1. minimal sensed profitability as a result of high-risk amount of the kind of loan portfolio 2. tall degrees of financing automation and centralization which may allow it to be very hard to introduce a pilot on a scale that is regional. As a consequence of the investigation, further investigation on alternate financing will give attention to locally-based finance institutions.

As well as the activity that is above Momentum has convened a tiny set of philanthropist leaders thinking about the topic of fair funding. They usually have co-created a thought brief that details their reasoning to date which is often made open to project proponents.

Venture Goal:

The task objective is: to produce a reasonable and scalable alternative cash advance 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 in this particular project must look into two alternative that is possible, 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 supply loan loss money, and

Personal Business: A model that leverages ‘non-traditional’ banking institutions to give short-term consumer loans. Momentum anticipates a less active part in solutions through this flow, though we might have the ability to become an agent between social accountable investors and alternate financing company operators.

Momentum will not assume it’s going to always have a job to relax and play in all solutions that are potential.

Design Question: just exactly 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 answering the concern above, by attaining two objectives that are primary.

Ecological Scan and Market Feasibility (roughly 20% of task): the goal of this goal is always to investigate the presence and popularity of other alternate lending models, in addition to feasibility of this two options described above. Momentum’s present presumption that the most readily useful course ahead features a partnership by having a lender, nonetheless it desires to make sure hardly any other viable alternative is over looked. In this particular objective, the consultant is accountable to:

Confirm current Calgary market size and earnings information (if available) for mainstream payday financing.

Conduct a higher level scan of payday financing options currently provided in united states cities (eg BankOn, Van City Fair & Fast Loan, brand New begin Canada)

Provide a synopsis of short-term, low buck value products seem to be when you look at the Calgary market with a certain increased exposure of task that could be considered ‘in between’ old-fashioned fringe financing and old-fashioned bank offerings. Use in scope lending that is online some other financing that develops away from finance institutions.