October 2, 2023

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Alternative financial services (AFS) are financial services provided outside traditional banking institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance. In developed countries, the services may be similar to those provided by banks and include payday loans, rent-to-own agreements, pawnshops, refund anticipation loans, some subprime mortgage loans and car title loans, and non-bank check cashing, money orders, and money transfers. It also includes traditional moneylending by door-to-door collection. Alternative financial services are typically provided by non-bank financial institutions, although person-to-person lending and crowd funding also play a role. These alternative ļ¬nancial service providers are estimated to process about 280 million transactions per year, representing roughly $78 billion in revenue. Customers include the Unbanked. Alternative financial services in the United States, for example via payday loans, are more extensive than in some other countries, because the major banks in the U.S. are less willing to lend to people with marginal credit ratings than their counterparts in many other countries. In the United Kingdom, alternative financial services include payday loans and money lending, the latter termed “home collected credit” or “home credit”. Organizations such as Debt on our Doorstep campaign for improved regulation.

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