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Sunday, October 26, 2014

Predatory Lending: Why JIFFI is Fighting It

Helen Sheng | Vice President of Marketing 

Until I joined JIFFI, I, like many others, had no idea about the dangers of predatory lending (or really what it even was). Unfortunately, it has become one of America’s ugliest secrets. Although it has been receiving a lot more media attention lately, very little is actually being done to combat this monster.

The mechanism of payday loans is deceptively simple. Sure, a small 14-day loan with a 15 to 30 percent interest rate sounds fairly reasonable (especially when most people intend on paying them back quickly). But a cursory interest calculation shows that annual percentage rates usually end up being over 300 percent. After borrowers realize they can’t pay back the full amount in 2 weeks, the payday lender gives them the option of extending the loan term and paying back the interest. In short, the borrower keeps paying interest but never knocks down the principal loan amount. Since these are short term loans, it could be considered unfair to judge them by an annual rate, but lenders actually do make their money on the long term—the Center for Responsible Lending reports that 76 percent of predatory lending revenue is generated on repeat borrowers, perpetuating this cycle of debt that keeps people in poverty.
This is what makes payday lending a 9 billion industry, with more locations than McDonald’s and Starbucks combined. Unfortunately, there isn’t much regulation on predatory lending—with their aggressive techniques and contracts, lenders can get away with annual interest rates in the thousands.
Micro finance institutions like JIFFI are fighting an uphill battle. Payday lenders have the resources, the demand, and the momentum to continue swelling in size and taking advantage of people in financial difficulties. To learn more about predatory lending practices and ways to protect yourself, check out this article:

Helen is a sophomore studying IT Management. In her spare time not spent working at JIFFI, Helen enjoys participating in SIBC and chasing waterfowl. 

Sunday, October 19, 2014

Talking microcredit with Professor P

Anvi Ton | Senior Associate of Financial Empowerment

On one glorious autumn day, I had the chance to meet with a visiting professor from Cornell University with a Ph.D. from Harvard in Sociology. One topic led to another and we eventually landed on the subject of her current research—microfinance. I didn’t record our conversation, but I think the following “reenactment” captures the gist of it:

Me: Thank you for joining me today. I didn’t have a chance to attend your talk, but do you think you could explain a little more about your research on micro finance?

Professor P: Of course! A lot of research has already been done on the financial impact of microfinance, so I wanted to study the phenomenon from a different angle—I wanted to study the cultural effects that microcredit groups have had in rural parts of India. I found that, aside from financial empowerment, women in India felt empowered to play a greater role in their own communities. They formed their own close-knit civic groups and some even started to take action against the injustices they saw.

Me: What types of injustices did they take action against? Can you tell me more about what they did?

Professor P: One example that comes to mind has to do with a young lady being beaten by her husband. Another woman saw this and quickly rallied the community women to help. They then all marched up to the couple’s house and put an end to the domestic violence––it was group solidarity at its finest. This is especially incredible considering how many of the women (with a bit of embarrassment) even admitted that they had not even known their own neighbors very well prior to their involvement with the microcredit group. Now look at them!

Me: Wow. That’s great that these women are all working together and supporting each other! Considering that patriarchy is still heavily-embedded in Indian culture, how do the men feel about the microcredit groups?

Professor P: A lot of them were hesitant at first—they did not want their wives to leave the house for extended periods of time. In fact, a lot of the women had to sneak out of the house at first in order to attend the microcredit meetings. However, as time passed and more women became involved, I think the men slowly came to accept the existence of the groups . . . and the fact that they couldn’t really stop all the women from partaking in them.  Although it should be noted that a lot of the men also saw the value in having their wives learn about money management––the microcredit groups provided a way for their wives to take part in the household’s finances, as well as a way for the women to potentially bring in extra income.

Me: What would you say was one of the most inspiring things you learned about while you were there?

Professor P: The greatest thing I saw was the way that the institution of microcredit empowered the women to unite and take action in areas of their lives they never would have thought to before. I was especially excited to hear about how this “women’s empowerment movement” might be affecting the way their kids think. For instance, there was one woman who talked about how her son used to be so furious – so angry – that she wasn’t home to feed him because she was off participating in one of the microcredit meetings. Even though she had always prepared food for him before she left, he used to refuse to eat it until she came home and fed him. Now whenever he sees that she’s home instead of at a group meeting, he says: “Mom, what are you still doing at home? You’re going to be late to the meeting! You need to leave now!” This is a stark difference to how he reacted before—it is truly a testament to how the later generation’s view on the role of women might be changing. I’m excited to do follow-up research about this in the future.

Me: Do you have any advice for our JIFFI team moving forward?

Professor P: I would definitely consider trying to create a more cohesive network between your JIFFI clients—it might be beneficial for them to be able to talk and connect to each other, especially if they find themselves in similar situations. That being said, this might be a little more feasible to do with the clients in your Financial Empowerment classes—they would actually be able to see each other on a consistent basis and would (presumably) all have a desire to learn from/communicate with each other. Needless to say, I don’t think you guys should underestimate the power of community.


Unfortunately, I only had about an hour to talk to her, and our conversation ended rather abruptly as we realized we had gone overtime. Even so, Professor P. offered a wealth of information about microfinance, as well as lot of great ideas on how to improve the JIFFI network—ideas that I’m excited to share with the rest of the team!

Now if only I hadn’t needed to run off to my Accounting class, I could have learned a lot more from her…Darn that Accounting class!

Oh well, until next time…

- Anvi

Anvi is a sophomore studying finance and sociology. Her interests outside of JIFFI include geocaching and sleeping.

Sunday, October 12, 2014

A Quick History: South Bend's Economy

Grace Watkins | Legal Associate

The river its name refers to has always driven South Bend’s economy. Settlement in this area began in the 1800s as an outpost for fur traders traveling along the river, which is an industry that has obviously since declined. Post-industrialization, the river facilitated the development of South Bend factories for corporations such as Studebaker and Oliver Chilled Plow. This period was the “Golden Age” of South Bend, when population and employment were at their highest. Industrial manufacturing employed half of the South Bend workforce.

South Bend has been on a somewhat steady economic downturn since the closing of the manufacturing factories fueling their economy. Companies started closing in the early 60’s due to economic troubles related to the technological outdating of the factory process. While industrial jobs can still be found today, there are significantly less offered. Industry occupies a substantially smaller portion of the make-up of the South Bend economy.

The economy is now focused more towards jobs relating either directly or indirectly to the University of Notre Dame (e.g. tourism, teaching, and small business ownership etc.). As of 2010 in the Comprehensive Annual Financial Report, Notre Dame was South Bend’s top employer with over 5,190 residents employed. This was followed by the Memorial Health System, with 4,069 and the South Bend Community School Corporation, with 3,489. Other significant employers are the Saint Joseph Regional Medical Center, the Roman Catholic Diocese of Fort-Wayne-South Bend, Indiana University South Bend, St. Joseph County, the city of South Bend, South Bend Medical Foundation, and Honeywell. Given that Honeywell is the only of these involved in industrial manufacturing, this is notable evidence of the economic shift that has taken place. If you have ever wondered about the many abandoned brick buildings that you see when driving through downtown—here is your answer.

In the same way that some of these buildings are being reclaimed while many more still remain empty, the South Bend economy is improving but still remains a shadow of what it once was. The effects of the economic downturn continue to be deeply felt. The median income in South Bend is $32,778, while the median income in the state as a whole is $12,646 higher. The unemployment rate in South Bend is 8% in comparison to 5.9% in Indiana itself. The concerning nature of these statistics becomes even more apparent when compared to the United States as a whole, where the median income is $51,939 and unemployment is at 6.1%. This illustrates why JIFFI is so important to have in an economically disadvantaged area such as South Bend. We want to change the descriptor of South Bend’s economic state from “economically disadvantaged,” which denotes a certain sense of stagnancy, to something more along the lines of “economically recovering”. It is our mission to facilitate this upward movement as much as possible through aiding residents in escaping the circle of poverty exacerbated by debt.

Grace is a sophomore studying philosophy, political science, and PPE. Her interests include reading, traveling, horseback riding, and photography.

Sunday, October 5, 2014

The Role of Financial Literacy in Low-Income Communities

Cristina Gutierrez | Senior Marketing Associate

As an organization with a powerful mission to bring people out of poverty, one of JIFFI's goals is to improve the financial literacy of the South Bend community. Financial literacy refers to people's understanding of financial products, and the benefits and risks associated with each. Having this ability to understand how money works is extremely important, considering that much of what we do on a daily basis requires financial planning. Whether it's buying food from the supermarket, paying rent or funding educational opportunities, having a good understanding of financial concepts is crucial to developing healthier financial habits  in terms of both investing and saving.

Over the last decade, the decline in financial literacy has become a global issue. Research conducted by the Woodstock Institute, however, has revealed that financial literacy rates are lower among low-income communities. With limited access to financial learning resources, people in these communities are more susceptible to making financially burdensome decisions and, as a result, end up damaging their credit scores and falling into more debt. Particularly worrisome is that people with limited understanding of finance are more likely to become involved with predatory lending.

Predatory lenders offer loans with unfair terms and extremely high interest rates. These practices are deceptive, and are more likely to entice people who don't have a strong financial background and are unaware of the risks associated with such loans. Predatory lending has become a growing concern within the South Bend community and, to combat its negative effects, JIFFI developed a series of modules within its Financial Empowerment Program (FEP). This program is available to all members of the South Bend community, and is designed to provide valuable feedback and resources to all participants. Through its modules, participants work with JIFFI members to analyze their budgets, plan goals to manage their debt, determine long-term savings strategies and explore ways to boost their credit scores.

The road to improve financial literacy may be long, but JIFFI has already begun to leave its mark.

Cristina is a junior majoring in Finance and Psychology. Besides working with JIFFI, she serves on the Board of the Student International Business Council and works as Controller for The Observer. Her interests include learning about marketing, reading, and baking.