Bringing back the lending circles: MacArthur Fellow José Quiñonez GS '98

On Sept. 22, José Quiñonez GS ’98, founder and CEO of microfinance nonprofit Mission Asset Fund, became one of the four University alumni named as a MacArthur Fellow.

The annually awarded fellowships, colloquially referred to as “genius grants,” entail a $625,000 cash prize paid over five years by the John D. and Catherine T. MacArthur Foundation to between 20 and 30 Americans who have shown "extraordinary originality and dedication in their creative pursuits and a marked capacity for self-direction.”

As head of the San Francisco-based Mission Asset Fund, Quiñonez, who received a master’s degree in public affairs from the Woodrow Wilson School, seeks to solve the crisis of lack of access to financial services for low-income people, especially immigrants and minorities.

According to the Mission Asset Fund’s website, many lower-class citizens are “underbanked,” or not actively engaged in the financial system. Many people in this group have no bank accounts or credit history, cannot get car or home loans from banks, and are forced to rely on predatory payday lenders. At least 64 million Americans have no credit scores, and 17 million have no access to a bank account.

“When people don’t have access to the basic financial services, it’s virtually impossible for people to work themselves out of poverty. Checking accounts, saving accounts, and credit histories are basic pillars that you and I take for granted, and not having them is a huge barrier for poor families,” Quiñonez said.

The Mission Asset Fund seeks to improve this status quo through a modernized version of the practice of lending circles. Seen in cultures as disparate as Mexico, Africa, and the Philippines for hundreds of years, lending circles traditionally comprise a group of people who contribute a certain amount of money to the group pool every month, which goes to a certain group member each month. Group members rotate through receiving the money, thereby receiving zero-interest loans without relying on outside sources.

Mission Asset Fund brings this ancient process into the 21st century and seeks to solve the problem of lack of access to financial services by requiring lending circle members to have checking accounts and transfer funds to each other through banks. The organization manages the accounts and reports transactions to credit agencies to allow participants to build up the credit that is crucial for securing loans. Mission Asset Fund has been tremendously successful in accomplishing its goal of improving financial outcomes: according to independent audits of its programs by San Francisco State University and Yale University, the average debt reduction for participants is $1,000, and the average credit score growth is 168 points.

Quiñonez attributes his success with Mission Asset Fund in part to his graduate education at the University: “I went to get an MPA because I wanted the training that the Woodrow Wilson School provides, and to become a better policy analyst, and gain a better understanding of how government works. And that’s definitely what I got from that experience.”

Frederick Wherry GS ‘04, a professor of sociology at Yale University, was a participant in a sociology reading course that Quiñonez attended, and reflected positively on both Quiñonez and lending circles, a subject about which he is currently writing.

Wherry also believes that lending circles are a key tool in the fight against poverty. “Lending circles force us to rethink our approach to solving problems like poverty and debt, by asking us to stop trying to fix people, and instead try to figure out what kinds of activities people are already engaged in, and then tailor services to fit current practices. We need a mix of approaches to solving poverty, and lending circles are an important tool from the informal sector,” said Wherry.

Quiñonez also cited University Professor Alejandro Portes, whose sociology reading course Quiñonez took, as influential to his development the Mission Asset Fund’s core principle of lending circles.

“He explained the concept of looking at informal economies as viable activity that supports a lot of people, and not as criminal or bad just because it’s outside of the regulatory structure,” said Quiñonez.

Portes did not respond to requests for comment.

“José [was] always very capable, but always very helpful. He would always be able to get people to roll up his or her sleeves and [accomplish a job together.] He always had a sense of humility, and a dedication to doing things right,” said Wherry.

Ultimately, Quiñonez is optimistic that his MacArthur Fellowship will allow him to expand Mission Asset Fund’s work.

“It’s such an honor…with this platform and media exposure, I’m able to articulate a different vision. I’ll use the award to invest in lending circles across the country, to reach more families and communities, and help low-income families develop their true economic potential,” said Quiñonez.