Poverty

Red -- Getting Out of It -- Is the New Black

Maria Sotero — Tue, 10 Nov 2009 02:22:00 -0500

Across California and the nation- in New York, Los Angeles, San Francisco, and Sacramento- money is the subject of buzz, new ideas, and VIP events. Specifically, the topic is the lack of money- the have-nots, the why-nots, and trendsetting solutions.

For once the subject is not just the typical California budget woes. Those aren't new (yet somehow the designers bring them back every season). It's banking development districts (BDDs), and the new models of community-building and economic development being tried on by cities. And it's the poverty measure, and the work being done to revamp its outmoded form and function.

BDDs create incentives to encourage banks and credit unions to locate in low-income areas that lack mainstream financial institutions, and are fast becoming the subject of local buzz. On October 30th the Los Angeles City Council announced it was unanimously passing a motion directing the city attorney to draft a BDD ordinance.

LA is the first city in the nation to create a BDD ahead of the example of its own state. New York City created one, after New York State did ten years ago. That model has been proven to work, but other states have failed to pick up the trend. (And with any hot, "in" model, there's been a bit of catty criticism. These ordinances make city deposits already deposited in - guess what - banks a 'carrot' for those volunteering to locate in bank-less areas. That's not "corporate welfare" or "letting council members play with bank funds," it's good, smart policy.) This recent local action could provide the impetus to state legislators to create a statewide BBD program.

As far as non-legislative ways cities can help their unbanked constituents, San Francisco has set the trend. The city's "Bank on" initiative is a public-private partnership to 'bank the unbanked,' who in San Francisco pay as much as $40 million a year to check cashers and payday lenders, by facilitating access to free or low-cost traditional bank services. Where location of banks is not the issue, partnerships like Bank on do much to increase the economic stakes of hard working families. And 50 cities across the nation 'Banked on' after seeing Frisco's success.

We're talking about poverty. So let's see what we're talking about. The federal poverty measure, which was designed the same year as the lava lamp and the smiley face, is pitifully outdated. Tripling the cost of food does not endure eternally as the measure of 'how much is enough' for America's families. Housing and health care have become luxury goods, while food has become relatively cheap.

New York City, not surprisingly, is where the modern measure debuted. Mayor Bloomberg's Director of Poverty Research Mark Levitan took the National Academy of Science's recommendations to create a method that reflects both the geographic differences in housing costs, and all the varying kinds of state support received, when determining whether a family is in poverty. That's two things the current measure does not do. President Obama endorsed the update. And a few weeks ago, New America's California Asset Building program hosted Dr. Levitan at a small roundtable in the Capitol for key staff. If California follows suit, it will be fitting with the goal of keeping the state on the leading edge.

All fashion puns aside, the work and the conversation is not important because it's new, but because it's necessary- California may actually have the highest poverty rate in the nation. And before a problem can be mended, it has to be measured correctly.

Simple and creative solutions are not going to go out of style- we just need to make sure we update policies that no longer function the way they were originally designed.

Applying Counterpressure to the Microfinance Backlash: FP Op-ED

Jamie Zimmerman — Wed, 28 Oct 2009 17:43:00 -0400

I've been arguing for awhile now that microcredit has been overly hyped, even dangerously so (i.e., credit will end poverty). But now media (see The Times, The Boston Globe, Foreign Policy, articles, for examples) are beginning a backlash against microcredit (likely caused in large part by failed expectations caused by said hype) that I nonetheless find equally, if not more, disturbing (i.e., microfinance isn't working). I've never thought of credit as a panacea, but I do believe financial inclusion and access to an array of asset building financial services are essential if the poor are ever to move out of poverty.

So, I'm pleased that my colleague, Shweta Banerjee, just published an piece in Foreign Policy magazine - How Microfinance Can Change the Lives of Millions - that applies some much need counter pressure to the new naysayers of microfinance, by focusing on what is working, what might work, and why we should continue our efforts to innovate before falling back into old (and bad) development policies and practices.

In particular, the piece highlights specific programs and experiments aimed at providing the very poor with effective financial services, including WOCCUs matchsavings.org, Oxfam's Savings for Change and the Center for Social Development's AssetsAfrica pilot study, among others.

I'm interested in hearing others' opinions on which microfinance programs and services are most innovative and also worthy of a spotlight as this debate livens up. Send along your thoughts!

*******PS. I received this note from a colleague at WOCCU, with a slight correction to the description of matchsavings.org in the FP article:

"There isn't actually a physical credit union in these people's villages (a field officer from a nearby branch office travels to outlying communities 1x/month), and the reason they didn't join wasn't so much because of the membership fee. They can actually save over time to achieve full membership, and MatchSavings.org participants become full members after 2 months of saving. Some participants I spoke with didn't join existing credit union groups in their communities because they felt the savings requirement (set by the group itself) was too high for them or they didn't feel ready to join. The MatchSavings.org program, though it required a higher monthly deposit, incentivized people with the 100% match. And when they receive their match after 6 months, the group members then set their own savings goal (the same for all members) and continue on the monthly deposit schedule in their community, with access to the full range of credit union services."

To learn more about WOCCUs matchsavings.org and other matched savings programs in developing countries: http://www.newamerica.net/publications/policy/promoting_savings_tool_international_development

"Investing in those who invest in themselves" First-of-its-kind asset building pilot launched in Nigeria

Shweta Banerjee — Wed, 14 Oct 2009 15:27:00 -0400

By Jamie Zimmerman & Shweta Banerjee

Notoriously resource-rich, poverty-stricken and conflict-prone, the Niger Delta region has always been viewed among the unlikeliest places for reform, particularly one that "spreads the wealth." But this week we are proud to announce that the Bayelsa State Government (BYSG) located in the delta region of Nigeria will launch of a policy pilot that provides matched savings accounts to children and youth throughout the state's eight districts. This initiative is not only the first government-supported anti-poverty intervention in the Niger Delta region, but the first state-wide CDA policy pilot in the developing world.

Child development accounts (CDAs) have been successfully launched as a policy in developed countries such as United Kingdom and Singapore but there is a need for adapting this approach to developing country contexts. Development practitioners in Africa are moving away from traditional aid-based models and experimenting with new bottom-up approaches that directly invest in creating assets and wealth and improving education for the poor.

Columbia University and New America's Global Assets Project, who worked together to design the pilot, received a grant from the BYSG to assist in the launch of the pilot and test the impact of the accounts. The pilot will be implemented over a period of three years and introduce CDAs for at least 1000 school children throughout the 24 constituencies of the 8 districts of the Bayelsa State. The accounts provide a means and an incentive to stay in school, save and invest for their futures and also have positive changes in their attitudes towards themselves and their choices. By opening accounts for and matching the savings of low-income children and youth, the BYSG hopes to break the cycles of poverty, conflict and distrust of government by "investing in those who invest in themselves."

Despite being, or perhaps because of being, the most resource-rich region of Nigeria, the Bayelsa State in the Niger Delta faces extreme social and economic challenges, including high poverty and militancy rates. Youth lack access to adequate skills training or employment opportunities and increasingly become disenfranchised and unsettled, with little optimism about their future.

This policy pilot, intended to address these challenges, will be the first anti-poverty intervention of its kind in the conflict-prone region. If this yields intended results, lessons could be incorporated to implement similar programs for children in need across the world, including places such as Afghanistan where there is a need to make aid reach the poor.

Columbia University is inviting applications for the position of a consultant who will be based in Yenegoa, Nigeria, for six months to start-up this project. Click here for a more information.

This project is part of an overall strategy to build assets for the poor in Africa. It has been well documented as to why traditional aid and development assistance - from both small and large actors - have fallen short in alleviating the extreme poverty that persists in the world's poorest region. A forthcoming report by Fred Ssewamala, Elizabeth Sperber and Jamie M Zimmerman examines a bottom-up, asset-based approach that draws on findings from latest development and research projects in the region. This report is slated to be published by the Global Assets Project by November 2009.

Jamie Zimmerman is the Deputy Director for the Global Assets Project.
Shweta Banerjee is a consultant with the Global Assets Project. Banerjee@newamerica.net

Now is the Time to Focus on Combating Growing Poverty

Hosai Ehsan — Thu, 10 Sep 2009 21:50:00 -0400

The much-anticipated official poverty rates for 2008 are out and they are not pleasant. According to the US Census Bureau, the percent of Americans living in poverty increased to 13.2. Nearly nine percent of Whites, 12% of Asians, 23% of Hispanics and 25% of Blacks make up the 40 million people who were living in poverty last year.

Almost one out of every five children living in this country fell into that category. Not only 19% of Americans 18 or younger but 12% of adults aged 18 to 64 and 10% of seniors aged 65 and over were identified as poor. The Brookings Institution expects poverty to rapidly rise through 2011 and 2012.

As depressing as these statistics are, this is not the time to lose hope. They lend timely perspective to current efforts to advance policies that provide low income Americans with the tools and incentives to build their personal savings.

We need to be forward-looking and focus on expanding economic opportunities to combat growing poverty. Asset building proposals at the national level and in California address retirement savings for all workers, college savings for all children, banking the unbanked, reforming TANF/CalWORKs asset limits, EITC awareness and other automatic savings opportunities. These are some of the ways America can ensure that people have the financial tools to be self-sufficient. With appropriate savings and better planning for the future, fewer Americans will suffer from poverty and more will move up the economic ladder.

Can Payments to Parents Cut Down on Early Elementary Absenteeism?

Sara Mead — Wed, 09 Sep 2009 18:30:00 -0400

A recent American Prospect article about the Opportunity NYC program caught our eye. Opportunity NYC, initiated by Mayor Michael Bloomberg, uses philanthropic dollars to reward poor and low-income families for engaging in behaviors that support their children's development, such as taking children to the doctor or dentist or attending parent-teacher conferences. Parents can also earn financial rewards if their children maintain a good school attendance record over a six month period. A recent evaluation suggests that the program has been successful in getting parents to make sure their young children are in school.

That's especially important, because research indicates that chronic absenteeism in the early elementary grades is both common -- nearly 20 percent of New York City elementary school students missed a month or more of school last year -- and a strong predictor of later school failure. Since young children don't typically make decisions to "play hooky," creating incentives for parents to make sure their kids are in school may be one promising way to address this problem. At the same time, research indicates that the causes of chronic absenteeism in the early grades are complex -- ranging from lack of access to health care and transportation, to concerns about school safety, to school cultures that alienate parents and children. Addressing the problem of chronic absenteeism will require both incentives and clear messaging to parents about the importance of regular school attendance, as well as changes in schools and other social services to address the obstacles that make it hard for parents to get young children to school. As we've written previously, seamless PreK-3rd early education programs -- which help smooth children's transitions to elementary school; offer high-quality early education differentiated to meet individual student needs; and engage families, communities and schools together to improve children's outcomes -- can also help here.

The article, by Dana Goldstein, appeared in a special supplement to the American Prospect looking at an anti-poverty agenda for the United States in light of the current economic crisis. One in five American children live in poverty, and the numbers are likely to get worse in the current downturn. Well worth checking out.

Also worth checking out on the American Prospect site is Michelle Goldberg's review of Just Like Family: Inside the Lives of Nannies, the Parents They Work for, and the Children They Love, a new book by Tasha Blaine looking at nannies and the families they work for. We sometimes get annoyed at the amount of media attention focused on nannies when the vast majority of American children are in other forms of childcare, but Goldberg's review offers a good reminder of how much our child care system relies on and too often exploits the work of low-paid, often minority, often immigrant women.

Imagining a Post-Recession America: On 'Combating Poverty by Building Assets'

Shweta Banerjee — Tue, 07 Jul 2009 19:37:00 -0400

When I first came to the United States as a student in Chicago in 2004, I realized how little I knew of the contradictions within this country. From the outside, it is the wealthiest nation in the world, with the most powerful army on earth and often referred to as the land of excess and opportunity. But to many outside the US it is a little known fact that there are deep pockets of poverty, tucked away in patches of its urban and rural areas. More recently, while working on poverty reduction programs in South Asia at the World Bank, I found it ironic to see homeless persons sitting under the pristine cherry blossoms outside its shiny building in Washington DC. It made me think about the need to apply innovations and successes from ‘developing countries' right here.

Ray Boshara's recent article "Combating Poverty by Building Assets" in Pathways magazine sheds some light on this issue. Boshara calls for a ‘new era of thrift' to be ushered in a post recession America and he explicitly draws on experiences from other national contexts.

Savings, not credit, is the first step in building assets. Instead of extending toxic sub-prime mortgages and deceptive credit cards without appropriate financial knowledge, savings-led strategies should form the core of anti-poverty efforts. During each financial rite of passage - at birth, at the workplace, at tax time and while purchasing a home - people should be given a savings product. For example, every child born into a low-income household should be given a $1,000 savings account and the opportunity to earn $500 in annual matching funds until 18 years of age. Both Great Britain and Sri Lanka have successfully launched child saving accounts; every family that leaves the hospital has an account for the newborn.

Borrowing from Singapore's Central Provident Fund, an American Savings Plan should be created in which every worker in the United States would be provided with an American Stakeholder Account. This account would grow from mandatory savings of 1-2% from both employers and employees.

Income and consumption-based evaluations which then inform income-based poverty programs, do not take into account the growth of assets. As first proposed by Michael Sherraden in 1991, and now widely proven by research across the world, the key to moving out of poverty lies in sustainable asset creation. As the article points out, even prior to the economic meltdown, one in three American households had no more than $10,000 in net worth and one in six had negative net worth.

Given the challenges many confront in savings and building assets, we should be open to lessons learned from policy efforts and programs around the world. There is much to be learnt from the Peruvian woman who saves a portion of her conditional cash transfer to open a small business, or the woman from a small village in India who, with her self-help group, has moved out of poverty. Now is an opportune time to redouble our efforts to promote savings and asset building, and smooth-out some of the hard edges of wealth inequality.

Shweta Banerjee is a consultant with the Global Assets Project of the New America Foundation.

PODCAST: The Promise of Savings-Linked Conditional Cash Transfers

Jamie Zimmerman — Tue, 12 May 2009 16:09:00 -0400

On April 29^th, the Global Assets Project hosted an event to launch its newest policy brief, "Savings-Linked Conditional Cash Transfers: A New Policy Approach to Global Poverty Reduction," at the New America Foundation. By request, we have created a 10 minute Podcast summarizing the paper and key points from the event, for those unable to attend the two-hour event or watch or listen to it in its entirety on our website or YouTube.

The event, which attracted almost 900 participants in house and (mostly) via webcast, explored the opportunities for linkages between CCTs and savings accounts, the potential impact on financial inclusion and economic empowerment as well as the possible challenges of such a proposal. While the concept of financial inclusion and economic empowerment through CCTs is still in its infancy, participants agreed that it is already building incredible momentum in both social policy and financial services fields.

The podcast , narrated by Jamie M. Zimmerman, includes highlighted remarks from the policy brief co-author Yves Moury (Proyecto Capital) and panelists Michelle Adato (IFPRI), Mark Pickens (CGAP), Marguerite Robinson, and Luis Tejerina (IADB). Please visit our website or contact us for additional information about the policy brief or the event.

Policy Innovation toward Financial Inclusion: Colombian Government Links CCTs to Savings

Jamie Zimmerman — Mon, 20 Apr 2009 16:54:00 -0400

Just days before the New America Foundation released its Global Assets Project policy brief, "Savings-Linked Conditional Cash Transfers: A New Approach to Global Poverty Reduction," the Colombian announces a major effort to do just that - link the beneficiaries of its nationwide CCT program with savings accounts. This major policy development in Colombia has emerged in part as a result of the efforts of the policy brief's co-author Yves Moury (Executive Director of Fundación Capital), and his project, Proyecto Capital. Our brief, released today, advocates using the (typically) massive CCT infrastructure to formally bank the largely unbanked poor populations in developing countries. But we also advocate going one step further: use the power of CCTs to encourage saving and asset accumulation of the poor. This approach can be viewed as a two-pronged poverty reduction strategy of building income and assets while increasing the effective financial inclusion of an entire poor population.

Back in September 2008, the Proyecto Capital signed a cooperation agreement with the Government of Colombia to mobilize, in bank accounts, the savings of millions of beneficiary families of Familias en Acción (Families in Action), promoting their financial inclusion and facilitate their socioeconomic graduation from the program. Proyecto Capital's role in the agreement includes assessing possibilities (and possible bottlenecks) for these families to participate in a program that would encourage them to save part of the conditional cash transfers they receive from the CCT programs in a savings account.

Late last week, the administrators of the Familias en Accion, announced the official launch of this massive financial inclusion effort. The plan is to open no-minimum balance savings accounts for up to 3 million beneficiary families in a partnership with Colombia Bank, Banco Agrario. Beneficiaries will also receive debit cards for the accounts.

The administrators are calling it "the largest financial inclusion plan in the history of Colombia." Not only will all beneficiaries of the CCT program have access to savings accounts and debit cards, but those who comply with the requirement of the program (based on proper education and nutrition of poor families, in particular children), will receive their conditional nutrition and education subsidies on their debit cards, without the use of intermediaries. The Colombian government stated that it believes this effort will reduce the vulnerability of the poor to costly informal financial services, such as payday lenders and other informal loans to help them smoother consumption.

The Government of Colombia should be congratulated for their bold effort to provide their poorest and most vulnerable citizens with formal financial access, in particular access to savings account that will help them smooth consumption, prepare for their futures, invest in themselves and (hopefully) move out of poverty. I hope the financial inclusion field watches this effort with keen interest to observe if and how it achieves its ambitious goals.

*Please Note: We will discuss this innovation along with a number of other policy ideas for linking CCTs and Savings at an upcoming event at the New America Foundation on April 29^th. For more information, click here.*

Last Day to Vote: Building Assets into a 21st Century Foreign Assistance Framework

Jamie Zimmerman — Mon, 12 Jan 2009 19:48:00 -0500

Its last day of the Better World Campaign's On Day One project and there is still time to vote for the idea you think President-Elect Barak Obama should prioritize on the first day of the next administration for improving the United State's image in the world. When blogger Mark Goldberg of the UN Foundation came to New America in the spring of 2008 soliciting ideas for policy proposals, I thought it was little more than a fun experiment in the use of new media to express opinions. I had no idea the Campaign would face the ideas off against each other in November, narrowing 81 selected ideas down to 9 for '09 (9 big ideas for the incoming president to consider upon taking office). Or that my idea to reform foreign assistance (to focus the allocation of funds more squarely on the social and economic empowerment of poor people) would win the Global Poverty category. Or that there would be a Round 2 to the contest in which the 9 for '09 would face off yet again.

I don't expect to win the contest -- my idea is up against some even more lofty and innovative competitors. On the other hand, that this idea - that funds should be more smartly allocated to providing opportunities for asset building and wealth creating empowerment for the poor, rather than wasted and corrupted on ineffectual top-down projects - has resonated with voters in this first place (and making a fair showing at that), should be utterly encouraging for those of us working to elevate asset-building microfinance and social policies around the globe.

Even in a world of economic uncertainty, there is a still a belief that given the right tools, the poor and traditionally disenfranchised can stake their own claim it the dream of a better future. The microcredit movement has helped shape this confidence in the power of individuals to lift themselves out of poverty. Yet, the tools people need to take ownership of their lives extend well beyond microcredit, including (but certainly not limited to) an identity that will allow them access to the formal economy; property rights so that they can take ownership in their land, home, or business; access to an array of financial services such as savings accounts allow them to save for future investments in education, a business or old age and insurance to further protect them from the vulnerability of any number of shocks, and; access to policies and programs that facilitate this process, such as child development accounts, conditional cash transfers, or other microfinance-plus initiatives.

Reforming the foreign assistance framework to redirect resources toward bottom-up programs is a fairly specific policy idea, yet it finds itself competing with much grander goals. In this final day of the contest, I thank voters for their encouraging show of interest in telling President Obama to break the wasteful status quo in development assistance spending and, instead, concentrate on something with potentially a much greater return on investment - the empowerment of people.

CGI's Call for Integrated Solutions I: How About a Broader Perspective on Poverty?

Jamie Zimmerman — Thu, 25 Sep 2008 17:34:00 -0400

All day yesterday, I capitalized on the opportunity to unabashedly promote the asset building framework by putting a spotlight on its prominence in poverty alleviation discussions and commitments here at CGI. And I actually barely skimmed the surface of some of the specific asset-focused activities coming out of these sessions (Habitat, others). As much as I relished it, I also want to acknowledge that asset building and financial services for the poor are one piece of poverty alleviation in a complex global environment. The specific commitments are great, but what about the larger perspective?

Yesterday's afternoon CGI held a plenary on profits, jobs and equitable growth. The stifling of poverty alleviation around the world is not simply due to lack of access to effective financial services, but also to lack of access to property, to opportunity, to education and to healthcare. Exclusion from any combination of these often results market inefficiencies, slack productivity, an inability for an individual to live to their full human potential. Hernando de Soto called for property rights and legal empowerment of the poor to give them the tools they need to achieve their version of the American Dream.

Still wearing me asset-building hat, I applauded when members were reminded of the threat and persistence of poverty traps, but were instead described as inequality traps. But the panel didn't go far enough: the term "inequality" was largely used in the context of income. In fact, President Clinton remarked that income inequality has increased every year in the United States since 1973. This seems a dramatic statement, but imagine how much more impact it would have had if he had instead stated the rise of wealth inequality, much starker (by some estimates 50 times more) than income inequality.

If we are going to develop any successful, integrated solutions to poverty alleviation (the subject of this morning's plenary too, and more to come on that), then the very least we could do is stop describing poverty so very narrowly as a lack of income. Instead, why not describe it as a lack of assets (financial, human, social) that the enterprising poor can leverage in any number of ways to improve their lives?