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MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTS AMERICORPS*VISTA INITIATIVE

MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTS AMERICORPS*VISTA INITIATIVE. State IDA Policy Conference St. Louis, Missouri November 8, 2002 Center for Urban Affairs Michigan State University.

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MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTS AMERICORPS*VISTA INITIATIVE

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  1. MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAINITIATIVE State IDA Policy Conference St. Louis, Missouri November 8, 2002 Center for Urban Affairs Michigan State University

  2. A Statewide Learning Demonstration Initiative to design and implement IDAs within Michigan’s community development credit unions MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAINITIATIVEApril 2000 through June 2002

  3. COMMUNITY DEVELOPMENTCREDIT 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

  4. WHAT ARE INDIVIDUAL 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 Development Washington University February 2001

  5. IDAs should be designed to improve access to savings institutions for the poor, address public policy mechanisms that subsidize savings, and grow wealth among the poor through asset accumulation Center for Social Development Washington University February 2001 SAVINGS MOBILIZATION • Deliberate and consistent savings over time FINANCIAL EDUCATION • Boosting consumer knowledge • Building personal financial management skills • Application INCENTIVES/ACCRUED MATCH • Match support to close the income gap ASSET PURCHASE • A blend of savings and match are directed toward a high return asset FACILITATION The mechanism for continued savings

  6. CORPORATION FOR NATIONAL AND COMMUNITY SERVICEAMERICORPS*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

  7. MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAINITIATIVE RATIONALE A 1999 MSU Center for Urban Affairs national study of 23 community development credit unions (CDCU)found inherent compatibilities between IDAs 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.

  8. MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAINITIATIVE 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

  9. MICHIGAN CREDIT UNION INDIVIDUAL DEVELOPMENT ACCOUNTSAMERICORPS*VISTAINITIATIVE STRATEGY • Initial contact • Feasibility and VISTA • Design and Implementation • Learning Exchanges • Transition Plan

  10. INITIAL 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

  11. FEASIBILITY • 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.

  12. DESIGN 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.

  13. LEARNING EXCHANGES OPPORTUNITIES TO SHARE IDEAS AND PRACTICE IN A SUPPORTIVE ENVIRONMENT • Roundtable Discussion • Proposal Writing • Conference Calls • List Serve

  14. TRANSITION 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

  15. IMPACT: 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%)

  16. IMPACT: 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

  17. EARLY 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

  18. A Coherent Michigan Strategy Towards Financial 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

  19. MICHIGAN STATE UNIVERSITY CENTER 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

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