It's Not So Easy Being Green

I have an MA in Environmental Studies. I wrote my masters thesis on how to use financial services to empower people out of poverty and, as they do so, take action on environmental issues.  For 7 seven years my bicycle was my only means of transportation; I have solar panels on the roof of my condo and even a rain barrel...In short, you'd think I'd be the least likely of people to struggle with making a choice between the 'green' and 'gray' options.  Alas, it's not so simple.

Introducing The TECH Project

"What," you might be wondering, "does Capital Good Fund, an organization that provides financial services for the poor, have to do with education?"  Well, we're glad you asked! The TECH (Technology, Education & Community for Holistic-schools) Project brings together parents, teachers, students, and other stakeholders to foster vibrant school communities with the dual intention of increasing educational outcomes and lowering rates of poverty.

Hiring a Creative Officer!

CGF’s Creative Officer will work to create a press kit, videos about CGF’s work and borrowers, graphics that explain our business model and other important needs, and training materials for clients. 

Seeking a Special Projects Coordinator

Capital Good Fund (CGF) and Broadband Rhode Island (BBRI) recently signed a contract to pilot an innovative program through which we partner with underperforming elementary and middle schools to provide the parents with the following services: loans for computers and Internet service, digital literacy training and financial coaching. 

Hiring a Head Loan Officer

The Head Loan Officer will be tasked with closing at least 250 loans during the year of his or her service, while also maintaining a high repayment rate.  Accomplishing this will require an ability to become deeply embedded in the communities that CGF serves.

RI Treasurer References CGF

From RI General Treasurer, Gina Raimondo:
(See paragraph 9 for  CGF name drop)


Protect R.I. from these abusive lenders

GINA M. RAIMONDO

   Rhode Island’s economic outlook is directly linked to the financial well-being of its citizens. When Rhode Islanders are empowered to make informed, responsible financial decisions and can access capital on fair terms, our economy can prosper.

   We cannot build strong communities if our families are mired in debt and constantly worried about their financial footing. Some of these challenges may be mitigated or avoided through a greater understanding of personal finance and the dangers of risky lending products.

   As treasurer, my office is working with local nonprofits and financial institutions to offer financial literacy programs to a wide range of Rhode Islanders. We are also working with the state’s financial institutions to ensure greater access to safe, low-cost financial products.

   We must protect Rhode Islanders from abusive lending practices that impair our state’s economic success. One such practice is payday lending. With numerous economic challenges, Rhode Island cannot afford to permit the sale of a financial product that traps many consumers in a cycle of debt.

   A payday loan is a small, short-term loan secured against a customer’s next paycheck. A borrower writes a personal check for the amount borrowed plus the finance charges or “fee” and receives cash in return. The borrower must pay the amount borrowed plus the fee on his or her next payday in one lump sum. Payday advocates highlight the fact that these loans help consumers who would otherwise have nowhere to turn because traditional financial institutions are reluctant to lend to risky borrowers.

   Too often, however, that begins a vicious cycle of debt, as the borrower is forced to take out another loan to make ends meet until his or her next paycheck. The Center for Responsible Lending estimates that borrowers who take out 12 or more loans a year generate the majority of the industry’s business.

   I have joined with state Rep. Frank Ferri, state Sen. Juan Pichardo, Mayor Taveras and the Rhode Island Payday Lending Reform Coalition in advocating against this practice.

   We should curb the predatory practices of the payday lending industry, while ensuring fair access to capital and financial education needed to thrive.

   One such safer alternative is the Capital Good Fund, a Providence-based nonprofit, which provides loans and financial coaching to low-income Rhode Islanders. Some credit unions are also beginning to launch safe payday alternatives.

   Payday lending is relatively new in Rhode Island and we are the only New England state to allow it. Prior to 2001, existing law capped small dollar loans at a maximum rate of 3 percent a month — or 36 percent APR. However, legislative changes in 2001 and 2005 made Rhode Island fertile ground for the national payday lending chains. Today, a payday lender can charge up to $10 per every $100 borrowed over a two-week period, which equates to a 260 percent APR.

   In 2006, with bi-partisan support, Congress banned lenders from issuing payday loans to members of the armed forces or their dependents. This action was taken in response to growing financial problems associated with the practice of payday lending around military bases.

   It is time for Rhode Island to take action. The General Assembly should enact legislation that mandates a reduction in the allowable payday-lending interest rate, requires lenders to offer extended repayment plans, calls for greater disclosure of the real dangers associated with payday lending and emphasizes the need to create and publicize safer alternatives.

   In protecting our citizens from predatory lending, we can take a step toward a more prosperous economic future.

5 Ideas for Impact: A Brainstorm

In the spirit of open-source collaboration, I am sharing five (5) ideas, ranging from the easy to the difficult, for increasing CGF's social impact.  The impetus for this post is a fantastic book I just finished reading called 'The Power of Habit: Why We Do What We Do in Life and Business.'  Specifically, the book set my mind aflame with ideas for ways in which behavioral psychology--that is, a deep understanding of how human beings form habits and make decisions--can be used to change lives.

These approaches can be used by anyone to quit smoking, save money, exercise more, learn an instrument or meet any number of goals.  So here are some ideas that came out of the book and that can be applied at Capital Good Fund or in your personal lives: please comment!

1. Give Financial Coaching (FC) graduates a certificate.  The reason why handing out a certificate can increase social impact is that habits are formed in the following manner: first, there is a 'Cue' (i.e., a stressful situation); second, there is a 'Routine' (i.e., going shipping); and finally, there is a 'Reward' (i.e., a feeling of calm).  Habits change when the Cue' and 'Reward' stay the same, but the 'Routine' is supplanted with something healthier.  Therefore, Financial Coaching can empower someone to react to the stressful situation Cue in a different way; the Routine can become about implementing the lessons learned from Coaching, such as choosing to save money instead of spending it, and the certificate feeds into the sense of calm that serves as the Reward.  Simple, easy and powerful.
2. At loan closing, identify potential barriers to successful repayment.  The vast majority of people that take out a loan from CGF intend to pay it off.  However, things come up that stymie that goal--a family emergency, a depression, an unexpected--or (unnecessary) expense, and so on.  Studies have shown that one of the most effective ways of changing a negative response to a situation is to name it ahead of time and then to outline how it will be handled.  My idea is to do the following when closing a loan closing: have the client write down 3-5 things that might arise during the loan term that could derail the goal of paying back on-time (and therefore building credit and meeting the client's other goals).  Once these scenarios are on paper, the client will be asked to write down how s/he will handle them: for instance, s/he may identify the holidays as a time when spending goes up and, in response, pledge to set aside the loan payment money before shopping.
3. Call loan recipients to congratulate them on their first successful loan payment.  Going back to the Cue, Routine, Reward loop mentioned in the first idea, we can call clients after their first successful payment to congratulate them for getting on the path to their goals.  The hope is that the good feeling this engenders will form a habit of making loan payments on-time, every time.
4. Train Financial Coaches to identify barriers to success.  The more our Financial Coaching Fellows understand about behavioral psychology, the better equipped they will be to help clients name barriers to success and design strategies to overcome them.  Throughout the Coaching process, for instance, Coaches should be trained to work with clients to spell out how they will change their reaction to certain Cues so that, instead of resorting to a Routine that moves them away from their goals, they can create new Routines that get them where they want to go.
5. Facilitate more interaction between Financial Coaching clients.  One of the reasons why Alcoholics Anonymous works so well is that AA creates a community of trust and support for people struggling with addiction.  And this is critical because it turns out that changing the Routine only works until a particularly stressful situation arises; at that point, it's easy to revert to the old Routine.  What AA does is foster a culture of belief in the participant's ability to overcome addiction, and that belief, research shows, is essential to sticking to a habit change.  If CGF can find a low-cost/low-footprint way of facilitating interaction between Coaching clients so that they can talk about challenges and motivate and learn from each other, then we can further drive impact through our work.

There are plenty more ideas we can implement.  The main point here, however, is that by understanding how human beings think, act and form habits, we can help them set goals for themselves, and then stick to them.  The power of behavioral psychology is that it acknowledges how hard it is to do things that we know are good for us--eating better, saving more--but that require a change in behavior and habit.  What's more, behavioral psychology enables us to not only serve the people that are already 'ready' for change, but also those that want to but keep getting stuck.  And that means we can move toward our mission of ending poverty in the United States in a quicker, more coordinated and more sustainable manner.