BankPlus CEO William Ray has seen firsthand how financial literacy training can transform unbanked, middle-class consumers into bankable ones. Since 2008, the Ridgeland, Miss.-based BankPlus has been offering low-interest loans of up $1,000 to cash-strapped, largely unbanked consumers who agree to open accounts at the bank and enroll in a three-hour seminar on money management. In all, more than 19,000 Mississippians have gone through BankPlus' financial education program; roughly 14,500 have received one or two consumer loans from the bank; and perhaps, most important, roughly 80% of those borrowers still have savings or checking accounts at the bank. Some have even raised their credit scores enough to qualify for home loans.

Ray had expected that most of the borrowers would be in low-wage jobs, so he's been surprised to find that many of them are police officers, school teachers or employed in other middle-class occupations. The so-called CreditPlus loans helped them get out of short-term debt, but it's been the financial education that has taught these formerly unbanked consumers the importance of saving, paying bills on time and raising their credit scores.

CreditPlus "is not so much a low-income product as it is a moderate one," says Ray. Many of the borrowers, he adds, "just never had any financial literacy training and got caught up in the payday lending habit."

Of course, banks have long supported financial literacy programs like those offered through Junior Achievement, Operation Hope, and countless community orgaizations, partly to gain Community Reinvestment Act credit but also on the vague hope that the newly literate would become bank customers.

The success of BankPlus' initiative confirms that committing to financial education can be good for business at a time when all banks are struggling to generate more revenue. Ray points out that CreditPlus clients have more than $4 million on deposit at the bank and several dozen have accounts with balances of more than $5,000.

Other banks, too, are ramping up financial education initiatives in hopes of bringing more unbanked or underbanked consumers into the mainstream. Bank of America has teamed up with the Khan Academy to develop a series of free online videos offering tips on things like how to get out of debt and building credit. Meanwhile, SunTrust Banks, First Horizon and Regions Financial are among more than a dozen banks that have opened or agreed to open financial education centers within their branches. The centers are run by the nonprofit Operation Hope and, according to its chairman, John Hope Bryant, they provide banks with a fresh opportunity to win over the unbanked.

Under its old model, Operation Hope offered financial education at a dozen stand-alone centers in low-income neighborhoods. Its new model is to put centers inside bank branches in all types of communities. The aim is to expand beyond the low-income consumers it had historically targeted, and reach out to those with moderate incomes who crave financial guidance but might be reluctant to seek it. "Nobody who is middle class wants to come to a Hope Center because that's where poor people go," says Bryant.

First Horizon recently opened a Hope center inside a branch in Memphis, Tenn., and CEO Bryan Jordan says it plans to add several more across the state. While the bank has long supported financial education, Jordan says the business case for setting up Hope centers in its branches is compelling. "If you take someone who is struggling and turn them into a business owner, whether they are a customer of ours or not, they are likely to be employing customers of ours," Jordan says. "Or if it's someone who now qualifies for a home loan, they will need to do some repairs, they'll likely be [contracting] with a customer of ours. It all has a trickle-on effect."

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