Lending Circles Use Teamwork, Skill-building to Strengthen Lawrence

What can a group of like-minded people accomplish when they are accountable to one another? In the case of the Lending Circle, the answer is simple: they can help each other down the path to lasting financial stability.

Patterned after a similar program from San Francisco, the Lending Circle featured eight residents of Lawrence, MA coming together to be accountable to one another and work to attain financial stability. The program was developed and implemented by Lawrence CommunityWorks (LCW), a United Way partner and affiliate, and operated out of the Lawrence Financial Stability Center, which is part of a regional network of similar United Way-supported centers.

The lending circle ran for eight months and allowed participants to each in succession withdraw a one-time $1,000 loan. Each individual committed $125 monthly to the funding pool. A loan loss reserve was established through an innovation grant secured by LCW from the Community Services Block Grant program to ensure that all of the participants received their loan proceeds in the event of any loan defaults.

But there were no defaults.

“It’s a credit builder,” said Gail Sokoloff, Community Impact Director at the United Way. “The lending circle uses a peer support model to ensure that people are accountable to each other. It gives them an incentive to be responsible in coming up with $125 each month and not let one another down.”

By the end of the program, the repayments were reported to the credit bureau and participants saw their rating improve. In fact, credit scores had an average increase of 29 points during the duration of the program.

“This fills a need for products that will help program participants with credit issues to start to rebuild their credit,” said Sokoloff. “There aren’t a lot of products out here for people with poor credit histories to access capital.”

The ongoing financial coaching provided by LCW added much to the equation and was an element that the participants recommended expanding for the next round of lending. The coaching approach is key to the strategies behind the financial stability center model, which brings in all manner of financial services and education under one roof, delivering intensive, comprehensive supports to all who walk through the doors.

Juan Bonilla is the Deputy Director at LCW and saw first-hand how the lending circle impacted LCW’s members.

“As participants pool their resources to ‘lend’ to one another,” he says, “they develop better financial habits and embark on a path to achieve their financial goals. As they become equipped with the right information with the help of a financial coach, participants learn to take control of their finances, making sound decisions with their money that result in improved financial measures and greater financial stability.”

Bonilla notes some impressive results: 100% of the participants demonstrated the ability to complete and maintain a budget for over 90 days; all eight participants established a financial plan and goals through the coaching tools; and, finally, all eight expressed a desire to participate in future lending circles. The Lending Circle will now be a regular offering of the Center along with other new and exciting programs that LCW has under development.

In true United Way and LCW fashion, the initiative represented a nexus of multiple partners, coming together to create something impactful: the pilot was funded by the Massachusetts Department of Housing and Community Development, Mill Cities Community Investments administered the loan accounts and provided the guarantees and Merrimack Valley Federal Credit Union hosted the accounts.

“All of us bring a piece to the table, “ said Bonilla. “ From community residents to institutional partners, everyone is bringing their strengths to make this community stronger.”

“Everyone was unanimous in their praise,” Sokoloff said. “They all reported that they planned to continue to participate in Lawrence Financial Stability Center programs.”