Ohio Short-term Lending Generates Nearly $1 Billion in Spending
The short-term consumer loan industry pumps $900 million in direct and indirect spending into the Ohio economy, according to a newly-released Kent State’s College of Business Administration Economic Impact Study.
The study by the College of Business Administration Economics Professor Dr. Shawn M. Rohlin also found that in 2014 the industry caused Ohio’s residents’ earnings to rise by $400 million and created an employment impact equal to 10,500 full-time jobs each year.
“In any industry, particularly one that is divisive, it’s important to weigh the benefits versus the cost of that industry,” Dr. Rohlin said. “The costs have been focused on in the past, but there hasn’t been much study on the industry and little is known about the costs and benefits of the industry.
“This report finds supporting evidence of the positive impact this industry has on the lives of Ohio residents, a reality that does not get enough attention,” he said. “We found that overall more than half-a-billion –$512 million - was spent by local residents because of this industry. This is new money spent in Ohio and demonstrates the integral role the short-term consumer loan industry plays in the state’s economy.”
The industry generated $400 million in indirect spending for a total impact of nearly $900 million.
To put the industry’s statewide economic impact in perspective, Rohlin referred to the economic impact of Super Bowl XLVI in 2012, which was played in Indianapolis and featured the New York Giants defeating the New England Patriots.
“The direct economic impact of the Indianapolis Super Bowl was $176 million,” Rohlin said. “The direct economic impact of the short-term lending industry is like holding almost three Super Bowls a year in Ohio.”
The research included written surveys from nearly 4,000 customers who were asked how they spent the funds they borrowed.
This landmark study is believed to be one of the first of its kind to truly analyze the economic impact of short-term lending in a specific state. Nearly 4,000 surveys were collected from consumer lending storefronts throughout Ohio. Borrowers were specifically asked whether their spending would have occurred without access to short-term loans. If they said “no”, their spending was not counted. This study then captures spending that was solely enabled by short-term loans.
“One of the findings that surprised me is that was an economic impact – a real economic impact – across multiple industries,” Dr. Rohlin said. “It really showed how important this industry is because some of the top areas of spending are utilities, medical and pharmacy, groceries and gasoline.
“These are important in the everyday lives of consumers,” he said. “The research shows that people are using short-term loans to heat their homes and keep on their lights, go to the doctor and pay for prescriptions, feed their families and drive to work and school.”
Consumers were also asked what they would have done without access to short-term consumer loans. The answers included selling or pawning possessions; borrowing from family or friends; borrowing from an unregulated online lender; overdrawing their bank account; using a credit card; or cutting back on expenses.
“Some of these are far worse scenarios for borrowers,” Dr. Rohlin said. “Short-term consumer loans offer a real lifeline to the people of Ohio.”
Dr. Rohlin also studied the industry’s economic impact across 10 major communities across Ohio. The largest impacts are in Columbus, Cincinnati, Cleveland and Akron.
“We found that the economic benefits have a far-reaching effect in cities across the state,” he said.
The economic impact by metro area is:
· Akron: $43 million direct spending; $32 million indirect spending; $33.6 million earnings.
· Canton: $21 million direct spending; $15 million indirect spending; $15.2 million earnings.
· Cincinnati: $74.3 million direct spending; $58 million indirect spending; $61.2 million earnings.
· Cleveland: $56.2 million direct spending; $42 million indirect spending; $43 million earnings.
· Columbus: $91.3 million direct spending; $68.2 million indirect spending; $69 million earnings.
· Dayton: $38 million direct spending; $28 million indirect spending; $29 million earnings.
· Lima: $7.4 million direct spending; $6 million indirect spending; $7 million earnings.
· Toledo: $29 million direct spending; $21 million indirect spending; $22 million earnings.
· Youngstown: $21 million direct spending; $15 million indirect spending; $15 million earnings.
· Zanesville: $3.7 million direct spending; $2.8 million indirect spending; $3 million earnings.
Dr. Rohlin also used quantitative and qualitative analysis to determine how borrowers perceive the industry and how it affects their quality of life. A majority of consumers said after using short-term lenders services they had a positive view of the industry and that their quality of life changed positively because of access to short-term consumer loans.
“The benefits of the short-term lending industry have a far-reaching effect across industries and cities,” Dr. Rohlin said. “The perceptions and quality of life analysis illustrates the positive impact short-term consumer loans have on borrowers’ lives.”