The Community Bank Incubator: Unbanked Customers

By Corey Carlisle

For HarborOne Bank in Brockton, Mass., building trust within the community’s immigrant population saw many positive results. In 2007, against the backdrop of a foreclosure crisis, the bank converted 11,000 square feet of its former headquarters into a multicultural banking center called HarborOne U-Brockton, offering financial literacy classes in multiple languages, as well as U.S. citizenship classes. Thousands of volunteer hours have been logged by HarborOne staff teaching the approximately 7,000 attendees that have taken advantage of the various class offerings. In turn, those attendees have made $10 million in deposits and borrowed $35 million in business and personal loans.

Recently, the bank’s small business team also began teaching financial management curriculum to microbusiness owners. A second HarborOne U location has opened in nearby Mansfield, focusing on female business owners and entrepreneurs. Graduates of the classes are eligible for a business loan of up to $5,000 that can be expanded to a $10,000 line of credit.

BankPlus, a $2.5 billion community bank in Mississippi that won a 2015 ABA Foundation Community Commitment Award, provides small-dollar loans to consumers who use payday lenders or other high-interest, alternative lenders. The bank’s “CreditPlus” program gives borrowers with a credit score of 550 or above the opportunity to get loans of up to $1,000, while those with a score of 549 or below can borrow up to $500. The loans have a repayment term of one or two years and a low 5 percent APR. The bank requires six months of continuous, verifiable income, attendance at a bank-sponsored financial literacy seminar and two forms of identification. When the first loan is repaid, customers have the option of applying for a second loan. Since the program’s inception, the bank has made nearly 23,000 loans totaling more than $17 million. BankPlus has conducted 674 financial literacy seminars as part of the CreditPlus program, with more than 23,000 individuals in attendance.

The CreditPlus program also establishes checking and savings accounts for each customer. Half of the loan is deposited into a savings account and held as collateral. This encourages these customers, many of whom are struggling to break the payday lending cycle, to use the checking account as their primary account and add funds to the newly created savings account on a regular basis. Free online banking, bill pay and ATM usage complement these accounts. BankPlus heavily marketed the program when it first launched, but it now attracts most CreditPlus customers through word of mouth or via churches, nonprofits, schools or businesses where the bank has held financial literacy courses. Given the program’s success and strong demand, BankPlus also created CreditPlus Auto and BusinessPlus for customers that have completed CreditPlus and are looking to purchase a car or realize a business plan.

“CreditPlus has steered many people away from payday lenders, while helping them pay off previous payday lender debt, medical bills and even establish savings plans for the first time,” says Bill Ray, BankPlus president and CEO. “It’s rewarding to see the impact the program is having on families right here in Mississippi.”

These outstanding community banks have found that serving the unbanked benefits their business strategies, not only by bringing in new customers, but by spurring the development of creative offerings that appeal beyond their initial target audience. A tremendous innovation engine, indeed!