Allstate Microloan Program

Loan Amount:   $150 – 500
Interest Rate:    0% 
Term:                  6 months to 1 year
Market:              Survivors of domestic violence
Prerequisite:    Must have participated in KDVA's IDA program for at least 6 months   


The Kentucky Domestic Violence Association (KDVA) offers no-interest microloans to Individual Development Account (IDA) participants and secures the loan with the borrower's IDA savings. The microloan program was launched in January 2009 with grant support from the Allstate Foundation. It specifically aims to assist survivors of domestic violence build positive credit and eventually graduate them to financial products such as as a car loan, credit card or home mortgage. IDA participants can borrow up to $500 if they have saved that much in their IDA account. During the time of the loan, the IDA participant cannot withdraw their IDA savings that are securing the loan.

The microloan program builds on KDVA's existing IDA program, taking the concept of asset accumulation one step further by helping their clients build credit. Women who experience domestic violence often face financial burdens that make them vulnerable to having poor or no credit. They may have been barred from having their own accounts or may have left a spouse or partner who had poor credit. Many also have developed poor financial behaviors after years of no access to their own money. Most participants in KDVA's IDA program have credit scores between 450 and 600 – scores that do not usually translate to access to conventional loans from financial institutions.

KDVA places no restrictions on how the microloan funds can be spent. Some participants use the loan to cover personal expenses, to create an emergency fund, or to pay off collection debt. However, many of the 25 women have immediately deposited the funds into an interest-bearing checking account and used the account to write a check each month to pay back the loan.

To apply for the Allstate Microloan Program, the applicant must have an Individual Development Account (IDA) for at least six months, although KDVA prefers to lend to savers who are in their second or third year of the IDA program. IDA Coordinators screen the applicants to assess if they are a good candidate for the microloan program and can make monthly payments on a loan in addition to continued monthly savings deposits into their IDA. All clients receive one-on-one financial counseling through the IDA program. KDVA educates borrowers that their payments are reported monthly to the major credit bureaus. Staff makes clear to borrowers that regular on-time payments will help their score, but late or missed payments will also be reported and would hurt their credit score. To date, only one participant has missed consecutive payments. In her case, the loan was paid off with funds from her IDA after she was 120 days late, and KDVA reported to the credit bureaus that the account was paid in full. This process ensures no delinquent accounts go to collections.

KDVA's commitment to reporting the microloans to build credit is showing an impact. Check out KDVA's Credit Outcome Success to learn how a KDVA client and microloan borrower built her credit - and re-built her life!

Kentucky Domestic Violence Association ensures that the right to live free of any form of domestic abuse is valued, protected, and defended in Kentucky. A KDVA project, the Kentucky Asset Success Initiative (KASI), provides free tax-preparation services and financial education to low and moderate income families.


Related articles:

Kentucky Microloans Build Battered Women's Credit

Program Helps Abused Women Rebuild Finances