Alternative Credit

New York City’s Office of Financial Empowerment (OFE) is the first local government agency in the nation whose mission is to help low-income individuals build assets and maximize their financial resources. It provides low-income residents with access to an array of innovative financial services to achieve greater equality.  This is achieved through a number of programs that focus on educating, empowering, and protecting consumers. The OFE strives to develop new frameworks to strengthen existing programs and accelerate its impact within the neighborhoods it serves

For low-income residents, who either lack a traditional credit history or suffer from bad credit, the inability to demonstrate credit-worthiness can serve as crippling barrier to financial freedom and upward mobility. In light of this credit crisis, the OFE partnered with Urbane Development to identify “alternative” credit as a means for underserved communities to access more traditional financial services.

The OFE and Urbane selected the neighborhood of Bedford-Stuyvesant in Brooklyn, New York, to anchor the research and to begin building a framework that is replicable and provides actionable insight to the public, private and nonprofit institutions working in this space. Urbane set out to answer a number of questions, including how lenders assess the risk of borrowers; the level of trust low-income and minority communities place on government systems and institutions; what existing formal and informal networks at the neighborhood level can be leveraged for credit-related activities; and the risks associated with subsidies and alternative credit for the individual consumer.

To answer these questions, Urbane conducted thorough primary and secondary research in Bedford-Stuyvesant. Twenty-five small businesses were surveyed in Bedford-Stuyvesant, with a special emphasis on grocery stores, health and beauty retailers, food services and restaurants, and dollar stores. To understand the financial challenges faced by residents and opportunities within the neighborhood, Urbane met with a number of local institutions, including Bed-Stuy Gateway Business Improvement District (BID) and Bed-Stuy Restoration, both agencies that have valuable insights into the power dynamics of lenders, businesses, and consumers at the neighborhood level.

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Leveraging the OFE’s network, Urbane conducted a group interviews and focus groups with the Financial Empowerment Center Counselors and consumers to understand broad level trends and begin connecting the issue to the neighborhood context of Bedford-Stuyvesant. Additionally, Urbane conducted numerous interviews with experts in the field, city agencies, and banking and lending agencies, all institutions that have a unique perspective on financial trends they see in underserved, minority communities and can speak to the viability of targeted initiatives to take root and transform neighborhoods like Bedford-Stuyvesant.

The final report produced by Urbane draws from the research and includes data and insights necessary for the New York City Office of Financial Empowerment to advance future programs, partnerships, policies and research to help establish efficient and community-led processes for alternative credit reporting in targeted neighborhoods within New York City.