With 32 payday lenders for every 100,000 people, Mississippi has the higher payday lender per capita rate in the country. Known for offering exorbitant loan rates, payday lenders are a less than ideal financial alternative for those who lack basic financial services, yet millions of unbanked and underbanked turn to them for temporary financial relief every year.
One Mississippi community bank – BankPlus in Belzoni, Miss. – is looking to change all that. And after several years of incurring a loss, they say they’ve found a way to educate and serve the underbanked while still making a profit.
“The idea was to create a program to assist anyone caught in the payday lending cycle, but also to serve the underbanked who seek to enter the commercial banking system,” Bill Ray, CEO of BankPlus, told American Banker.
From that desire came CreditPlus: a program tailored for the unbanked and underbanked that offers one- or two-year loans of $500 or $1,000. But unlike their payday loan alternatives, CreditPlus loans come with an ARP of only 5 percent, and require the completion of a three-hour financial literacy course by the loan’s recipient before they can be obtained.
According to Ray, such terms help some of the un and underbanked population avoid payday lenders all together, and helps break others out of their cycle of debt. BankPlus has dolled out over 12,000 CreditPlus loans in the past four years, totaling $9.3 million dollars and facing just a 7.14 percent default rate.
“The key to the program’s success is commitment to seminars, education and beating the pavement in communities that really need help,” Ray said.
“It’s rewarding to see the impact the program is having on families right here in Mississippi.”
To read more about BankPlus’ program and Mississippi’s payday lending troubles, read the full American Banker article here.