The impact of IDA policies and programs
By: N. Baharanyi, R. Zabawa, A. Paris, J. Quaye-Wilson, and P. Kanyi, Tuskegee University
In recent years, researchers and policy analysts have emphasized the need for assisting the asset accumulation efforts of the poor by providing incentives to save and build wealth. Wealth-building is critical because it provides another dimension of well-being and assets provide the kind of safety net that can be relied on when income is interrupted. Recent hurricanes like Katrina, Rita and Wilma in the south have highlighted the fact that many Americans live in abject poverty, without any assets to draw upon in bad times because they were never a part of the ownership society. With the concerted efforts of researchers, policy advocates, community-based nonprofits, financial institutions, and state and local governments, financial education and IDA savings are being offered to hurricane victims as part of the recovery process.
Louisiana legislators recently approved $2 million in funding for a statewide IDA program aimed at getting low-income hurricane victims back on their feet. In 2006, the State Department of Social Services selected Southern University in Baton Rouge as administrator of the Louisiana Asset Building Initiative. The university's Center for Social Research is now working with 25 community-based providers that coordinate financial education, intake, enrollment, case management and other client services. The Louisiana IDA program provides a 4-to-1 match for a minimum of $500 to a maximum of $1,000 in participant savings. The purpose of the savings is limited to homeownership, a legislative priority since the 2005 hurricane disaster because home ownership is also seen as a productive step towards helping working poor families escape poverty. About 200 people are currently enrolled in the program and there is still room for 150 more participants.
Similarly, the Assets for Independence program is the initiative that promotes savings and financial stability among low- to moderate-income earners in Alabama. The program is administered locally by United Way of Central Alabama and is overseen by Alabama Asset Building Coalition. The coalition is made up of more than 30 agencies committed to empowering Alabama's low-income earners and providing ways to help them become financially independent and self reliant. The AABC IDA program offers a 2-to-1 match for a maximum of $2,000 in participant savings towards a first home purchase, a small business capitalization, and post secondary education. The program targets TANF recipients and disaster victims as well as other low-income earners, and allows participants to learn financial responsibilities and develop healthy financial habits.
Mississippi is developing an IDA coalition named the Mississippi Coalition for Asset Development (MCAD) in response to the Corporation for Enterprise Development's (CFED') state asset-building policy initiative Request for Proposals in 2002. The Foundation for the Mid South (FMS) marshaled a group together to develop the coalition which is at an initial stage and hopes to work on legislation, public awareness, and networking practitioners. Meanwhile, IDA and financial education programs are run by Jackson County Civic Action Committee, in Moss Point, by Mercy Housing and Human Development, in Gulfport, and by Quitman County Development Organization in partnership with Quitman County Federal Credit Union.
In Florida, there is considerable IDA activity on the community level, including budgeting for an IDA program under a welfare-to-work program in Miami-Dade County, for the purposes of job training and education. Also, for over five years, Lutheran Social Services and Catholic Charities of Miami have been implementing IDA programs that accommodate refugees, and disaster victims among others. United Way of Palm Beach County, and The YWCA of America, also operating in the Miami area, has implemented an IDA initiative in Florida.
To this date, IDAs have proven to be one of the most promising approaches for asset building and thus, an important tool for achieving family economic success. However since its inception in1991, and despite its promising ambitions, growth has been slow. Today, only about 30 states sponsor IDAs and over the past decade, federal and state governments have dedicated a meager $183 million to related initiatives. Therefore policies across states and regions must be structured to provide more effective and sustainable programs.
First, there is the need for professionals in academic and research institutions, economic policy, community development, financial institutions and public and private institutions to support and expand state asset policy initiatives. Although asset building priorities differ across the states, there are commonalities that can serve as learning models for a continuum of asset building policies and strategies. By building successful state and or regional coalitions, policies can be moved from the grassroots to state and federal levels. Second there is the need to better "advertise" or "market" asset building policies, to build support for these initiatives among funders, policymakers, and the public. This can be done by putting a personal face on success stories and connecting these stories to demonstrate tangible successes and impacts of various programs. Documenting success stories will not only get the word out to potential participants and funders, but could also offer best practices and approaches to other program organizers and administrators. Third, policy initiatives must also address structural issues that limit asset building and asset preservation. As a long term issue, there is the need to focus on the regulatory and policy environment and develop strategies to prevent predatory lending and credit card abuse. Focusing on financial education for individual responsibility in making healthy financial choices is the first part of the issue. The second part is to develop a structural system that replaces high cost services like cash checking, pay-day loans and other predatory lending practices that lead to asset erosion with low-to no-cost banking services by mainstream financial institutions.
Finally, policy initiatives must take into consideration local community factors that might affect the level of success of programs administered in rural communities. Such factors may include lack of public transit systems, predominance of low-wage jobs, access to local public and private funders among others. Program funding, eligibility requirements, and permissible uses must thus be structured around these local factors rather than being based on broad national perspectives.
Alford, Jeremy. (2007) "Funding the American Dream." Gambit Communications Inc.
"Building a Regional Asset Building Coalition for the Southern Black Belt States." A project funded by the Ford Foundation for an inclusive asset building policy.
CFED. (2006) "Federal Reserve Forums: Innovations in Asset Building Policies, Products and Programs." www.cfed.org
Housing Assistance Council. (2006) "Designing and Implementing Rural Individual Development Accounts."