Morris Plan Bank
Categories: Banking, Regulations
In the early 1900s, working class folk had trouble getting loans from regular big banks. Today, we have payday loans and loan sharks, microfinance lending, and community banks—many more options for non-traditional borrowers.
The Morris Plan Bank was one of the first to fill that market gap, giving out loans to lower-income people that the big banks didn’t want to risk their money on. They used an old-fashioned, reputation-based way of lending. No collateral needed, just a good standing and moral character (and some income and employment), as assessed by two peer references. They also paved the way for automotive financing and favorable credit life insurance policies.
If the Morris Plan Bank was so great, where are they? Well, big banks saw the Morris Plan Bank all busy with business, so they created similar loans, creating competition in the lower-income borrower market. That, along with the Great Depression, killed off the Morris Plan Bank. Still, it’s left its mark on today’s loaning practices.