Interest Free Loans From the Benevolence Fund?

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I am curious if anyone has experience providing individuals in financial trouble with interest-free loans as a ministry of benevolence. If so, could you share what you have learned from doing this? Are there legal issues I'm unaware of? I haven't found much on this topic from my cursory skimming of the handful of books I own about diaconal ministry. It seems clear to me this strategy has biblical precedent (Exodus 22:25; Leviticus 25:35-37; Deuteronomy 23:19-20; Psalm 15:5) and fits the call to minister the mercy of Christ (Article 25c of the Church Order).

Here is a hypothetical scenario: A lower income family who relies on government supplements to afford housing has a car accident that sets them back. They get behind on their bills and they need to pay the rent they owe in order to keep their government-provided benefits. The deacons hear their story with compassion and encourage them in the plan this family has put together to get out of their pickle. If the deacons pay the landlord $600 from their benevolence fund and treat this as an interest-free loan to the family, who agrees on it back at $50 a month over 12 months, this family could get back into a situation where they can make ends meet.

One question I think we need to answer right away is what we will do if they tell us they are unable to make the payments we have agreed upon. There must be other things I'm not thinking of. I would appreciate your questions or comments.

— Phillip

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Thanks for the thoughtful question, Phillip.  My personal perspective is that the church is not a bank and does not make loans.  In the situation you mention, give the family $600 and help them get on their feet now, not a year from now.  Making someone a creditor of the church will inevitably color the spiritual relationship, in a negative way.

Admin

I like that direction, Bill. And if the family feels called to 'pay it forward' to help other families in a similar situation down the road, they could always voluntarily contribute to the benevolence fund over time. Not to pay back a loan, but out of gratitude to God.

This family does not want a hand out but the dignity that comes with getting over this hurtle in a way they can manage with the church's assistance. I don't know what Bill Vis means by "help them get on their feet now, not a year from now." The money would be given now and they want to pay it back in a manageable increment. The church has already helped this family out with several "gifts" to cover other expenses. The interest free loan was an idea I threw out (I'd just read some of the Bible passages I posted) and they jumped on it. We could say "here is $600 and we appreciate your contribution to the benevolence as you can," but we've already done that with other expenses and everyone involved seems to want this aid to be different.

Phillip, I'd still structure it as a gift.  If along with the gift is a semi-formal understanding that they will do their best to give $50 to the benevolence fund to bring it level, that's fine.  Two advantages.  Because the $50/month is not required it become a tax-deductible gift.  And if they run tight in month seven they can use their money to put food on the table that month and drop $50 into benevolence in month 13.  The idea of a member being a formal debtor to the church sets my teeth on edge.  There is at least as much dignity in freely and joyfully giving to the benevolence fund throughout the year as there is in making mandatory payments.

Phillip,

At Many Peoples Church we carry a rollover benevolence fund that serves that purpose.  We initially set the fund up with $ 1,000.00.  Over the last 8 years since we began meeting for worship, at least 6 church members, and several community neighbors have borrowed from that benevolence fund.  Their reasons were much like the case study you described.  We ask people to sign an agreement that underscores 2 things - 1 - their commitment to repay the amount according to the terms they agreed would work with their budget And 2 - they understand that failing to repay will mean that we will be unable to help others from this fund.  The fund depends on their repayment.

So far, 3 out of 4 people have repaid the loan.  We feel like the benefits far outweigh the possible 25% losses.  It's a model Habitat for Humanity uses for home loan repayment.  This models adds an element of sustainability to charity.  That feels very much like the model used by the early church - a model that depends on healthy 'receiving' and 'giving' by God's people.

John Hoekwater

As we prepare for an increase in requests for benevolence due COVID 19, our diaconate is also reviewing the option of asking people to repay what they receive.

John, do you ask the same type of repayment from recipients who are not from your congregation?

Do the repaid funds fit the criteria for a charitable tax receipt?

Do you also have benevolence funds that are not expected to be repaid?

Jennie Van Hooft

I'd be extremely careful with this.  Check your bylaws and check your Benevolence (and/or offering) Policy.

Money collected for a cause must be used for the cause that it was collected for.  And since benevolence funds are not typically understood to be 'loan' funds, they can not be used to provide loans. 

In fact, if your church has a benevolence policy, it will likely include a sentence like:  "Disbursements from the Benevolent Fund may not be made in the form of a loan."

Thank you, Rob.  Do you have any suggestions as we expect unprecedented requests for benevolence?  We do have a policy which we'll follow.

Hi Jennie,

Since this is unprecedented territory it's difficult to provide a lot in the way of clear guidance but I will make a few suggestions to get the ball rolling.  Hopefully others will chip in their thoughts. 

First, prayerfully stick with your benevolence policy as much as possible.  While it probably wasn't written for times exactly like these it's also likely that its original authors wrote a carefully considered document worth following.  (Remember the prayerful part.)

Secondly, at least in Canada, look for information going out from World Renew and Diaconal Ministries Canada (an email was sent to all deacon chairs) -- they are offering some extra $$ assistance and coaching to help deacons as they help others.

 Third, keep watching The Network -- a lot of great information on best practices is being shared here as well as here https://www.crcna.org/covid19

And finally, and I'm borrowing this from a piece by Jodi Koeman which you can read in its entirety here https://network.crcna.org/community-engagement/being-community-during-co... , stick to Asset Based Community Development principles... 

--Remember relationships are the key so ask yourself (your diaconate, your church)

--What strengths and gifts do you or your church have to bring to this situation and to your community? What strengths are right in your neighborhood?

--If you cook, who needs a meal? 

--If you are an employer, consider how you will take care of your employees.

--If you have a car, how can you grocery shop for others or pick up medications? 

--If you are physically healthy, can you organize walking/running clubs that are virtual to encourage one another to stay healthy? 

--If you are a nurse, can your church provide a hotline to answer questions for neighbors?

--If your a praying persons PRAY

Perhaps be the organizes and mobilizes -- not necessarily the "do everything" folks. 

Remember it's not only and always about money. 

Be creative, work with others, and share what you're learning!  :-)

Hope this helps -- please share your thoughts and ideas below!

 

Community Builder

Hi Jeannie - 

Thanks Ron for your responses. I agree with what you wrote.

Jeannie - feel free to reach out if you have questions or want some guidance on how to respond. I have been in conversation with some churches and we all are working our way through a process.

One thing I think we should be critically working on - Now is a great time to be collaborating with churches in your community and other organizations so that the whole community is working together in a coordinated approach.

World Renew, Diaconal Ministries of Canada, and others are working on specific ways we can resource churches during this time. Stay tuned and informed. And again - feel free to reach out if you would like.

 

1 more addition...

Make sure that you are aware of all the government resources that are (becoming) available.  We have found on numerous occasions that people under stress have a hard time finding / tracking / accessing information that under normal circumstances they'd find easily.  Having a check list available for them can be very helpful.

My posting was made in 2014 based on a family who asked our church to loan them money. They stated they would not accept a gift. We gave them $600 and told them if they wanted to give back to the church, to contribute to our offerings and that could be their way of giving back. We helped them out at the time and this family moved out of state about a year later.

We do not have anything by way of written benevolence policy that gave us guidance or parameters to this inquiry. I suggested our deacons draft some but I think they want to remain as flexible as possible. Thank you to those who offered your input. This discussion seems to have gotten rebooted in light of COVID-19. I had almost forgotten all about this until people started commending again on it. I will leave it up if it is helpful to others, but I am no longer asking this question.

Thanks Phillip

It seems like a good thread to re-visit for such a time as this!  :-)