New Orleans rent loans in doubt as ASI FCU posts 43% default rate on microloan pilot program

ASI Federal Credit Union has served as a pilot program for the Kiva global microloan project. As such, ASI provides small unsecured loans to local tenants who need help with a number of financial needs, including rent, car payments, utility bills or starting a business.

ASI provides microloans through its nonprofit organization, A Shared Initiative. The purpose of this initiative was to provide options for lower income borrowers who are normally turned away by most banks.

These borrowers tend to apply for loans through subprime lenders that charge heavy fees. Those who are most in need of emergency loan proceeds can least afford to pay the higher interest rates charged by finance companies, payday lenders and pawn shops. New Orleans rent loans are commonplace among predatory lenders, but many mainstream financial institutions shy away from these products.

Following Hurricane Katrina, ASI has been an important partner for the Greater New Orleans community. By making small loans available to those who cannot qualify through traditional lenders, it enables borrowers to obtain the cash they need with the benefit of being able to repay those loans under more favorable terms. This however has been the problem.

ASI Federal Credit Union reported to its international partner, Kiva that its default rate was a whopping 43.69%. Nearly 28% of its loans were at risk. It is important to note that these figures were reported to Kiva under this specific microloan pilot project, and in no way relates to overall loan portfolio default rates outside of this special program.

Still, the high default rate throws the whole pilot project into question, since it relies on individual investors that actually provide the cash for these microloans. As default rates rise, potential investors will naturally shy away from the program and instead focus on other projects with much safer risk ratings.

Will ASI Continue the Microloans Project?

Tenants and other borrowers that would like to request a rental loan or similar microloan may contact ASI Federal Credit Union at 504-733-1733. It is up to ASI to determine whether they will continue to remain a Kiva partner.

Either way, the credit union does offer personal loans to members in good standing. Membership is available to anyone who lives or works in several communities making up the Greater New Orleans area.

While ASI is a lender, there may also be nonprofit organizations in New Orleans that may provide rental grants as a part of emergency rental assistance programs in New Orleans. It may be worthwhile to see if you qualify for grant-based support prior to taking on a loan to make your rent payments.