NP’s national partner CFED highlighted credit building as a key area of attention in their Assets & Opportunity Scorecard release this week. Oregon is ranked 19th nationally in “consumers with Prime Credit” and 23rd in “access to revolving credit.” Itzel Hernandez-Spehar covers Oregon’s credit building efforts below.
My grandmother raised 5 children by herself.
She was a single mother in rural Mexico with only a 5th grade education and she didn’t have many choices. Her dream was to open her own business. She wanted to sell seafood at a small open-air market in Oaxaca City. But there was no money to invest in her entrepreneurial vision. It was hard enough to make ends meet. So with nowhere else to turn, she organized her community and started a tanda.
Tanda—that is the Mexican term for “lending circle” and it works like this: A community member chooses ten friends, family or co-workers and forms a group. Twice a month each member of the groups contributes $100.00 to the organizer, to hold on behalf of the group. At the end of the month, one member of the group gets the “pot”—all $2,000.00. This practice continues on for 10 months. Each month someone takes home $2,000.00 until every member has received the “pot.”
In my grandmother’s day, this was the only way for working class people to finance major purchases or pay for large expenses. So finding people who wanted to participate in a tanda wasn’t difficult. The trick was to pick “responsible” people, with a solid reputation in the community. You did not want someone getting the “pot” and then refusing to participate any further. You needed to be sure they would be there until the end of their commitment—for everybody.
My grandmother had no problem finding people to participate in tandas. She knew her community very well and vetted people prior to their participation. She needed to be certain that they would be reliable members and would honor their commitment each month.
She picked wisely and everyone stuck by each other. And when the tanda had cycled through the whole group—she had her booth! And later, as her business grew, she organized more tandas to expand the booth and hire people to work with her. She became a leader in her community and she was able to buy a house and provide a stable environment for my mother and her 4 siblings.
Today in modern times things haven’t changed that much. People still need access to credit in order to make major purchases such as buying a home or starting a business. The difference is that people no longer rely on their community for credit. They go to financial institutions, banks or credit unions for a loan.
And just like my grandmother—the banks and credit unions screen the people before they enter into a loan agreement with them. They make sure the person is reliable and trustworthy. But banks do not walk around the town to confirm someone’s reputation. Instead, they just pull a “credit report.” If a person has a “good” credit score, the loan gets approved and the person gets to move forward with their goal such as buying a car to get to work or repair a home to make it habitable.
But what if they don’t have good credit? What happens if they have a low credit score? What happens then…?
The answer is harsh. Loans are denied because people are considered high-risk borrowers or it becomes more expensive for them to access credit. For those pressing needs that can’t wait, people resort to taking loans with outrageous interest rates. They also end up paying higher insurance premiums and paying more for basic things such as getting utilities turned on.
In short, a person’s credit score—just like their reputation in the community during my grandmother’s day—goes a long way in determining whether the person is financially successful or constantly struggling.
This isn’t just a theoretical problem. It is a real one, and it’s growing.
According to the Corporation for Enterprise Development (CFED), 56% of consumers in the US have poor credit histories. That’s over half of the 220 million of us with credit files. Furthermore, the Consumer Financial Protection Bureau’s recent report on credit invisibles found that 26 million—or 1 in 10—individuals in the US are credit-invisible—meaning they have no credit history at all. This is a massive problem that affects a large portion of our population—and Neighborhood Partnerships and its partners are working hard on a solution.
Last month, Neighborhood Partnerships (NP) with JP Morgan Chase’s Office of Nonprofit Engagement and the Credit Builders Alliance offered a Credit as Asset training specifically for organizations within the Oregon Individual Account (IDA) Initiative. The training took place at the Northwest Health Foundation and it was a well-attended workshop where NP’s partners had the opportunity to learn about the importance of credit building as an asset-building strategy, review key credit building concepts, explore tools to enhance credit building programs, share innovations in the field and learn from each other.
Building off our new legislation, NP anticipates a second rollout of credit building pilots beginning in April 2016. This is a fantastic opportunity for clients to establish or repair their credit scores, save towards a specific goal, and get match funds from the Oregon IDA Initiative once they have completed their savings plan agreement.
The first Credit-Building IDA pilot began in February 2015 to explore how IDA savers’ deposit transactions could simultaneously build their credit. A working group formed to develop and carry out the pilot, consisting of Innovative Changes, Hacienda CDC, CASA of Oregon, Credit Builders Alliance and Neighborhood Partnerships. The pilot pairs an IDA with a credit-builder loan (a small installment loan for which on-time payments were reported to the credit bureaus). Pairing these products means that the IDA saver could make a single deposit transaction which would both contribute to their IDA and make a payment toward a credit-builder loan. The pilot set out to create a system which streamlines program participation for the saver and promotes administrative efficiency for the service providers.
I am extremely excited about what we can learn from the piloting period. NP will be releasing a summary report on lessons learned thus far in the near future. The IDA team at NP looks forward to hearing from partners how we can support their effort in expanding their current IDA programs to include credit building. If a current IDA partner is interested in piloting credit building IDAs, they are encouraged to reach out to their current Fiduciary Organization (FO).
Even my grandmother is very excited about the work we are doing in Oregon with credit building IDAs because she understands first-hand what it means for a family to have access to credit. At 89, even though she no longer runs the fish booth, she still organizes tandas and finds a way to help others who want to start their own businesses or buy their own home. The last time I called her she asked me how my kitchen remodel was doing. When I told her that the project is taking longer than planned because of the high costs she laughed and said “Itzel, what are you waiting for? It’s time for you to organize a tanda!”
Oh my goodness, have we got exciting news for the Oregon IDA Initiative! We have locked in our plans with national financial education expert extraordinaire, Inger Giuffrida, to roll out a new project aimed at (among other things) securing the Oregon IDA Initiative’s status as a national leader in financial education.
Standards for the whole state will mean that an IDA participant taking financial education in Coos Bay will have the same high-level, high-quality access to financial capability as a person opening their IDA in Ontario, or Eugene, or Salem. We already have strong partners across the whole state. The new standards will build on that foundation to ensure that partners all have the opportunity to share resources and trainings to continue evolving their programs for all the Oregon IDA Initiative’s clients.
In case you don’t know Inger already, let me fill you in on her before diving into the project specifics – short story, she’s basically a rock-star in the financial capability world.
Longer story, in addition to operating her own consulting business for 13 years, she served in the U.S. Peace Corps in East Africa, ran a community-based non-profit in Michigan helping women with low income build businesses and achieve economic security, developed a small business development and financial education program for a credit union in upstate New York, and led the asset-building department at a think tank in Washington, D.C. She has written several nationally distributed financial education curricula as well as the CFPB financial empowerment toolkit, Your Money, Your Goals for the CFPB.
We have been fortunate to work with Inger over the years and can hardly contain our excitement that she’ll be guiding us again, in collaboration with our statewide partners, in the refinement and development of the financial education component of the IDA experience. The collaborative process with our statewide partners has five primary goals:
- To provide a process for Oregon IDA Initiative Fiduciary Organizations to review and recommend changes or additions to the Oregon IDA Initiative Financial Education Standards. The result will be revised standards for 2016.
- To provide a Financial Education certification process for Oregon IDA Initiative Fiduciary Organizations to ensure that financial education quality and consistency across the Initiative is in alignment with the Oregon IDA Initiative Financial Education Standards. The certification process will allow for local innovation based on target audiences and service contexts.
- To develop and provide effective, efficient, and engaging training that will firstly, help fiduciary organizations develop the knowledge and skills required to meet the Oregon IDA Initiative Financial Education Standards, and secondly, to provide effective and engaging training and one-on-one support to clients.
- To develop assessment and evaluation tools that can help Fiduciary Organizations assess and evaluate their effectiveness in providing financial education. Common assessment and evaluation tools will also help the Oregon IDA Initiative show collective impact through financial education.
- To acquire, adapt, and/or create high quality, unbiased curricular resources that support the implementation of all Oregon IDA Financial Education Standards at Fiduciary Organizations.
As you might have guessed, we are super stoked to have Inger on board to work with all of us in bulking up our collective financial capability muscles. At the end of this project, we’ll know with certainty that no matter where an Oregonian accesses an IDA in the state, they will have the same high level of education available to them. We’ll also have resources and regular trainings available for all practitioners to support them in designing classes and coaching that fits the clients with whom they’re working. Clearly, 2016 is going to be an exciting year.
Laina Green will be our project lead. Please don’t hesitate to contact her with questions or comments (including how awesome you think this all is!).
By Amy Stuczynski, Data Analyst
The State of Nonprofit Data report conducted by NTEN and Idealware found that 99% of nonprofits track some sort of metrics yet, “how nonprofits are currently using data does not necessarily reflect how they would like to use it.” We think some of that disconnect might come from not bridging the numbers and the real people who live that data on a daily basis.
Too often numbers sit in a report or in the dark corners of a website when they should be intimately connected to providers’ and participants’ lives. So in the past couple months we’ve been sharing the latest Oregon IDA Initiative data about reach and impact at Roadshow events in Bend, Grants Pass, Roseburg, Springfield, and Portland. Events in Salem and Portland are scheduled for December.
Participants at each have provided valuable insights and feedback. Here are 4 reasons we’ve found the IDA Data Roadshow to be useful:
1. Hearing IDA graduates share their insights on the statewide data.
IDA graduates have shared the impacts the IDA program has had in their lives. Beyond looking at hard numbers, IDA graduates remind us about the immense sense of accomplishment and security they’ve experienced, and how those impacts continue to grow and be felt over time. They’ve been able to comment on whether the conclusions we’re drawing from the data ring true for them given their experience in the program. They are also able to speak to the experience of completing exit and follow-up surveys, from which the Initiative gathers a lot of its data on impacts.
2. Seeing our different stakeholders come together collaboratively.
We’ve been hearing about the different ways partners are building programs and offering services in their regions, which is spurring us to think about the impacts of these partnerships in new ways. For instance, when we hear about service providers in the same region working together to provide financial education to savers, it leads us to think about the ways in which these types of program collaborations may be linking savers to additional resources. We’ve witnessed donors, IDA graduates, and program providers developing relationships and exchanging innovative ideas on how to support IDA savers and further their impacts.
3. Challenging us to evolve the evaluation to better reflect the different asset classes and communities we serve.
Roadshow participants have asked questions seeking to better understand the IDA’s accessibility and availability. Their stories remind us that while our desired impacts are universal, they may look different based on the asset the participant is saving for, where the participant lives, and myriad other circumstances. Their questions challenge us to tell a more refined data-driven story of the impacts in different communities.
4. Learning about different barriers participants and programs are facing across the state, so we can assess our success at overcoming them.
We’re hearing about both programmatic and data collection challenges that may be unique to rural areas, or for youth, or for microenterprise savers, etc. By surfacing these concerns and understanding where various challenges lie, we can refine our questions and what we’re monitoring so that we can gauge our success in breaking down those barriers.
We appreciate the feedback, questions, comments and discussion to date. By working together with those on the ground with the IDA program, we believe we will have a stronger evaluation and stronger ability to demonstrate our impact. A summary report of the specific themes that arose in the Roadshow conversations, and what those ideas might mean for refining our data collection, cleaning, and analysis, will be posted at the beginning of the year. We will continue to look for ways to engage stakeholders in the evaluation process.
Learn more at https://oregonidainitiative.org/roadshow/