MICHIGAN CREDIT UNION MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSINDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAAMERICORPS*VISTAINITIATIVEINITIATIVE

State IDA Policy Conference

St. Louis, MissouriNovember 8, 2002

Center for Urban AffairsMichigan State University

MICHIGAN CREDIT UNION MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSINDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAAMERICORPS*VISTAINITIATIVEINITIATIVEApril 2000 through June 2002April 2000 through June 2002

A Statewide Learning Demonstration Initiative to design and implement IDAs within Michigan’s community development credit unions

COMMUNITY DEVELOPMENTCOMMUNITY DEVELOPMENTCREDIT UNIONSCREDIT UNIONS

Non-profit, federally regulated and insured, financial cooperatives

Serve the financial needs of low-income populations and disinvested communities

Anchored in the community which it serves

Represent a growing infrastructure for self-help initiatives to strengthen local economies and build wealth among the nations least advantaged citizens

WHAT ARE INDIVIDUAL WHAT ARE INDIVIDUAL DEVELOPMENT ACCOUNTS ?DEVELOPMENT ACCOUNTS ?

“IDAs are a conceptually simple community development and public policy tool that may be adapted to a wide range of applications and circumstances.”

Center for Social DevelopmentWashington University

February 2001

IDAs should be designed to improve access to savings IDAs should be designed to improve access to savings institutions for the poor, address public policy mechanisms institutions for the poor, address public policy mechanisms that subsidize savings, and grow wealth among the poor that subsidize savings, and grow wealth among the poor through asset accumulation through asset accumulation Center for Social DevelopmentCenter for Social Development

Washington University February 2001Washington University February 2001

SAVINGS MOBILIZATION Deliberate and consistent savings over timeFINANCIAL EDUCATION Boosting consumer knowledge Building personal financial management skills ApplicationINCENTIVES/ACCRUED MATCH Match support to close the income gapASSET PURCHASE A blend of savings and match are directed toward a

high return assetFACILITATION

The mechanism for continued savings

CORPORATION FOR NATIONAL AND CORPORATION FOR NATIONAL AND COMMUNITY SERVICECOMMUNITY SERVICEAMERICORPS*VISTA PROGRAMAMERICORPS*VISTA PROGRAM

MFIA and CNCS cost-share VISTA placements for each credit union interested in developing an IDA program

VISTA Member is recruited directly from the community

VISTA Member serves one full year with an option to re-enroll for second term

VISTA Member as IDA Coordinator

MICHIGAN CREDIT UNION MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSINDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAAMERICORPS*VISTAINITIATIVEINITIATIVE

RATIONALE

A 1999 MSU Center for Urban Affairs national study of 23 community development credit unions (CDCU)found inherent compatibilities betweenIDAs as an asset building tool and CDCUs as mission driven financial institutions serving primarily low income populations.

The MSU Center for Urban Affairs was identified by FY 2000 MFIA Appropriations boiler plate language to design and implement IDA projects through Michigan credit unions.

MICHIGAN CREDIT UNION MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSINDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAAMERICORPS*VISTAINITIATIVEINITIATIVE

PARTNERS Michigan Credit Unions

Michigan Legislature

Michigan Family Independence Agency

Michigan Credit Union League

Corporation for National and Community Service

National Federation of Community Development Credit Unions

Michigan State University Center for Urban Affairs

MICHIGAN CREDIT UNION MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSINDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAAMERICORPS*VISTAINITIATIVEINITIATIVE

STRATEGY

Initial contact Feasibility and VISTA Design and Implementation Learning Exchanges Transition Plan

INITIAL CONTACTINITIAL CONTACT

Initial contact made with every Michigan Credit Union League member via letter from MCUL Executive Director

All twenty-five low income designated credit unions contacted by MCUL Small Credit Union Consultant, Carolyn Miller

Fifteen credit unions expressed interest in site visits by MSUCUA

FEASIBILITYFEASIBILITY

The Center conducted a feasibility assessment with fifteen interested credit unions

Thirteen credit unions express interest in pursuing VISTA member and to act as IDA site

Technical assistance provided to complete VISTA site application and IDA workplan

A follow up survey was conducted by MSU- CUA for feedback on value of the site visits in preparing credit union for VISTA and IDA program design.

DESIGN AND IMPLEMENTATIONDESIGN AND IMPLEMENTATION

The Design and Implementation stage was based on two basic principles: 1) structure the IDA program so that is consumer driven, and 2) create a learning environment based on the exchange of ideas and sharing of practice

The CUA used a mixture of two-day training sessions, bi-weekly VISTA conference calls, a monthly update, a listserv, some site visits, and learning exchanges with national credit unions.

LEARNING EXCHANGESLEARNING EXCHANGES

OPPORTUNITIES TO SHARE IDEAS AND PRACTICE

IN A SUPPORTIVE ENVIRONMENT

Roundtable Discussion

Proposal Writing

Conference Calls

List Serve

TRANSITION PLANTRANSITION PLAN

Tracking Document

Membership with community development trade association

Experience with proposal writing

Learning Exchanges with national experienced credit unions

Legislative Information Exchange

VISTA exit plan

IMPACT: IDAsIMPACT: IDAs Eight credit unions in the MSUCUA initiative have a

total of 82 open IDA accounts

Total accumulated savings is $21,786; number of months saved ranges from 1-12 months; average months saved is 5 months, monthly savings range $25 -$55

Seven credit unions were awarded a sum of $312,000 in match funds from MIDAP

Two credit unions have youth accounts through local public schools; five of the credit unions offer first time home ownership and small business permissible uses

All of the participating credit unions are located in or have branches in communities whose poverty level average is 14% (Michigan average is 11%)

IMPACT: Expanding IDAsIMPACT: Expanding IDAs

Seeking Funds for IDAs: As new members of NFCDCU, credit unions applied for NFCDCU IDA funds; Four credit unions applied for the US Treasury First Account Initiative to further serve the unbanked

Sustaining IDAs: One low income designated credit union created line item for IDAs in FY 2002 budget

Leadership: One credit union CEO is now an NFCDCU Board Member; One credit union CEO was a featured speaker on credit unions and IDAs at a national NCUA Federal Examiners Convention

Reaching Out: One credit union has 26 student-run credit unions in 26 elementary schools; created internally-funded match to savings program for post-secondary education; four credit unions are coordinating EITC-financial education-savings accounts campaigns; One credit union staffed office in Michigan Works! tri-county office

Community – Economic Development: One credit union applied for CDFI certification and is now packaging Fannie Mae loans for home mortgages

EARLY THOUGHTSEARLY THOUGHTS The low income designated credit unions’ role in

offering IDAs is distinct from other mainstream financial institutions

“A credit union’s role is to serve people of all means; to help low income people become people of means”

The sustainability of credit unions hosting IDAs is influenced largely by their approach, public policy support, and integration into broader community/economic initiatives.

Credit unions who serve low income populations offer a more direct and low cost approach to attract residents to mainstream banking.

Credit unions are positioned to carry out public policy initiatives

A Coherent Michigan Strategy Towards A Coherent Michigan Strategy Towards Financial Security For AllFinancial Security For All

Address Structural Issues First Welfare Reform: is there goal and policy gaps? Decision Making: Does policy and flow of dollars follow an

individual development strategy? Recommendation: Developmental Model of Financial Security as

Structural Change to Insure Functional Change

Create Public Policy to Support Structural Changes Block Grants: How are block grants used to promote and increase

financial security among the working poor Income Taxes: Michigan imposes income tax upon those already

at the poverty level. Revision of tax policy not just attributable to current recession; there are structural problems.

Tax Credits: Opening the door to financial institution partnerships

Tie Economic Development to Growing Wealth Among the Poor

Integrating asset building within community revitalization activity Create paths of access to financial Institutions whose mission and

business is wealth creation for low income individuals

MICHIGAN STATE UNIVERSITY MICHIGAN STATE UNIVERSITY CENTER FOR URBAN AFFAIRSCENTER FOR URBAN AFFAIRS

Current Activity: Field Testing and Impact Evaluation:

– EITC/Child Tax credit access in eight Michigan sites

– Access to savings accounts and financial education through CDCUs

Research Areas:– Current state tax policy around income

support– IDAs, Microenterprise, Financial Products

through CDCUs– Cost efficient methods of going to scale

with IDAs as income support tool– Reliable measurement tool that

describes the behavioral aspects of using fringe banking/predatory lenders

1801 W. Main Street

Lansing, MI 48915

Vox: 517.353.9555

Fax: 517.484.0068