CDFI Consumer Loans Help Immigrants and Refugees Climb Economic Ladder

Avery Kaplan, Membership Associate, Opportunity Finance Network

OFN member IRC-CEO uses CDFI small dollar consumer loans to combat predatory financial institutions.  

Read time: 7 minutes

OFN member IRC’s Center for Economic Opportunity (IRC-CEO) is the lending subsidiary of the International Rescue Committee (IRC), founded to help newly arrived refugees and other low-income families across the country climb the economic ladder. 

As we recognize National Immigrant Heritage Month, as well as World Refugee Day on June 20, IRC-CEO’s Kasra Movahedi and Gokcen Topbas discuss how they landed in community development, the overlap between the needs of immigrant and refugee borrowers and those of U.S.-born borrowers, and how small dollar consumer lending can have major impact in the communities that CDFIs serve. 

Kasra Movahedi (left) has been the Executive Director of IRC-CEO since it made its first loan in 2015. He has overseen the growth of its loan portfolio as well as its expansion into active lending in 18 states through 30+ community partners. Gokcen Topbas (right), Director of Credit Strategy, oversees small business lending efforts, including technical assistance to business owners, training for IRC-CEO’s community partners, and underwriting policies and procedures for the organization. 

How would you describe IRC-CEO to someone new to community development?

 

Kasra Movahedi: IRC-CEO is a nonprofit lender with a menu of loan products that directly address the most common economic needs of diverse, low-income populations. Our loan products are designed with these populations in mind. We offer these loans through community partners, which helps those organizations enhance their efforts through their existing programs. New loan products are developed in consultation with community partners and informed by borrower feedback.  

From our borrowers’ point of view, our loans create incentives to stay engaged with financial education and job training programs offered by our partners. For example, imagine a client is enrolled in a workforce program but may consider dropping out due to some barrier. If they know that at the end of the program there is a tangible offer for them, such as a loan to help them build credit or purchase a car, they may be incentivized to remain engaged. Now the client and partner are more likely to work together toward the common goal of economic improvement.  

Gokcen Topbas: The communities we serve do not have a lot of awareness about the credit and financial systems in the United States. We are helping them to learn, and we find our refugee and immigrant borrowers are often more cautious about their credit histories. We also find similar knowledge gaps with our U.S.-born borrowers because there are no financial literacy training standards for students across the country. 

What’s your “why” for working in the community development space, and how did you end up at IRC-CEO?

 

Gokcen Topbas: I have many “whys.”

I came to America from Turkey in 2017, began working at IRC in 2018, and joined IRC-CEO in 2021. I am an immigrant myself and had to learn the U.S. financial system on my own. But I also come from a country that recently has taken in millions of refugees and immigrants, where a refugee resettlement system does not exist – not like in the United States. When I was living in Istanbul, I would see the Syrian refugees on the street and I did not want to criticize or complain about the situation, but instead learn more and find a way to help. I notice the contrasts of a good faith resettlement system here in the United States and having no system in Turkey.  

I wanted to be a part of impactful work for the overall economy, both financially and socially. It is important to help refugees and immigrants learn the credit system, get financial education, and get small business development support. It makes a huge difference in that person’s life, in their neighbor’s life, in their household, even in the next generation, and maybe the generations to come.  

What keeps me working at IRC-CEO and in the community development space is seeing the impact of our small dollar consumer lending. When I underwrite a 0% interest loan for $100 for someone who is new to the country, I know that in six months that client will likely have established a decent credit score (640-700) and have better access to a credit card to help manage cash flow or get a reasonable interest rate on an auto loan.

Borrowers come away with a better understanding of how credit works in the United States and how their credit score impacts the financial options available to them after having a credit building loan through CEO. We’ve had borrowers return for financing through IRC-CEO because they trust our flexibility when life gets hard, even if they could likely receive slightly better rates elsewhere because their credit score has improved after working with us.      

In the past few years, what initiative do you feel had the biggest impact on the community you serve?

 

Kasra Movahedi: When Kabul fell to the Taliban in August 2021, more than 70,000 Afghan civilians were airlifted out of the country. Those who arrived in the United States did not go through the “normal” resettlement process and therefore did not have access to the same resources as refugees.  

IRC-CEO launched Supporting Afghan Financial Empowerment (SAFE) alongside our partners at the International Rescue Committee. Within five months of the evacuation, we stood up digital access to financial education — available remotely, anywhere in the United States — with translated resources and access to financial coaches who were from Afghanistan, could understand the experiences clients were going through, and communicate with them in their own languages. Notably, IRC-CEO raised loan capital for SAFE with terms that were favorable to borrowers experiencing serious hardship.

From March 2022 to July 2023, IRC-CEO made 982 loans, totaling $6.9 million, to recently arrived Afghan parolees through the SAFE program.  

IRC’s SAFE program has since expanded to include Spanish-speaking coaches and resources and provide remote service delivery across the country, making financial education, coaching, and lending available to more newcomers from different backgrounds.  

IRC-CEO took what we learned from the SAFE program and now apply a 1% discount on loans to any borrower with humanitarian status within their first two years in the United States.  

Gokcen Topbas: Another exciting initiative from IRC and CEO is the Community Navigator Pilot Program, which shows the nationwide impact of our business lending and has allowed us to reach new places and work with other nonprofits serving their communities. Through the program’s referral process, IRC-CEO has funded small business owners who represent different countries, languages, industries, financial acumen, and business experience.  

What are you looking forward to seeing in the CDFI industry in 2024? 

 

Kasra Movahedi: More consumer lending and a recognition of its importance.  Auto loans and other types of financing outside of business lending.

I wish the CDFI industry would realize how much we’re leaving on the table when we limit the tools that we’re using only to support entrepreneurship. Not all people from low-income communities are or want to become entrepreneurs.

Borrowers served by CDFIs should not be incentivized to start businesses simply because capital may be available to them. However, they will almost certainly benefit from not having to rely on payday lenders and fringe financial service providers. Consumer lending has so much value and ability to drive impact for people who are low-income and credit-thin.   

CDFIs are investing in making communities healthy; however, it often seems that, as an industry, we could do more to prevent predatory lenders from extracting funds from vulnerable populations.   

CDFIs already lend, assess risk, and service loans. Why not add consumer lending to their offerings, to help those in need of safe and affordable financing? Why allow predatory financial institutions to undercut everything they’re trying to do in the community?  

It is my hope that more CDFIs see what we have accomplished at IRC-CEO and consider the impact and opportunity in offering consumer lending—as well as the risks of not doing so.  

Stay in touch with IRC-CEO by following them on Facebook, LinkedIn, and YouTube. 

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Tags: Consumer Financial Protection Bureau (CFPB), Impact Investing, OFN Membership