Stratyfy, a fintech providing credit underwriting decisions with machine learning solutions, has partnered with the Beneficial State Foundation, with an aim to minimise racial disparities in lending.
The Beneficial State Foundation runs the Underwriting for Racial Justice (URJ) program, which aims to identify opportunities to improve access to affordable and inclusive credit in communities across the US.
The partnership between Stratyfy and Beneficial State Foundation sees the two organisations launch a two-year pilot program to unlock capital for people of colour. The initiative hopes the program can lead to wealth-building in communities that have historically been under-resourced, under-represented and affected by racial disparity in the lending sector.
As part of the new program, 20 lenders will leverage Stratyfy’s technology, including its credit risk and decision optimisation solutions, to predict creditworthiness without bias and refine their loan policies to drive fairness.
Laura Kornhauser, co-founder and CEO of Stratyfy, explained the significance of the collaboration: “We are honoured to partner with Beneficial State Foundation on this groundbreaking initiative. The innovative lenders selected for the URJ program are redefining how people of colour in their communities are able to access credit, and Stratyfy is the technology chosen to deliver the collective insights and recommended actions to make it happen.”
Erin Kilmer Neel, executive director and chief impact officer at Beneficial State Foundation, said: “Stratyfy is a key partner in this effort, using their credit risk solution to help lenders confidently make bold and meaningful changes while managing risk and meeting regulatory requirements for safety and soundness. Beneficial State Foundation launched the Underwriting for Racial Justice program to guide lenders through a process to increase access to fair credit.”
By combining the URJ program and Stratyfy’s solutions, lenders will be able to convene, share and learn with peers doing similar work, furthering collaboration as well as providing a continuous exchange of insights among this group of financial institutions.
A $40,000 problem: Racial disparity in lending and banking
Black and Latino or Hispanic borrowers are more likely than their white counterparts to depend on high-interest financial services. This has caused many to either go without or turn to unsafe, exploitative banking alternatives.
One study found that increasing access to banking services could also save Black and Latino or Hispanic Americans up to $40,000 over their lifetime. This statistic highlights the extent of disparity in lending for differing ethnicities – and is why Stratyfy and Beneficial State Foundation are committed to promoting fairer lending practices with innovative technology solutions.
“As a former chief credit officer of a community development financial institution, I understand the importance of taking tangible actions to address the systemic racial disparities in lending,” said Shannan Herbert, executive vice president of inclusive credit at Stratyfy. “By combining Stratyfy’s technology with URJ’s mission-driven approach, lenders will have the resources to instigate industry-wide change, remove antiquated, racially-inequitable practices, and also make new, equitable lending into standard practice.”