Lunch with Leaders: Mission Asset Fund

A Quick Bite with José Quiñonez

Every month, we invite an inspiring leader or two from our grantee portfolio to join us in the Tipping Point Cafe. Our “Lunch with Leaders” series is an opportunity for our team to hear directly from those on the ground in the fight against poverty, to learn what they’re most excited about, and what keeps them hungry to do more.

In the Bay Area, approximately a million people are credit invisible. With no credit score or credit history, it is nearly impossible for hardworking families to rent an apartment, save for college, or open a business. The high-interest predatory loans these households rely on instead keep them in a cycle of poverty perpetuated by debt.

Founded in 2007 by José Quiñonez, Mission Asset Fund (MAF) creates a fair marketplace for low-income families by developing and scaling programs that build financial stability. MAF has been a Tipping Point grantee since 2012. We were thrilled to learn more about the work recently in conversation with José.

Q: Why did you start Mission Asset Fund?

A: I was born in Mexico. I lost both of my parents when I was early in childhood. My father died when I was two, my mother when I was nine. I had five siblings, and there was nobody to look after us in Mexico, so we came to San Jose to live with extended family. My oldest sister was 15 and she had to become an adult very quickly to look after us. We were doing anything we could just to earn money so that we could have food on the table. When people talk about poverty, I actually know what that is. I lived that.

When we started MAF, there was a notion that low-income people were financially illiterate and that all they needed was more financial education to set them straight. Show them another brochure on how to balance their checkbooks. Another course, another teacher, another lecture. We rejected that notion. We were able to recognize what was happening in people’s financial lives, and appreciate their strategies for survival as bona fide financial activities. We saw what was good in their lives instead of seeing them as broken, inefficient, and ignorant. And we figured out a way to lift that up.

Q: Tell us about MAF’s model.

A: We decided to follow the very creative way that people outside the financial mainstream manage their money: lending circles. Imagine 10 relatives, co-workers, or neighbors come together and agree on how much money to put into the pot. Let’s say each person puts in $100. Now you’ve collectively come up with $1,000. Then they all agree on who takes the $1,000 in turn. It could be on a monthly basis, on a weekly basis, whatever frequency they choose. But they are lending and borrowing money from each other.

This informal activity has been going on for millennia. In Mexico, it’s through what is called tandas; in West Africa it’s susus. It mirrors formal lending and borrowing — paying back your lending circle is the same as making a payment to your bank — but in the formal structure, that activity gets recorded and reported to the credit bureaus. The informal activity doesn’t. It gets lost.

So we decided to formalize it as a way to help people get into the banking system. We bring people together into lending circles, and then capture payment activity and record it in a way that credit bureaus can understand. With MAF, the system will recognize you and start to generate a credit score for you.

Q: What impact has MAF had so far?

A: In 2009, our first full year of providing the program, we had 85 clients. Our growth has been dramatic. This year, we’re projected to engage with 1,400 clients in lending and borrowing over a million dollars at zero interest. About 20% of those clients use the loan for a business-related activity, investing in tools, merchandise, or facilities. About half see it as a sort of savings program – everyone in the lending circle makes the same monthly payment. The rest use it to manage their income, their cash flow.

By reporting loan payments, we are able to help people increase their credit scores by an average of 168 points. About a third of our clients start with no credit score at all — they were invisible, out in the shadows looking in. Within a year of reporting, those with no credit score dropped to just 9%. Today, that number is almost zero.

The results are life changing. In six months, clients go from 0 — that’s no credit score at all — to 650. They go from having to rent hallways in crowded apartments with their small children to passing the credit check for their very own apartment in the Bay Area. They’re using their zero interest loans as rental deposits, to become citizens or send their kids to college.

Q: How has MAF evolved from the original vision you had for it?

A: About three years ago, Tipping Point asked us: “How do you know that you’re actually helping people?” I was stunned by that question. Building credit and a credit score are meaningful because people’s financial security is based on that number. But how did that influence their financial life? I didn’t know how to answer that yet.

From talking to our clients, we knew that there were other data points that represent the fullness of their financial lives. So we took Maslow’s Hierarchy of Needs and developed something similar, a hierarchy of financial needs that captures what we all require to realize our full economic potential.

First, you have to have income, one or more ways to get money to spend. You need insurance, security for your assets. You need credit — that’s like love from the community, where you use somebody else’s money to acquire assets you couldn’t acquire with your income alone. You need savings, because paying yourself builds self-esteem. The pinnacle is investments, where you can actually earn a return that supports your income.

We’re using this model as a diagnostic tool to identify our clients’ financial pain points. It provides guidance on strategies to further stabilize their finances, and understand the different barriers in the system that prevent poor people from economic self-actualization.

Q: How has working with Tipping Point helped MAF?

A: Our relationship with Tipping Point has always been great, not just in terms of funding but also as a meeting of the minds. What Tipping Point does as a funder is something out of the ordinary, out of the box, and that’s what MAF does also. It’s always very difficult to explain MAF because we don’t fit into neat boxes, and the same is true for Tipping Point. I have always appreciated that, and learning from each other has been a big treat.