RACHEL MARTIN, HOST:
Time now for our series Hanging On where we take a look at the economic pressures of American life. This week - the financially invisible, meaning people who don't have a credit card or checking or savings account or a credit score, people who are invisible to banks and credit institutions, which can make it hard to get loans for things like a house or a car or a business. Jose Quinonez found a solution to that problem. He is the founder and CEO of the Mission Asset Fund, and he just won a MacArthur Fellowship for his program helping people become financially visible. He joins us now in our studios here in Washington. Thanks so much for coming in.
JOSE QUINONEZ: Thank you.
MARTIN: All right, how does this work? You came up with this idea and you called it lending circles. What are these, and how does it help people become financially visible?
QUINONEZ: Right, so in immigrant communities, there's a rich tradition of people coming together to lend and save money. This is an activity that is pretty widespread and it's a pretty global phenomena and has been happening for a millennia. What we did was basically recognize that activity as bonafide financial activity that just needed to be formalized. And the way we did that was we asked people to sign promissory notes so that they can then participate in the program, and then we then report that activity to the credit bureau. So that's how we're helping people build and establish their credit scores by reporting on this activity that's already taking place in the community.
MARTIN: OK, so let's back up. So this is an idea where people in an extended family or neighborhood, a community, get together, actually pool their money.
QUINONEZ: Right.
MARTIN: And that creates a fund that then down the road anyone can withdraw from.
QUINONEZ: Well, so let's talk about a typical case. You may have 10 people, and informally it could be your neighbors, could be your, you know, relatives, could be your co-workers. And then they'll all agree to, say, put in a hundred dollars into the pot, so you then collect that thousand dollars. And then they agree on who takes that thousand dollars first, and they do that in rotation until everybody has a chance in getting that thousand dollars. Again, this activity has been going on for millenia. What we did differently was we asked them, OK, well, by signing a promissory note, we basically transformed it from being invisible to being invisible. We transformed it from being informal to being formal so that the financial systems of today can actually recognize that activity. And so we put ourselves in the middle of that transaction, and then we become the loan servicer and then also become the data furnisher to the credit bureaus.
MARTIN: So someone whose only lending experience is through one of these lending circles, now if they went to go get a mortgage...
QUINONEZ: Exactly.
MARTIN: ...The bank would recognize that as being a solid credit history.
QUINONEZ: Exactly because in our economy today, you need a credit score to do anything. You need a credit report to rent an apartment. I mean, some places you need a credit report to even get a job. And so without that credit report, it's extremely difficult to actually become a full participant in our economy.
MARTIN: The lending circles that you create, are these all circles of people who have to be in the same geographic area or could you connect an individual in San Francisco with another individual in Washington, D.C.?
QUINONEZ: Yeah, well, theoretically we can, and I think in the future we'll do that, but right now we're keeping it very local, you know, because we want that human interaction to happen 'cause that's actually is a very important element to the program.
MARTIN: Why? Why is that so important?
QUINONEZ: Because people, when they come together in what we call, you know, a lending circle formation session, they have to decide on how much. Is it a hundred dollars or $50, $75, $200? And then they'll start to decide who goes first, who goes second, and sometimes they do that by drawing numbers from a hat. And then they negotiate and it's like, oh, I actually need number four because April I need that money for this or I actually want the last number so that I can, you know, save it for a down payment or something. So there's, like, a community conversation about money and they're talking about their goals and aspirations for what they're going to do with this. And then that solidifies it. That gets people more committed. You know, they see each other eye to eye, right, and I think that's one of the elements of our success is, like, we create this human connection across people.
MARTIN: So this grant's a big deal. You get $625,000.
QUINONEZ: Yes.
MARTIN: What are you going to do with that money?
QUINONEZ: Oh, well, you know, I'm going to take my family to Disneyland several times a year, I think. No - why - I, you know, in all seriousness, I, you know, we're going to do more of what we're doing. We're very excited by expanding lending circles throughout the country with - to more communities. And a lot more of those individuals, they just need an opportunity to turn their lives around or to actually continue on with their lives. And so we want to be there to help them.
MARTIN: Jose Quinonez is the founder and chief executive officer of the Mission Asset Fund. Thanks so much for talking with us.
QUINONEZ: All right, thank you.
MARTIN: And congratulations.
QUINONEZ: (Laughter) Thank you. Transcript provided by NPR, Copyright NPR.