Valjean Financing: An Argument for Lending to Former Prisoners

The plan was initially rolled out in Hass Adjunct Business Professor John O’Brien’s class on financial innovation. “Valjean Financing attacks a problem that we see in the U.S. and other countries. It is an ingenious way to involve the private sector and a perfect example of how financial engineering can be used for positive results,” he says.

Here’s the plan in a nutshell. The financing initiative would offer personal credit to ex-felons, no matter their criminal history. The report cites a “selective qualification system” that screens applicants' behavior and social conduct both in prison and after they’ve left.

The deal would include performance-based incentives to allegedly heighten the chances of investors getting their money back. According to the paper, the loans would be granted by public and private intermediaries, on behalf of investors who win the loan via an interest rate auction. The lower the bid rate, the higher the odds the investor would land the deal.

Obviously, what the University of California is recommending faces long odds. But the UCal group is serious about the initiative and says, with Uncle Sam’s help, giving felons a real helping hand is an idea that should be granted parole – from the government, from investors and from society.

Banks and venture capitalists aren’t the only lenders out there. Here’s a look at how to get your hands on micro loans for your small business.