Giving Credit

Every year people in the United States lend $89B to family, friends, neighbors, and coworkers. Half of these loans are used for basic necessities like paying utilities, bills, and rent. Peer loans are especially vital in low-income communities of color. With large racial disparities in wealth and limited access to low-cost, mainstream banking services, there are around 4.5 million unbanked and 10.8 million underbanked Black and Latinx households that are soft targets for high-cost, exploitative loans. Communities of color are saturated with payday lenders and other high-cost alternative financial services that offer loans at exploitative interest rates. Payday loans extract $9.1 billion from low-income families annually.

Faced with financial exclusion, people living with low-incomes create their own financial justice and alternative solutions, benefiting greatly when their local ingenuity is harnessed through innovation. Community-lenders, often low-to-moderate income themselves, make unsecured loans to kin and friends at risk to their personal financial well-being. This risk is especially acute for Black and Latinx households who tend to have materially poorer networks than Whites. About 10% of the Black-White racial wealth gap is attributable to Blacks providing financial assistance to lower-income members of their social networks.

Access to financial services is central to well-being and human dignity. People should not have to choose between caring for their communities and securing their financial futures. They will benefit greatly when their local ingenuity is harnessed through innovation. 

• What if informal banking practices had the same data transparency as mainstream credit and banking services? 

• What if there are people in communities willing and able to lend at no interest but they are invisible, and their capacity and willingness are unknown to others in their social circles? 

• What if the transparency created through an informal banking platform allowed peer lenders to better manage requests they inevitably receive from kin and friends? 

• And what if peer-loan repayments were reported to credit bureaus?

If these problems could be addressed, the need for predatory services would be eradicated, and financial well-being would increase. We envision a future where people have true financial citizenship - access to the resources they need, agency over their lives, the opportunities to co-create loan terms, and recognition for the solutions they innovate. In this future state, informal loan repayment is recognized by mainstream finance, qualifying informal borrowers for high-quality, low-interest, wealth-building mainstream credit products like mortgages and business loans. 

Enter Giving Credit a web-based social credit network that amplifies community finance by bringing transparency to social credit networks, protecting peer lenders against loan loss through loan guarantees, reporting informal loan repayment to credit bureaus, and enabling lenders to deduct loan loss from income taxes.

Giving Credit is a web-based social credit network that amplifies community finance by bringing transparency to social credit networks, protecting peer lenders against loan loss through loan guarantees, reporting informal loan repayment to credit bureaus, and enabling lenders to deduct loan loss from income taxes.

1. Social credit line transparency - A central component of formal credit markets is that borrowers know how much credit they have available at any time. Knowing how much credit a potential borrower has available provides a psychological sense of financial security, even when one is not borrowing. The platform reveals people’s social credit lines by enabling them to report how much they would be willing to lend others if they needed a loan. The increased visibility into social credit lowers the cognitive bandwidth tax of financial scarcity and decreases reliance on predatory loans.

2. Loan guarantees - The platform enables organizations to extend loan guarantees to their constituents engaged in peer lending. The loan guarantees protect the assets of lenders by insuring them against loan loss while further capitalizing informal banking networks.

3. Mainstream credit reporting - People in informal networks demonstrate their credit worthiness through peer-to-peer loan repayment. However, these repayments are not recognized by mainstream finance. We are working toward reporting peer-to-peer loan repayments to community banks and credit bureaus, creating mainstream credit opportunities for the 45M credit invisible households in the country.

4. Write-off loan default on Federal income taxes—When lenders experience a loan default, the application provides a pre-filled tax-filing document for US lenders that they can use to deduct the loss from their income taxes.

Peer lenders and borrowers join the platform through institutional partnerships with nonprofits and community development financial institutions. Partner organizations extend loan guarantees to their constituents. For example, an organization might establish a $100K loan guarantee pool, extending $500 dollars in loan guarantees to 200 peer lenders. We currently have loan-guarantee partnerships with nonprofits in Pittsburgh, Pennsylvania, Delaware, and Menelas, Haiti. 

As organizations extend loan guarantees to constituents, peer lenders give credit to people in their networks, who in turn give credit to others, growing the social credit network.

Giving Credit is designed to meet the small-dollar credit needs of financially excluded communities. In the United States, where Giving Credit is located, low-income communities of color face the highest degree of financial exclusion and exploitation. In the 1980s as income inequality rose, mainstream banks increased their focus on middle-income and higher-income depositors, shutting the depository accounts of people increasingly deemed too poor to bank. As mainstream financial exclusion accelerated, alternative financial services like payday lenders and pawn shops literally moved in. Specifically, they moved into low-income communities of color, leading to vast levels of racialized financial exploitation that persists today.

Black and Latinx households are twice as likely to be unbanked than White households. Blacks pay twice what Whites pay in loan interest and bank fees every year. Latinx borrowers pay 1.4 times more. Faced with financial exclusion, communities engage in informal finance to meet their financial needs. 25.6M people, or 10% of adults in the United States, borrowed from their networks in 2021, including 17% of Black and 15% of Hispanic households.

I know this problem well. My mother, an immigrant from Panama, borrows informally from her network (and me). I have undocumented family members here in the United States who are excluded from mainstream finance, instead relying on informal social credit networks to meet their financial needs. Giving Credit brings transparency to these social credit networks, capitalization, and mainstream recognition. The current framework of financial inclusion efforts does not meet people where they are and fails to recognize the ingenuity of community-led financial efforts.

Indeed, even people who are served by the mainstream financial system engage in informal community finance. This is especially true for people living with low-incomes. While having a credit card at middle and high-incomes reduces reliance on peer borrowing, having a credit card does not reduce peer-borrowing for lower-income households. And with good reason. Borrowing from one’s social networks often comes at zero-interest with flexible repayment terms.

I have interviewed dozens of people about their informal lending. I have spoken to people who have avoided eviction and started small businesses with these loans. Unlike loans from mainstream or alternative financial institutions, informal loans are from people who care about you, who care about the impact of the loan, not just repayment. People in communities are not only creating their own financial justice, they are generating tremendous social value, all with their capital. That initiative should be recognized and further capitalized. 

Giving Credit is the financial technology solution for community finance. It is not designed to replace mainstream finance or good financial products. Instead, the aim is to eradicate the likelihood of predatory alternative financial services and provide an on-ramp to wealth-building mainstream financial services.

Access to credit is central to human dignity. Princeton professor Frederick Wherry defines “financial citizenship” as having access to the resources you need to do the things you want. I have family members who are undocumented, lacking both country and financial citizenship. My mother immigrated to the United States from Panama in her 20s. Growing up, I observed her frequently remit money to family back home. She borrowed informally from her network to afford the downpayment to purchase the house she raised me and my brother in. Years later, I saw how the financial system exploited her, leaving her in financial ruin.

Like my Panamanian mother, my undocumented family members bank on each other and me, creating our own financial citizenship. While predatory finance extracts wealth, community finance is financially regenerative mutual aid. I do this work to recognize and capitalize communities like mine.

Giving Credit’s co-founder, Ashley Sherwin, and I have spent our careers working in nonprofit organizations at the intersections of poverty and technology. We started working on ways to capitalize communities as colleagues at UpTogether, a national nonprofit technology organization. At UpTogether, we led the teams that distributed over $200M in unconditional cash transfers to hundreds of thousands of people living with low-incomes across the United States. At UpTogether, we saw how people would lend cash they received to others. We learned to think of cash transfers as capital infusions into hidden banking networks.

Seeing the impact of informal lending in my personal life and again at UpTogether, I started researching informal peer-lending as a fellow at Princeton University. I did not start with books or academic articles; I started with people. I spent months interviewing people living with low-incomes from different parts of the United States. I spoke with a variety of people, from Latin American immigrants in Los Angeles to Black women in Pittsburgh. In my conversations I heard how vital peer-lending is. What I didn’t expect was just how frequent and bi-directional lending tends to be, especially in low-income social credit networks.

I expected that people would first get into trouble with a payday lender and then reluctantly turn to their networks for a loan. I found the opposite. People vastly prefer to borrow from their social networks. It’s only when they have tapped out their network (or think they have) that they reluctantly turn to payday lenders. This insight is foundational to Giving Credit and directly contradicts the prominent thesis of financial literacy efforts that assume people are too dumb to realize 600% APR loans are a bad deal. Everyone knows that!

Giving Credit is a behaviorally informed solution. Ashley and I are building Giving Credit for me, for my mother, for my late wife's family who immigrated to the United States from Mexico. Impactful solutions originate in impacted communities. Too many "solutions" attempt to change people's behavior. Giving Credit amplifies the solutions communities innovate for themselves. Giving Credit exists because everyone deserves financial citizenship.

I incubated Giving Credit as a Sugarman Fellow at Princeton University, where I researched peer lending, conducted user interviews and market research, and developed the technology platform, which went live in August 2023.  In Fall of 2023, Giving Credit moved into the partner pilot phase. We currently have three fund partners: Neighborhood Allies in Pittsburgh, PA; Work in Menelas, Haiti; and Student Recover in Delaware. These partners are offering Giving Credit to their constituents and offering loan protection or rewards of varying amounts totaling $26,000. We also partner with SaverLife and Union Capital in Boston, MA, to offer Giving Credit to its members.

We have 226 users pooling $49,870 in peer credit. The platform has tracked a total of $9,960 in loans. We are fielding countless inbound partnerships and scoping eight new pilot and loan loss protection partnerships. Additionally, we are in conversations with Credit Builder’s Alliance, Equifax, and VantageScore about making peer lending activity part of credit reports and used in underwriting.

I have deep subject matter expertise in the field of poverty and financial exclusion. I know how to build a product and have led engineering and analytics teams. I am currently a START Innovator at Princeton University’s Entrepreneurship Council and a Visiting Fellow at the Federal Reserve Bank of Boston, authoring a paper on informal peer-to-peer household debt.

I brought on Ashley Sherwin as co-founder because she complements my technical expertise with strong business acumen, deep social sector knowledge, and a proven track record in relationship building and organizational management. 

We are applying to Solve because we know what we are good at and, more importantly, where we need help and when to lean on others' expertise. We are specifically looking for support on user retention strategies, refining and testing possible business models, and regulatory matters. 

User retention strategies: Everyone participates in peer lending. We have yet to speak to anyone who has not participated in some form of informal borrowing or lending. In fact, our research shows that people are overwhelmingly doing so because they want to support their community and the relationships they have. Communities of color and low-income communities are not alone in this. Peer-lending may be common, but doing it in a more formal way using technology is not.  In our early pilots, we have succeeded at acquiring users, but, moving them along the user journey has been more difficult. We would like to leverage the Solve network to help us refine the user journey and experience. 

Business models: We have recently incorporated as a nonproft. At this pilot stage, we are primarily focused on philanthropic support. However, it is vital that we test and refine possible earned revenue streams and other business models for sustainability.  We have several concepts for earned revenue streams in the future, which include partner fees, user fees for credit reporting, data/research partnerships, investment gains from guarantees, etc. These are concepts that need to be further researched, developed, tested, and financially modeled. We are confident we have not thought of all the possible ideas and would like to lean on the Solve network for mentorship and advice in this area. 

Regulation: Giving Credit facilitates loans between peers. We are working on a solution to report loan repayment to the major credit bureaus. In order to do so, Giving Credit will need to hold the note even though the terms and capital are from the users themselves. We need to better understand the regulatory requirements to reduce risk and ensure compliance. This is an area that our team has limited expertise in, and we are seeking support for it. 

We have had significant momentum in the last 12 months. The more people we talk to about Giving Credit, the bigger the opportunity and possibilities seem. Those opportunities and possibilities cannot be achieved on our own. We need your help during this pilot stage to set up Giving Credit for scale.

Giving Credit is not innovative. Communities are innovative. Giving Credit provides a modern financial technology platform, capitalization, and mainstream recognition to support community solutions.

The best solutions are the ones created in communities. Where mainstream finance has failed people living with low incomes, communities have forged their own way. Communities are not the problem; they are the solution. Yet, for too long, the financial inclusion space has focused on the wrong issue, erroneously assuming people living with low-incomes are financially illiterate.

Social credit networks are intricate, effective financial solutions. For the first time, Giving Credit brings transparency to people in social credit networks, leveraging community capital and social underwriting through third-party loan guarantees. These mechanisms work together, increasing access to community capital and reporting activity to credit bureaus, building mainstream credit.

Giving Credit was successfully spun out of Princeton University’s Kahneman-Treisman Center for Behavioral Science and Public Policy. Giving Credit’s approach is (sadly) unique in that we lean into the financial decision-making of people living with low-incomes instead of trying to change it. The affiliation with Kahneman-Treisman gives us access to world-class behavioral scientists like Eldar Shafir and Frederick Wherry, who are advisors to Giving Credit. 

By better understanding how people make financial decisions and the intricate pro-social informal credit networks people participate in, we believe we can catalyze the financial inclusion space and mainstream finance more broadly to design financial products that enhance the power of community finance.

Imagining a line between informal and formal finance is a false dichotomy that ignores the reality of how people think and behave. Giving Credit is not simply an on-ramp to mainstream finance. We envision a world where Giving Credit (and many more community financial products like it) sit alongside and deeply integrate with mainstream finance.

Giving Credit’s theory of change is divided into two parts; our impact on individuals and our impact on systems.

Impact on individuals: Giving Credit increases the financial well-being of users and decreases reliance on predatory debt through the following causal pathways.

• Social credit line transparency - People on the Giving Credit platform gain transparency into their social credit networks, allowing them to know how much they can borrow from their networks. Knowing how much one can borrow from their network lowers the cognitive effect of financial scarcity (known as the bandwidth tax). Additionally, people become less likely to borrow from high-interest debt sources, given the increased visibility into their social credit network.

• Loan guarantees - Partner nonprofits and credit unions extend loan guarantees to select users on the Giving Credit platform. The loan guarantees improve the financial well-being of borrowers by insuring them against loan loss and increase the availability of credit in social credit networks, decreasing reliance on high-interest debt products.

Additionally, financial well-being is increased as people’s loan repayment data on Giving Credit is reported to credit bureaus, building mainstream credit.

Impact on systems: Giving Credit surfaces data and publishes reports highlighting the effectiveness of informal peer-to-peer lending. We partner with Credit Unions and other mainstream financial institutions to co-create financial products that bridge the gap between informal community finance and formal, mainstream finance. We also advocate for regulatory changes that recognize and value the social outcomes people living with low-incomes create.

While our impact on individuals is important, we know that no one organization can affect change alone. Instead, we are intentional about publishing research and promoting a narrative that helps mainstream finance and public policy better understand and support the power of informal community finance.

In the near term, we are focused on optimizing Giving Credit to meet the needs of our target demographic. This means focusing on the efficacy of the application in mapping social credit networks and capitalizing informal loans through loan guarantees. Specifically, we have set a target for Giving Credit users to extend social credit to at least two other people on average, hitting an 80% or greater loan repayment rate, and developing better datasets on loan repayment to enhance our ability to predict the leverage one-dollar in loan guarantees creates.

We are working toward meeting these short-term objectives by onboarding users through partner organizations that are extending loan guarantees and getting regular feedback from Giving Credit users. A benefit of being lean is we can quickly deploy changes to the application and get immediate feedback through transactional data on the platform.

Over the five-year time horizon, we are focused on eradicating the need for high-interest predatory debt. We will measure our progress by collecting data on how users would have met their financial needs in the absence of Giving Credit. Eradicating the need for high-interest loans will have a substantive, transformative impact on the financial lives of people living with low-incomes.

More broadly, we believe that access to financial services is central to well-being and human dignity. We envision a future where people have access to the resources they need, and where communities are recognized for the solutions they innovate. Financial citizenship is about more than low-cost credit. True financial citizenship is about agency over one's life, including the opportunity to co-create loan terms.

We envision a future where informal banking practices have the same data transparency as mainstream credit and banking services. Where people access loans from lenders who prioritize impact over interest. In this future state, informal loan repayment is recognized by mainstream finance, qualifying informal borrowers for high-quality, low-interest, wealth building mainstream credit products like mortgages and business loans. 

A future where community finance is recognized and supported is a future where the need for predatory services declines and financial well-being increases for everyone.

Giving Credit is a mobile-optimized web application. Our technology is built on open-source solutions. The web application is built in Python using the Django framework with a PostgreSQL database. We have some light front-end Javascript using AlpineJS. We use Amazon Redshift for our data warehouse, Airbyte for moving data between our production database and our warehouse, and Dbt for data transformations. We use Apache Superset for business intelligence.

The Giving Credit founding team is comprised of David Henderson and Ashley Sherwin. David is currently a START Innovator through Princeton University, and Ashley is a contractor with Giving Credit. We are also in the process of bringing on a contract engineering firm. 

Contractors: 2 (Ashley Sherwin & TBD Engineering Firm)

2 Years - Giving Credit was incubated by David Henderson starting in 2022 as a Sugarman Fellow at Princeton University. In 2024, Ashley Sherwin joined the team as co-founder, and we officially incorporated.

I have lived experience with this issue, as described earlier in this application. One of Giving Credit’s enumerated core values is to be intentionally anti-racist in our work. We know that racial disparities in financial outcomes are the result of historical (and present) corporate and public policies. We center equity in everything we do and are building a diverse team of advisors who keep us accountable to our stated value of equity and inclusion.

Most importantly, we know that the best solutions originate from the communities themselves. As such, we have frequent feedback loops with our target users. In order to best listen to our users, we need a team of consultants, interns, staff, advisors, etc., that resemble the communities in which we operate. We take equity seriously not only because it’s the right thing to do but also because it is critical to our success.

Giving Credit serves both people living with low-incomes and partner organizations that extend loan guarantees to their constituents. Both segments are discussed below.

People living with low-incomes: People join Giving Credit to gain visibility into their social credit networks, track informal loans they give and receive, and have their loan repayment reported to credit bureaus. The value for these users is reducing reliance on predatory loans by gaining visibility into their social credit networks and building mainstream credit through their informal lending. For select individuals, an additional benefit is access to loan guarantees provided by partner organizations. The loan guarantees insure their lenders against loan loss.

Partner organizations: Nonprofit organizations, Credit Unions, and values-aligned businesses use Giving Credit to extend loan guarantees to their constituents. The value proposition for these organizations is to improve the financial well-being of their constituents by leveraging capital already existing in these communities and complimenting their existing services. Giving Credit surfaces aggregate level insights that partner organizations can use to better understand the intricacy of the social credit networks their constituents are engaged in. The analytics also highlights the social impact of the partner organization’s loan guarantees.

As a nonprofit fintech, we focus on impact versus profits while creating diverse mission-focused revenue streams, ensuring we can meet the unique needs of low-income communities of color. At this stage, we are focused on philanthropic grants for our two capital needs: operations and loan loss protection funds. We are also building partnerships for pilots to scale users and create loan protection funds to capitalize peer-lending. 

To date, we have received over $240,000 in grants and in-kind support. Unorthodox Philanthropy made a grant of $200,000 in the Spring of 2023, and we received a $15,000 grant as part of the Volunteers of America Community Health Incubator. Additionally, Princeton University has awarded David two fellowships where he has incubated Giving Credit over the last two years.  

Our future revenue model will be a hybrid between philanthropy and earned revenue. We are conducting market research and modeling the viability of various earned revenue opportunities. We believe the opportunities exist through charging a fee to partners to provide loan loss protection, access to our data for underwriting and academic research, and interest returns from loan protection funds. Although Giving Credit will always ensure loans remain interest-free, we would consider charging a small fee to users to report lending activity to the credit bureaus. 

We are actively seeking advice and mentorship on our earned revenue pathways and would welcome the opportunity to explore this further through the Solve network.