Hopemakers - Bringing Private Banking to the Excluded
- Human trafficking
- Financial services and markets
- Poverty alleviation
- Mentorship
- Vulnerable populations
- Microfinance
- Social enterprise
Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.
Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?
Founding Story
Richard
Biggs
Hopemakers
, Seoul
, Seoul
1‐5 years
Certified as "Best Member" by the Consumer Loan Finance Association in Korea.
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Operating for 1‐5 years
To give a fresh start to households who are struggling financially, and to restore hope in a life that is viable and sustainable. Either through imprudence or misfortune, there are 8 million people with sub-standard credit ratings in Korea, who are excuded from standard sources of credit like banks. The only recourse is loan sharks, who will only make their financial situation worse. By equipping and educating their clients through in-depth counselling, Hopemakers can change attitudes towards credit, advise on consumption habits, and encourage better financial management. Hopemakers then provides loans to refinance existing high interest loans. Success is when a client is clear about how finances work, is hopeful of a better future, and is confident in the plan to get back on track.
The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Other (Please describe below).
Lack of sources of credit for those with sub-standard credit ratings
Those people with sub-standard credit ratings. In Korea, ratings of credit range from 1 (best) to 10 (worst), 7 and below defined as sub-standard. Of the 33 million financially active population, nearly a quarter, or 8 million have sub-standard credit. They cannot approach banks or insurance companies, even savings banks will turn them away. This leaves them terribly vulnerable. If a family member becomes seriously ill, or the main breadwinner is incapacitated, the family has no option but to go to loan sharks. In the worst cases the loan sharks are connected with organised crime, and human trafficking can come into play as client's bodies are put up as collateral. In the best cases, the clients suffer from depression, anxiety, and shame (hardly best cases if this leads to suicide or alcoholism). That regular people, through no fault of their own, could find themselves in a situation where they are forced to go loan sharks is a terrible injustice that Hopemakers seeks to address.
Yes. The Hopemakers model of providing counselling as well as refinancing loans could work anywhere. In general, this should be the standard practice of banking everywhere. We like to call ourselves the "Private Bank for the Excluded", and believe that the services that are available to private banking clients should be available to everyone.
Specifically, because this model looks at those who have been excluded through institutional credit ratings systems, the model is most directly suited to first world nations that have established credit ratings systems in place. The necessity of credit, the institutional exclusion, the need for counselling and refinancing will be the same in any first world nation.
On the other hand, counselling and financial planning could have more impact in countries with lower levels of financial knowledge. In such countries, the debt counselling could be a strong tool for community building as well as financial sustainability.
We envision freedom from the debt trap for ALL Korean citizens. Through education and counselling, it is possible.
The absolute success case would be the counselling and refinancing of ALL the clients of loan sharks and other non-standard lenders (NSL). There are 1.5 million clients of NSLs in Korea.
A more realitic target is the counselling all of our target market of 130,000 people (those with refinaceable loans, steady income, and under 40 years of age), and refinacing 30,000 loans. Many of the counselling sessions result in us referring the client to cheaper, govt-funded sources of credit. This means around 400,000 people (incl families of clients) who will have been released from the debt trap through education into better financial management, and therefore released from the social ills that the debt trap entails. As each client can save 9.5 million won in interest payments by refinancing, around 300 billion won in interest payments to loan sharks can be saved.
Financing is key. Just to achieve the realistic target above would require over 100 million USD to refinance the loans alone. Because Hopemakers cannot accept deposits, all the loans need to be funded by external sources. A change in investors' (business and government) perceptions about social enterprises and towards Hopemakers in particular would be ideal.
Marketing is also key. In order to counsel over 100,000 people, at least 2 million people should have heard about Hopemakers and what they do. If a major media company could take up the banner of Hopemakers and champion its goals, it would be a godsend for the company.
The company would need to recruit more counsellors. They are looking at a scheme to hire retired financial industry professionals as counsellors. Many retired professionals are looking for something meaningful to do, and they have the requisite financial knowledge and life skills. If this scheme succeeds, it will be a huge boost to Hopemakers.
To date, Hopemakers has counselled over 2000 clients and helped them to get a fresh start in life. This translates to over 6000 people whose livelihoods have been directly impacted to the positive by our work. Many have been referred to govt credit sources for refinancing.
In addition, we have made over 300 refinancing loans totalling 2.7 billion won. Therefore over a thousand people have seen a direct increase in their standard of living through debt refinancing and financial restructuring.
In monetary terms, we have calculated that the average client can save 9.5 million won over 3 years by refinancing their high interest loan. Therefore, we have taken almost 3 billion won from the hands of loan sharks and put it in the pockets of our clients.
The knock-on effects of households emerging from the debt trap, such as emotional stability etc, are hard to quantify, but we believe them to be even more important than the monetary gain.
By the end of 2017, we expect to have counselled at least 10,000 clients, and made 2,500 loans. This is a conservative estimate - we hope the actual numbers will be much higher.
In monetary terms, this would mean an aggregate interest saving of 25 billion won for financially excluded citizens.
In 2H12, 400 people counselled, 100 loans made
Successfully raise equity capital
Launch new counselling-intensive product (fee charged for counselling)
Hire and train another counsellor
In 1H13, 500 people counselled, 120 loans made
Hire and train another counsellor
Launch PR/marketing offensive
Prepare scheme to recruit retired professionals as counsellors
Our main partnership is with Korea Easy Loan (KEL), a government-initiated loan broker. There are a myriad of loan brokers in Korea who earn their keep by snaring clients through flowery advertisements and referring them to loan sharks. In order to reverse this, the govt initiated KEL, who only refer clients to responsible lenders. As such, many of KEL's referrals come to Hopemakers, and most of Hopemakers' business (90%) comes from KEL.
Another significant partner is Podo Financial Planning, another company headed up by CEO Ra. Many of Hopemakers' best counsellors have come from Podo.
At present, our reach is limited to the Seoul Metropolitan Area. Because of the intensity and frequency of the counselling sessions, the clients need to be where our counsellors are based.
Inside 10 years we hope to expand to the regions around the 5 major cities of Busan, Incheon, Daegu, Ulsan and Gwangju. We have no plans to expand overseas as yet.
Nor do we have plans to expand our client base beyond income-earners under 40. It is important that we focus on our core strengths, and not spread ourselves too thin so that we can have the greatest impact.
Founder Ra's experience with Podo FP taught him the mechanics of client counselling along with the importance of upholding the dignity of his clients while helping them. He personally engages in the training of his counsellors to pass on his passion to them.
Recently, Mr Kim Hee-cheol took over the post of CEO. CEO Kim has over 30 years in retail banking, and has experience in financial product devmt, marketing, compilation of best-practice manuals and training. He spent many years in private banking where he cultivated the idea of private banking for the excluded. He is a founding shareholder of Hopemakers, and his experience will underpin the the coming expansion of the company. His contacts in the financial community are a huge asset, particularly in hiring retired professionals.