Pew Encourages Efficiency in Treasury Department’s Small-Dollar Loan Program Investments

On Sept. 10, The Pew Charitable Trusts filed a letter with the Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund in response to the department’s request for comment regarding the allocation of funding in its Small Dollar Loan Program.

In its letter, Pew applauds the fund for its effort to make affordable, small installment loans available to millions of American families through CDFIs—specialized organizations that provide financial services to underserved populations. With proper assistance from specialty providers skilled in automated underwriting and origination, CDFIs can compete successfully in the small-dollar loan market to offer borrowers affordable payments and substantially lower prices than payday and other high-cost lenders.

Drawing on its extensive market research, Pew recommended that the CDFI Fund allocate the bulk of the grants to lenders that demonstrate long-term financial sustainability, have the ability to serve a large number of borrowers, and could benefit from technical assistance for automating small-dollar lending.