Finding New Access for Low-Cost Loans in Disadvantaged Areas

Considered predatory by the critics of the payday-loan industry, payday loans are sometimes the only alternative for residents of rural and poor areas who lack access to mainstream banking and lending firms.

Payday lenders loom large in many states, including Mississippi, where their interest fees are as high as 572 percent.

As some states move to curb the presence of payday lenders, an opportunity has risen for organizations, such as community development financial institutions (CDFIs), to develop and test new and better types of unsecured loans.

Southern Bancorp is a CDFI experimenting with new ways to deliver consumer products to its distressed Mississippi markets. It’s also seeking ways to educate consumers in this area about money management.

The organization’s innovative efforts led them to create the “Liberty Line,” a loan product coupled with credit counseling that offers better terms than the typical payday loan. As a result, numbers of rural Mississippians avoided predatory lenders. Read more in “Testing an Affordable Alternative to Payday Loans in Mississippi,” in the Darden School of Business/Washington Post “Case in Point” series.


Testing an Affordable Alternative to Payday Loans in Mississippi” was written by Malgorzata Glinska, senior researcher for the Batten Institute of Entrepreneurship and Innovation.