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The Path to Asset Development through Access to Financial Services

The Path to Asset Development through Access to Financial Services. What is Asset Building.

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The Path to Asset Development through Access to Financial Services

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  1. The Path to Asset Development through Access to Financial Services

  2. What is Asset Building Asset building is the process by which individuals and families gain control of their existing resources, allowing them to build and leverage savings and develop tangible financial assets, leading to greater financial resiliency

  3. Inspiration Asset Development - Building Financial Resiliency • Income Maximization • Wages • Access to Benefits • Reduce cost of services • Debt Reduction • Stop outflow • Debt management plan • Financial edu & personal counseling • Credit Building • Financial edu • Increase credit score • Secured credit instruments • Timely bill payments • Savings • Basic savings • Purposed savings (person specific) • Savings incentives • Financial edu • Asset Acquisition • Small business investment • Other assets TBD • Retirement • Financial edu • Asset Retention • Advance training • Maximize asset value Wage Progression Access To Capital

  4. The Unbanked/Under-banked Story Lack of access to affordable financial services is a fundamental social injustice / people are paying the high cost of being poor Market failure creates a gap which opened the door for predatory practices Legislation or regulation alone will not resolve the problem / demand still exists Alternative business solutions are necessary to fill the gap

  5. Running the Numbers • Over 65% of households with incomes <$50K are asset poor • 44% of all households have incomes <$50K • 21% of all households are unbanked or under-banked • 26% of households with incomes <$50K are unbanked and nearly 20% more are under-banked • 49% of households with incomes <$50K use some form of alternative financial services • 21% of all Washington households are asset poor* • *Insufficient reserves to live for three months at the poverty level if household income is lost

  6. The Barriers to Banking for People • A 2006 survey King County residents says: The most significant barriers to entry into the mainstream financial system are: • Cultural and linguistic • Complex fees • Cost of maintaining an account • Distrust of financial institutions • Unfamiliarity with technology driven interfaces • Intimidation

  7. The Challenges for Banks and CUs • Financial Institutions have several reasons for NOT serving low income people who are un or underbanked: • Cost of customer acquisition and retention • Little or no return on investment • Need for high touch services (old banking) • Scrutiny by shareholders • Scrutiny by regulators • Lack of motivation to create a welcome and supportive customer environment

  8. The Result The Problem: Market Failure in Washington State Traditional financial institutions do not well - serve low income people Predatory alternative financial providers thrive in gap; consumers pay The Solution: Fill the Market Gap Develop designated low-income / Community Development Credit Union(s) Build from local community assets already serving target population Develop with an eye towards replication Evaluate and measure outcomes; prove model

  9. Payday Lending in Washington State PD Legislation enacted

  10. Payday Lending in Washington State

  11. Mission Express Credit Union Provide affordable financial services to low & moderate income people;In doing so, help them build assets and achieve financial stability Express Advantage Express Advantage helps people build assets and achieve financial stability through outreach, education, collaboration and advocacy

  12. About Express Express Credit Union Serving the community since 1934 Solid, basic services & products Highly personal service & strong member loyalty State regulated by Department of Financial Institutions Federally insured by NCUA The only designated low income credit union in King County, and 1 of 3 in the State of WA. Express Advantage Affiliated Non profit coordinating financial support services for low income credit union members Working with community partners to reach out to unbanked and under-banked populations in King County

  13. Express Service Model Products, Services & Support: Express Credit Union Financial Products & Services Express Advantage Outreach, Education, Advocacy Unbundled Savings Accounts Checking Accounts ATM, Prepaid, Debit CardsCustomized loansCheck Cashing/Wire Transfers Alternative forms of ID Free ATM and share branch network Partnerships Community Outreach Financial Education and CoachingMatched Savings Accounts Community Member Service Reps Access to public benefits Translation Services +

  14. Easy of Entry $5 deposit to open a savings account $10 initial deposit to open a checking account / no minimum balance Open savings accounts for people with adverse history Use savings accounts for bill pay Expand account privileges as people build history with Express Forgive first overdraft (and second with financial education) $20 per item overdraft fee / $80 maximum per day

  15. Lowering the Barrier with Products and Services Checking & savings accounts, Check cashing, Real-time transactions Payday loan alternative - 90 day payback with savings incentive Debit card – overdraft prevention features, ATM: free in-network Shared branching – Services at other locations (over 35 locations in King County) CO-OP ATM Network (over 300 locations in King County)

  16. Lowering the Barrier with Products and Services Wire Transfers – Bank-to-Bank and Person-to-person transfers 16 Community Member Service Representative locations Alternative forms of identification Online banking and bill pay Vehicle Ownership Program (Matched savings for car purchase)

  17. Custom Loan Products Payday Alternative Debt/Payday Consolidation Credit Builder Loans Cash Secured Loans US Citizenship Loans Micro-Enterprise Loans Small Farm Loans LifeLine Loans

  18. Custom Savings Products Basic Savings account Savings account without dividends Holiday Club Money Market Kids Club Savings Add-On CD Individual Development Accounts (through Washington CASH and YMCA)

  19. Education and Coaching Targeted Curriculum and scheduled classes Formal and informal education / every encounter is potentially a teachable moment One on One counseling including help with budgeting, credit building etc. Financial Coaching using best practices derived from professional coaching techniques

  20. Leveraging Partners

  21. Community Member Service Representatives Outreach within the agency and community Open checking and savings accounts Take applications and disburse small dollar loans Take applications for personal and car loans Help members with basic budgeting Teach people how to use online banking Refer people to other services including financial education and credit and debt counseling

  22. Results 1500 new members have joined Express since the beginning of the pilot in spring of 2009 Over 90% of new members are low income Over 50% of new members had adverse banking history when they joined Express 45% of new members opened their account with the help of a bilingual community member service representative More than 500 of our low-income members have qualified for at least one of our signature loans Over 140 have signed up for our Vehicle Ownership Program, a matched savings , education and loan program

  23. Results Through an independent survey of low income members by our evaluation partner Clegg and Associates in 2010 it was determined that after financial education and membership with ECU for at least 6 months there was: 11% increase in members who know how to open a checking account 18% increase in Members were more likely to know that their money is guaranteed to be safe in a credit union 16 % increase in members who had a plan to manage their money 24% increase in members who stated that they had made progress toward their financial goals since joining ECU 63% agreed or strongly agreed with the statement, “Since joining ECU, I have made progress toward my goals financially.”

  24. Going forward In 2011-12 and beyond new partnerships and programs are being developed to: Provide greater volume of micro enterprise loans and education to entrepreneurs and the self employed Provide citizenship loans plus education to refugees and immigrants Provide special products and services to military veterans, victims of domestic violence and other populations Start Prize Linked Savings Program Extend our services beyond King County

  25. Challenges to sustainability Shear volume of transactional services Cost of member acquisition and retention Cost of service to members who are unsophisticated bankers Lending to borrowers with no or poor credit Small dollar loans are not profitable Continued philanthropic interest and engagement Generally depressed economy = greater financial challenges for members and reduced revenues for CU

  26. Contact Dave Sieminski Dave.sieminski@expresscu.org (206) 622-1973

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