Hopemakers - Bringing Private Banking to the Excluded

Hopemakers - Bringing Private Banking to the Excluded

Seoul, South KoreaSeoul, South Korea
Organization type: 
for profit
Project Stage:
$500,000 - $1 million
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Hopemakers is a debt counselling service that offers to refinance high interest loans. In short, we offer private banking services to the financially excluded.

About Project

Problem: What problem is this project trying to address?

There are over 8 million people in South Korea without access to standard credit due to their poor credit ratings. If credit is needed, they have no option but to go to non-standard lenders (curb lenders, loan sharks etc) who will charge interest rates of at least 39% pa. These lenders will secure payment through intimidation and the use of violence, and they are often closely linked with human traffickers, who will offer the borrowers "easy" ways to get out of debt. The cause of this financial exclusion is one of misguided mindset or habit. Many debtors are trapped in a continuous cycle of debt, and even if they are offered cheap loans from public funds, they go back to loan sharks when they run out of cash. A viable solution can come only by attacking the root of this problem.

Solution: What is the proposed solution? Please be specific!

Hopemakers offers debt counselling and refinancing services so that highly indebted individuals can escape the cycle of high-interest debt. Debt counselling is absolutely vital as it is the debtors' mindsets and habits that caused them to be in debt. Couselling imparts financial knowledge, advises on unhealthy consumption behaviour, makes plans for disciplined financial transactions, establishes sustainability and above all restores hope to clients. Highly qualified and committed counsellors are trained to respect the dignity of the clients rather than to sell financial products. Often, the counsellors will refer the client to different organisations for refinancing. There are many lenders that don't offer counselling, and many financial planners that don't offer refinancing. Hopemakers is the only debt counselling service in Korea with the capacity to refinance - the two together ensure sustainabilty for both the client and the organisation.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

Most of our business comes through referrals from Korea Easy Loan, a government-initiated loan broker. Our clients will first complete an application form online, which will be reviewed by one of our counsellors who will then telephone the client and conduct an initial interview. If the counsellor is satisfied with the initial interview, another counsellor conducts a face to face in-depth interview which will cover not only issues of personal cash flow, but also consumption patterns and spending behaviour etc. The initial interviewer will then decide whether or not to offer a loan. (The case is passed back and forth between counsellors to reduce moral hazard. The counsellors can become very emotionally involved, which may cause them to make decisions that are not in everyone's interests) Loans are initially offered at 29% pa interest - high, but still considerably lower than the loans they are refinancing. Every six months thereafter, a follow-up interview assesses progress and checks how the client is getting on. If the client has met the loan repayments faithfully, then the interest rate will be lowered by 2%, eventually down to 23%. The in-depth interview and the follow-up interviews are where the counselling takes place. It is here where the clients are educated on matters financial, but more importantly this is the place of healing. Many clients have carried the burden of their debt without anyone to talk to because of shame. We hear repeatedly from our clients that it was the sympathetic ear of the counsellors that made the greatest difference.

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

There are two government initiatives that provide refinancing loans to sub-standard borrowers. The first is the KAMCO Refinancing Loan, and the other is the Sunshine Loan. The refinancing portion of their business is essentially the same as Hopemakers, but the big difference lies in the debt counselling. As neither of these initiatives offer cash flow planning or educate the client on financial matters, it is often the case the the client runs out of money again and needs to go back to the non-standard lenders for cash. Because of Hopemakers' integrated counselling and refinancing model, we are able to provide a viable and sustainable solution to our clients.

Founding Story

Our founder, Mr Ra Eui-Hyung has always had a heart for the marginalised, and was a pro-democracy activist in the days under Korean military dictatorship. In 1998 he founded Podo Financial Planning, which advises clients on financial planning, investments, insurance etc. After a decade of running Podo, Mr Ra had enough of clients coming to his firm asking for help with their debt situation. As Podo was not licensed to be a lender, it could advise the clients but could not take the crucial step to alleviate their situation by actually refinancing loans. In 2009 Mr Ra set up Hopemakers with the refinancing capacity that Podo never had, but coupled it with the consultation/counselling services which were Podo's core strength. In his experience with Podo, he had learned that counselling is not enough - you need to follow through with a loan; conversely refinancing alone was not enough - without the counselling, the client would just go back to loan sharks.
About You
About You
First Name


Last Name


About Your Organization
Organization Name


Organization Country

, Seoul

Country where this project is creating social impact

, Seoul

How long has your organization been operating?

1‐5 years

Has the organization received awards or honors? Please tell us about them

Certified as "Best Member" by the Consumer Loan Finance Association in Korea.

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How long have you been in operation?

Operating for 1‐5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Cost, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

To give a fresh start to households who are struggling financially, and to restore hope in a life that is viable and sustainable. Either through imprudence or misfortune, there are 8 million people with sub-standard credit ratings in Korea, who are excuded from standard sources of credit like banks. The only recourse is loan sharks, who will only make their financial situation worse. By equipping and educating their clients through in-depth counselling, Hopemakers can change attitudes towards credit, advise on consumption habits, and encourage better financial management. Hopemakers then provides loans to refinance existing high interest loans. Success is when a client is clear about how finances work, is hopeful of a better future, and is confident in the plan to get back on track.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Other (Please describe below).

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:

Lack of sources of credit for those with sub-standard credit ratings

For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

Those people with sub-standard credit ratings. In Korea, ratings of credit range from 1 (best) to 10 (worst), 7 and below defined as sub-standard. Of the 33 million financially active population, nearly a quarter, or 8 million have sub-standard credit. They cannot approach banks or insurance companies, even savings banks will turn them away. This leaves them terribly vulnerable. If a family member becomes seriously ill, or the main breadwinner is incapacitated, the family has no option but to go to loan sharks. In the worst cases the loan sharks are connected with organised crime, and human trafficking can come into play as client's bodies are put up as collateral. In the best cases, the clients suffer from depression, anxiety, and shame (hardly best cases if this leads to suicide or alcoholism). That regular people, through no fault of their own, could find themselves in a situation where they are forced to go loan sharks is a terrible injustice that Hopemakers seeks to address.

Could your solution work in other geographies or regions? If so, where?

Yes. The Hopemakers model of providing counselling as well as refinancing loans could work anywhere. In general, this should be the standard practice of banking everywhere. We like to call ourselves the "Private Bank for the Excluded", and believe that the services that are available to private banking clients should be available to everyone.
Specifically, because this model looks at those who have been excluded through institutional credit ratings systems, the model is most directly suited to first world nations that have established credit ratings systems in place. The necessity of credit, the institutional exclusion, the need for counselling and refinancing will be the same in any first world nation.
On the other hand, counselling and financial planning could have more impact in countries with lower levels of financial knowledge. In such countries, the debt counselling could be a strong tool for community building as well as financial sustainability.

If your solution is dramatically successful, how will things be different in 10 years?

We envision freedom from the debt trap for ALL Korean citizens. Through education and counselling, it is possible.

The absolute success case would be the counselling and refinancing of ALL the clients of loan sharks and other non-standard lenders (NSL). There are 1.5 million clients of NSLs in Korea.

A more realitic target is the counselling all of our target market of 130,000 people (those with refinaceable loans, steady income, and under 40 years of age), and refinacing 30,000 loans. Many of the counselling sessions result in us referring the client to cheaper, govt-funded sources of credit. This means around 400,000 people (incl families of clients) who will have been released from the debt trap through education into better financial management, and therefore released from the social ills that the debt trap entails. As each client can save 9.5 million won in interest payments by refinancing, around 300 billion won in interest payments to loan sharks can be saved.

What will have had to have changed to make this happen?

Financing is key. Just to achieve the realistic target above would require over 100 million USD to refinance the loans alone. Because Hopemakers cannot accept deposits, all the loans need to be funded by external sources. A change in investors' (business and government) perceptions about social enterprises and towards Hopemakers in particular would be ideal.

Marketing is also key. In order to counsel over 100,000 people, at least 2 million people should have heard about Hopemakers and what they do. If a major media company could take up the banner of Hopemakers and champion its goals, it would be a godsend for the company.

The company would need to recruit more counsellors. They are looking at a scheme to hire retired financial industry professionals as counsellors. Many retired professionals are looking for something meaningful to do, and they have the requisite financial knowledge and life skills. If this scheme succeeds, it will be a huge boost to Hopemakers.

What has been the impact of your solution to date?

To date, Hopemakers has counselled over 2000 clients and helped them to get a fresh start in life. This translates to over 6000 people whose livelihoods have been directly impacted to the positive by our work. Many have been referred to govt credit sources for refinancing.

In addition, we have made over 300 refinancing loans totalling 2.7 billion won. Therefore over a thousand people have seen a direct increase in their standard of living through debt refinancing and financial restructuring.

In monetary terms, we have calculated that the average client can save 9.5 million won over 3 years by refinancing their high interest loan. Therefore, we have taken almost 3 billion won from the hands of loan sharks and put it in the pockets of our clients.

The knock-on effects of households emerging from the debt trap, such as emotional stability etc, are hard to quantify, but we believe them to be even more important than the monetary gain.

What is your projected impact over the next five years?

By the end of 2017, we expect to have counselled at least 10,000 clients, and made 2,500 loans. This is a conservative estimate - we hope the actual numbers will be much higher.

In monetary terms, this would mean an aggregate interest saving of 25 billion won for financially excluded citizens.

What barriers might hinder the success of your project? How do you plan to overcome them?

The biggest risk factor is financing. If we are unsuccessful in raising capital to increase our loan base, it would hamper our growth potential. For this, there is no real answer - we will just do the best we can now, and build up trust and confidence among our investors so they will be on board in the future. It may be possible to piggyback off govt-sponsored initiatives - portions of the KAMCO Refinancing Loan could be outsourced to Hopemakers in a bid to link counselling and refinancing.

Lack of success in marketing our company and its services could also hinder our growth potential. We are working on our PR to increase our profile with media outlets - we are confident that buzz marketing, together with national news coverage, will bring in more clients than we can handle.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

In 2H12, 400 people counselled, 100 loans made

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Successfully raise equity capital

Task 2

Launch new counselling-intensive product (fee charged for counselling)

Task 3

Hire and train another counsellor

Now think bigger! Identify your 12-month impact milestone

In 1H13, 500 people counselled, 120 loans made

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Hire and train another counsellor

Task 2

Launch PR/marketing offensive

Task 3

Prepare scheme to recruit retired professionals as counsellors

Tell us about your partnerships

Our main partnership is with Korea Easy Loan (KEL), a government-initiated loan broker. There are a myriad of loan brokers in Korea who earn their keep by snaring clients through flowery advertisements and referring them to loan sharks. In order to reverse this, the govt initiated KEL, who only refer clients to responsible lenders. As such, many of KEL's referrals come to Hopemakers, and most of Hopemakers' business (90%) comes from KEL.
Another significant partner is Podo Financial Planning, another company headed up by CEO Ra. Many of Hopemakers' best counsellors have come from Podo.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

At present, our reach is limited to the Seoul Metropolitan Area. Because of the intensity and frequency of the counselling sessions, the clients need to be where our counsellors are based.

Inside 10 years we hope to expand to the regions around the 5 major cities of Busan, Incheon, Daegu, Ulsan and Gwangju. We have no plans to expand overseas as yet.

Nor do we have plans to expand our client base beyond income-earners under 40. It is important that we focus on our core strengths, and not spread ourselves too thin so that we can have the greatest impact.

What type of operating environment and internal organizational factors make your innovation successful?

Founder Ra's experience with Podo FP taught him the mechanics of client counselling along with the importance of upholding the dignity of his clients while helping them. He personally engages in the training of his counsellors to pass on his passion to them.

Recently, Mr Kim Hee-cheol took over the post of CEO. CEO Kim has over 30 years in retail banking, and has experience in financial product devmt, marketing, compilation of best-practice manuals and training. He spent many years in private banking where he cultivated the idea of private banking for the excluded. He is a founding shareholder of Hopemakers, and his experience will underpin the the coming expansion of the company. His contacts in the financial community are a huge asset, particularly in hiring retired professionals.

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list