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Economic Development Ministries for the Church in North America

Economic Development Ministries for the Church in North America. When Helping Hurts Webinar 5 December 10, 2009.

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Economic Development Ministries for the Church in North America

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  1. Economic Development Ministries for the Church in North America When Helping Hurts Webinar 5 December 10, 2009

  2. You can submit questions at any time. I will answer some of these toward the end of the webinar. I will focus more on questions dealing with the 3 economic development ministries I will be talking about.

  3. Jobs for Life

  4. FocusVocationally Centered “Life Journey” • Key Themes • How to view work • Makes one more “fully human” • Allows one to: • Provide for others • Give financially • Serve others

  5. Vocational planning-”Life Journey Map” • Career Possibilities: Interest, Skills, Realism • Vocational Plan • Roadblocks • Education/Training needs • Character issues • Social context • Job Acquisition • Job search • Sources • Informational interview • Intentionality

  6. Job Acquisition (cont) • Resume • Interviewing • Telling your story • Behavioral interview questions • Hidden Questions • Job Retention/Advancement • Satisfying Employers • Culture • Punctuality • Teamwork • Conflict resolution

  7. Key Components • Good Learning Principles • Relevant, expedient, active, safe • Biblical Insights • Linking social capital • Support • Group setting • Champions (mentors)

  8. Designing and Implementing a Financial Literacy Ministry

  9. What is Financial Literacy? • The Knowledge, Attitudes and Practices (KAP) that promote appropriate stewarding of household resources • Provides the foundation for further economic development

  10. Why is Financial Literacy needed • Economically poor can be unaware of money management options or not taking full advantage of them • Culture of consumerism is hard to resist • The lion that seeks to devour: Predatory Lending Practices

  11. Predatory Lending • Strips billions in wealth from low-income consumers and communities in the U.S. each year. • Borrowers lose an estimated $9.1 billion annually due to predatory mortgages; • $3.4 billion from payday loans; • $3.5 billion in other lending abuses, such as overdraft loans, excessive credit card debt, and tax refund loans.

  12. Who Do They Target • Blacks, Latinos and other minorities • 4X more likely on home purchase loan • 3X more likely on refinance loan • 3X more likely in high income black neighborhoods • Seniors • Single mothers • Military

  13. Payday Lending • What is a payday loan? • Short term loan, usually 2 weeks • Small loan, usually $300-500 • VERY high fees, ex. $45 every 2 weeks • Annual interest rate of 400% + • Looks like easy money, until you have to repay. 75% have to rollover their loans • 90% of the payday industry's revenue growth comes from making more and larger loans to the same customers • Payday lenders encourage consumers to borrow the maximum allowed, regardless of their credit history. If the borrower can't repay the loan, the lender collects multiple renewal fees

  14. Some Comparisons Transaction Fees/MonthAPR $255 payday loan $90 391% $255 bounced check $43 202% Late fee on $255 credit card bill $30 141% Late fee on $800 mortgage $32 48% Late fee on $600 rent payment $30 60% Late fee on $300 car payment $15 60%

  15. Other Predatory Lending Practices • Tax Refund Anticipation Loans Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR.

  16. Car Title Loans A typical car title loan has a triple-digit annual interest rate, requires repayment within one month, and is made for much less than the value of the car.

  17. Rent-to-Own Contracts Rent-to-Own companies "rent" merchandise, although the structure of the transaction is more like a loan because of the interest and credit insurance involved. The store does not have to report how much it is charging in interest. If a borrower is late with a payment, there is no legal limit to how much interest the store can charge in finance charges, although the company usually repossesses the rental property

  18. Key Issues in Designing and Implementing a Financial Literacy Ministry • Appropriate Resources Material Scope of Content Educationally sound -Relevancy: Socioeconomic and Cultural Fit -Immediacy -Active -Pace right to really promote behavioral change Biblical Integration

  19. Some sources • Faith and Finance by Gary Nederveld • Crown Ministries • http://www.crown.org/Tools/ • Brenda Armstrong material for single mothers • Dave Ramsey material • http://www.daveramsey.com • New Focus • Historically required training to access their curriculum • http://www.newfocus.org/pages/page.asp?page_id=76127 • The National Endowment for Financial Education (NEFE) • http://www.nefe.org/EducatorsandFacilitators/tabid/88/Default.aspx • Money Smart • http://www.fdic.gov/consumers/consumer/moneysmart/overview.html • Financial Mentoring • http://www.financialmentoring.net • Managing My Money • http://www.managingmymoney.com

  20. Human Technically and culturally equipped trainers and mentors Financial Who pays for trainers, material, childcare and misc. expenses?

  21. Group vs. Individual Focus It is hard to change alone Honoring household relationships • Scope of Ministry Depth/breadth of intervention Linkage to other ministries/programs

  22. Limitations of Financial Literacy Ministry • Doesn’t directly address policy change • Often doesn’t work as a stand alone intervention

  23. Individual Development Accounts

  24. Why is Asset Building So Important to Reduction of Economic Poverty? A household’s ability to cope with financial shocks is largely a function of the extent to which it has built up its assets. Assets also enable us to purchase other assets that we want or need: • Buy a Home • Pursue an Education • Start a Business • Prepare for Retirement • Buy a Car

  25. Assets will be more important in the future as labor market becomes increasingly volatile. • Building assets requires and fosters different attitudes and behaviors than earning an income: • Denial of instant gratification • Discipline for extended time-periods • An orientation toward the future • Planning skills

  26. According to a study by Wolff (2001), in 1998: • 26% of U.S. households had net financial wealth (net worth minus home equity) that was zero or negative. • 40% of households headed by a 25-54 year-old had sufficient net financial wealth to survive for less than 3 days at their current consumption levels.

  27. IDAs are matched savings accounts for the economically poor Matches are only made for qualified purchases of assets (typically homes, post-secondary education, business capital, etc.) Savings are matched at ratios that usually range from 1:1 to 3:1 but can be higher Matching funds can come from federal and state governments, financial institutions, foundations, churches, and individuals

  28. Examples of Savings and Match Accumulation

  29. Examples of Savings and Match Accumulation

  30. Components of an IDA Program

  31. Learning Opportunity • US Economic Development Ministries: A 4 week distance course offered by the Chalmers Center in June 2010 • Note that there is a pre-req for this course: US Foundations for Holistic Ministry • Take as a 4 week distance course facilitated by Steve: next offering May 2010 • Do as a self-study For more info on all training options see www.chalmers.org

  32. Next Webinar • International Economic Development Ministries • Today at 12:30-1:30 EST (i.e. in 30 minutes!)

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