An Introduction to the FDIC’s Small-Dollar Loan
Pilot Program
On February 5, 2008, the FDIC selected 31 banks to
participate in its Small-Dollar Loan Pilot Program.1
The pilot is a two-year case study designed to illustrate
how banks can profitably offer affordable small-dollar
loans as an alternative to high-cost financial products,
such as payday loans and fee-based overdraft protection.
Participating banks provide quarterly information about
their small-dollar loan programs, which will be analyzed
to identify and report on the most effective features for
creating profitable business models for such loans.
This article summarizes the key parameters of the pilot,
the proposals that participating banks described in their
applications, and the first quarter 2008 results. Overall,
banks in the pilot originated more than 3,100 smalldollar
loans, with a principal balance of about $3.7
million in the first quarter. Eight of the banks reported
on existing small-dollar loan programs, while the
remaining banks reported on new programs. It is difficult
to draw conclusions on the basis of only one quarter
of data for mostly new programs. However, an
important initial observation is that small-dollar loans
have provided pilot banks with opportunities for crossselling
other products, which creates significant potential
for building profitable customer relationships.
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