In America’s Payday Loan Capital, Innovative Microcredit Helps Break The Debt Cycle
Monday, June 22, 2015
JACKSON, Miss. — To drive down Ellis Avenue, just off the interstate, is to visit a paradise of easy money. Along a four-block drag of fast food joints and half-empty strip malls, the payday lenders are packed in tight. The names on their fluorescent signs melt into one another: Paycheck Loans, Advance America Cash Advance, Speedee Cash, Payroll Advance, Cash Flash, Cash Depot, Cash Connection, E-Z Check.
Mississippi, the poorest state in the nation, has more payday lenders per capita than anywhere else in America, and people there have less access to traditional banks than in any other state. But an innovative partnership between the Mississippi Center for Justice, banks and employers is helping to give the state’s residents access to responsible small-dollar loans, as well as free financial education and a new way to start building savings and credit.
Dubbed the New Roots Credit Partnership, the center’s program pairs community banks willing to provide financial literacy education and small loans with employers who are willing to offer this education to their employees. Now, two years after the program launched in 2013, it is growing slowly.
Across the globe, the small-dollar loans known as microcredit have transformed poor communities by providing entrepreneurs with start-up capital, often as little as $50, to fund small businesses that generate income. The Grameen Bank in Bangladesh, a microlender, was honored with the Nobel Peace Prize in 2006, and small loans have been touted as a breakthrough tactic in the fight against global poverty.
So far, the New Roots Credit Partnership has signed up the cities of Jackson and Canton, as well as a school district in the Delta and a regional housing authority. “It’s a win-win-win,” said Charles Lee, director of consumer protection at the Mississippi Center for Justice, during an interview at the group’s Jackson headquarters. “Participants get the loans they need, as well as financial literacy training; the bank gets new customers; and the employers cut down on the number of garnishments they have to process each month, while providing their workers with an important benefit.”