Why Fig Loans?
Fig Loans takes aim at exploitative payday lenders, which fits for our strategic objective to catalyze products that lead to greater financial inclusion. For those unaware of the payday lending epidemic, this excerpt from an article by The Atlantic describes the experience of a payday loan recipient:
“Payday lending works like this: In exchange for a small loan—the average amount borrowed is about $350—a customer agrees to pay a single flat fee, typically in the vicinity of $15 per $100 borrowed. For a two-week loan, that can equate to an annualized rate of almost 400 percent. The entire amount—the fee plus the sum that was borrowed—is due all at once, at the end of the term. (Borrowers give the lender access to their bank account when they take out the loan.) But because many borrowers can’t pay it all back at once, they roll the loan into a new one and end up in what the industry’s many critics call a debt trap, with large fees piling up.”
Fig Loans is committed to low fees and an amortization schedule which mimics a mortgage, a sharp contrast to a flat fee and short repayment period. This, in effect, avoids the debt trap without limiting access to capital. In addition to structural differences, Fig Loans is skilled at predicting events of default. This handy talent serves to inform loan recipients and influence their spending behavior.
How We Helped
We made an equity investment into Fig Loans following their participation in the Village Capital FinTech 2016 cohort. The investment came alongside other investors and funded their go-to-market strategy. This investment fits our initiative to promote financial inclusion by creating an innovative way to alleviate debt and improve access to better credit-based financial products.
