Real-time, Digital Small-Dollar Loans Offer Relief in Disaster-Prone Regions

Satellite view of night over America with masive hurricane in Caribbean. 3D illustration. Elements of this image furnished by NASA

In this new era of multi-seasonal, nature-related disaster events affecting nearly every region in the United States, one may or may not believe that federal agencies would be prepared to assist those affected most by the disaster – a large portion of whom reside in low-income neighborhoods and communities.

By the looks of the last two decades or so, those agencies have appeared to routinely fail in providing critical and budgeted financial assistance to the disaster survivors who need it most. Based on internal documents from within the Federal Emergency Management Agency (FEMA), low-income survivors of hurricanes are less likely to receive disaster funding to repair their damaged homes or cover the cost of rent compared to the more affluent survivors.

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Researchers and local officials themselves claim to notice racial disparities in regard to who receives financial relief. That startling admission is surprising, not to mention the opportunity for local credit unions themselves to potentially have onboarded a digital small-dollar lending platform for lower income members to access and plan ahead for such events of destructive magnitude.

Shirley Paine raised her children and grandchildren in her home – the only surviving house on her block – in the small city of Port Arthur, Texas. Turns out Port Arthur is located right on the Gulf of Mexico and surrounded by water on all sides – bad news when hurricane alerts come in, and especially when Hurricane Harvey laid devastation to the region nearly seven years ago. In fact, according to the National Risk Index Score (NRI), a tool showing which communities are most susceptible to natural disasters, Jefferson County, in which Port Arthur resides, has the fourth-highest risk hazard rating of any Texas county lining the Gulf Coast at 35.7.

Adding insult to injury, the neighborhood of El Vista is in a particularly low-lying spot – easy fodder for a moderate-to-ferocious Gulf hurricane, and one of the few communities Black residents could live in back when the city was officially segregated. Shirley, who served as a Port Arthur city council member for 15 years, said she had four feet of water in her house, and claimed she was only able to rebuild because she didn't have to rely on FEMA. Her less fortunate neighbors weren't so lucky.

As her fellow residents applied for FEMA relief to rebuild, Shirley instead saw them struggle to prove they actually owned their homes, treasured family abodes that had been passed down for generations. Many residents' houses weren't technically in their names, which is common in many historically-segregated communities.

The process took those life-long residents months, if not years, to iron out all the paperwork. Elderly neighbors and young children didn't have the kind of time to find long-term or even temporary housing, and they didn't have the savings or life event funding to afford the cost of a hotel or apartment. Circumstances left many with little choice but to leave the only home and community they'd ever known.

In such instances, a valuable mobile small-dollar loan would certainly have come in handy in easing the transition for whatever moving plans the individual had to make for themselves and their family, where they were moving to and the accommodations they would have to make. An accessible loan made right from their credit union's digital app makes those transitions so much easier, and it also enables them to bypass unreliable federal agencies that, as explained above, fail to get survivors the benefits anyway.

Such heartbreaking developments for low-income or underserved consumers in disaster-stricken communities can be difficult to hear, especially when there exists perfectly attainable access to financially stabilizing and credit-building programs and services like digital small-dollar lending offered by their local credit unions.

Improving Accessibility to Financial Relief Following a Disaster

As the evidence from FEMA itself indicates, the playing field between affluent and lower-income individuals and families remains a difficult and frustrating scale to balance for many in susceptible regions in America.

It's clear that disadvantaged communities will always get hit the hardest when natural disasters strike. In the two years following Harvey, nearly 20% of residents were still living in their damaged homes without completed walls or floors – repairs homeowners were uncertain they would ever be able to afford. A smaller percentage of residents moved outright following the hurricane.

Low-income neighborhoods like El Vista within Port Arthur and countless others across the nation have an immediate need, particularly in the gut-wrenching aftermath of a natural disaster. Almost by reflex, many surviving residents will turn to their credit cards to tread water until they can return to work or find sustainable accommodations. Such convenient backstops do their credit scores no good, and only add to their debt while lowering their credit scores in the long-term.

Credit unions, on the other hand, remain a locally-focused, accessible and financially-stabilizing resource that can offer those residents the time and the breathing room necessary to consider next steps. Considering Port Arthur has some 16 credit unions, they represent a great opportunity to help consumers meet temporary cash flow imbalances, unexpected expenses or income shortfalls, especially during times of economic distress and major weather events.

The credit unions that offer potentially life-saving financial tools give members in those areas immediate access to funds or services in times of crisis, be it home repair following a hurricane or financing a move elsewhere. That's how credit unions built their legacy and communities – by guiding their members forward to financial stability and a future of improved financial health and wellness.