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Innovative Microcredit Breaks the Cycle of Debt in Mississippi

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If you drive through Ellis Avenue, slightly off the interstate, you will arrive at what can be said to be the paradise for easy money. You will find here plenty of half-empty shopping malls, fast-food joints, and payday loan companies by the dozens.

Mississippi is the poorest state in the USA. There is more payday lending companies here per capita than any other place in America. Interestingly, people also have less in this part of the country to conventional banks than any other US state.

The government and regulators know this. And so, they have formed a unique partnership so that people can get the money they need in a crisis. It’s a partnership between payday lending companies, employers and the Mississippi Center for Justice. With this unique partnership, the Mississippi residents can now access responsible payday loans. They can also get financial education absolutely free to learn about new ways of building credit and savings.

The New Roots Credit Partnership

This program is called the “New Roots Credit Partnership“.

The program pairs lending companies who want to provide small loans and financial literacy with employers who want to offer the knowledge to their employees. The New Roots Credit Partnership was launched in 2013. Two years later, it’s growing steadily. There are more subscribers today than ever before.

The initiative has already published a number of partnership videos where the consumers are explaining how the loans have helped them. The Mississippi Center for Justice is involved in this initiative, and also the employers. So there is nothing to worry about. It is not just legal, these cash loans are safe too.

“It’s a great partnership”, says Charles Lee, who is the consumer protection director at the Mississippi Center for Justice. Consumers get the money they require, and also financial literacy. Lenders get new customers. Employers benefit too as they are able to bring down the garnishment numbers they must process every month. They can also give their employees important benefits. It works out for everybody.

Under this program, half of the loan amount goes to a free bank account. The other half is kept on hold. This is released only when the first portion is paid back. Borrowers get more time to pay back the loan. The cash advance can be as low as $500.

How the New Roots Credit Partnership is Helping

Employees – The benefits are both long-term and short-term. In the short-term, the employees get the loan they need. And long-term benefits include the financial education and free savings account. Many residents in this corner of Mississippi never had a checking account, and very little financial knowledge on how to handle money responsibly and how to save. Prior to the program, for a lot of people, taking care of important bills meant paying up cash or taking a money order.

But that is changing now, thanks to this loan and education initiative.

Lending agencies – It’s good for the lenders too, as they are able to connect with a previously untapped potential customer base. True, income from these accounts does not generate much income for them. The real benefit is long-term, and in the new relationships they are building.

The lenders are able to participate in the well-being of people. They are helping individuals turn things around. So in time, as the fortunes change, these associations are going to turn into relationships as people realize that the lenders can become the key to their changing fortunes.

Employers – This credit partnership is helping employers address several issues that are affecting their bottom lines. Many employees in Mississippi had no option but to approach employers for advances on next week’s pay check. Many employers were receiving garnishments that had to be processed from different parties. This was a payroll nightmare.

Also, employees under financial stress invariably became distracted at work as they had to deal with their financial emergencies. This naturally brought down productivity.

The New Roots Credit Partnership is addressing all these issues successfully. It’s no surprise that the program has been welcomed so well in the communities where it has been introduced.

Microcredit Is Transforming Poor Communities

Across the world, microcredit is transforming poor communities, just like it is doing in the US state of Mississippi. And those who are benefiting are not just the individuals. Small dollar or payday loans are helping businesses too. With this, entrepreneurs are able to get the crucial start-up funding they need, which is sometimes as low as few hundred dollars.

Sometimes, this is all that a small business requires for generating income in a poor community. The state of Mississippi is not the only example. For instance, there is the Grameen Bank in Bangladesh that has been offering small loans for a long time now. In fact, the Grameen Bank even won the Nobel Prize for their efforts at fighting poverty in 2006. The New Roots Credit Partnership in Mississippi is a step in this direction.

This unique initiative has for now signed up the cities of Canton and Jackson. One regional housing authority and a school district in the Delta have also joined the program. But they have plans to take it further and reach more communities soon.

Many Individuals Require Quick Cash Loans

It is believed that those who require payday loans are usually poor individuals. But Mississippi’s experience is telling a different story.

According to Charles Lee, many people who receive payment once every month, such as firefighters and teachers, discover that there is a gap, particularly at the end of the month when the money from last month is gone or almost gone. This is where they require a bridge loan till the next paycheck.

Credit alternative such as the New Roots Credit Partnership is currently the only hope for many of these people in places like Canton and Jackson. In fact, this is the only financial service many of the “unbanked” individuals in Mississippi or those without a bank account have ever used.

The program is helping in another way. There are thousands of individuals in the state who are “under-banked”, which means that these people have bank accounts, but still rely on the grey market for cash advances, which are not only illegal, but charge steep fees as well, thus making people go deep in debt. The FDIC says that according to statistics, 47% of Mississippi residents are under-banked or unbanked.

Providing Legal Lending and Bringing People into the Mainstream

The New Roots Credit Partnership is bringing these people into the regularized financial sector and protecting them by providing financial education and loans from legal sources.

People in the state are vulnerable already in several fronts. In Mississippi, there are many low income households. Many are not that familiar with banking. Also, almost half of those who need cash advances are single women. Garnishments set in when you lose control over a loan. Suddenly, there is no money for utilities. With debt spiraling, there are few alternatives to bankruptcy.

So the New Roots Credit payday loan program isn’t just giving them loans on good terms, it is going way beyond that in Mississippi.

We too practice good lending practices. For example our lenders are all licensed and never charge exuberant rates. On top of that roll-overs are allowed with a very low fee. And we totally appreciate programs such as New Roots Credit. We support anything that help consumers.


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