Offering a small-dollar lending program to your employees can have many benefits for both your business and those who work for you. These programs give employees access to small loans quickly that are then paid off over several weeks or months, helping an employee cover immediate needs while building credit and financial well-being. 

Oakridge Neighborhood  (image featured above) has partnered with the Financial Empowerment Center through the Director’s Council to develop a small-lending model based on a program developed in Vermont that proved successful in increasing employee financial stability and productivity and reducing turnover.

Teree Caldwell-Johnson, president and CEO of Oakridge and chair of the Director’s Council, and Deidre DeJear, who runs the Financial Empowerment Center, share why employers should consider this strategy. In a second article, they share how the program works. 

Financial stress impacts work performance

Nearly half of workers spend three hours or more during the work week thinking about or dealing with financial issues, according to PwC’s 2017 Employee Wellness Financial Survey. This impacts their performance on the job and their well-being.

“People at the lower end of the wage scale may live paycheck to paycheck,” Teree says. “They are one emergency away from not making it to work or losing that job, so if [a small lending program] is the difference between being able to get car repairs made so they can get to work, then it’s to our benefit as an employer to figure out how to support them.”

Systems have left individuals of color from building wealth

Systems have left individuals of color from being able to access capital and build wealth to manage emergencies that might come up. Deidre and Teree point to the One Economy Report that shows:

  • More than half of Black residents in Des Moines are unbanked or underbanked, compared with 16.5% of all Iowans.
  • Nearly 70% of Black residents in Polk County rent their homes, compared with one-third of the general population.
  • African Americans are denied loans at a rate of 2.2 times higher than the Polk County average.

Having  access to capital is no longer a luxury

Having access to credit and being able to build savings is critical for long-term financial well-being, especially for those who have been traditionally marginalized by financial institutions.

“Having credit is no longer just a luxury,” Deidre says, “It’s something that is necessary for people to survive. People are having to respond to emergencies every day with minimal resources to respond to them.”

We don't know who needs support when

Teree says employees at Oakridge have used small loans for things like paying medical bills, fixing their cars, or buying textbooks for their kids. She also notes that employees at all pay levels have accessed the loans. “We don’t know who needs what when,” she says.

Having a financial coaching component also allows individuals to begin planning for the future, so they are better able to respond to emergencies and build wealth. Since the Financial Empowerment Center opened in April, it has helped clients reduce debt by more than $160,000 and increase savings by more than $100,000 among individuals who mostly earn $30,000-$60,000 per year.

View Wealth-Building Strategies

The Central Iowa Works' guide on Wealth-Building Strategies can help you consider your best options for supporting employees' financial well-being. 

View the guide

TAGS: Thriving Workforce

About The Author: Sarah Welch

Sarah Welch is a communications contractor for the Thriving Workforce initiative and is the former Strategic Communications Officer at United Way of Central Iowa.