Affordable Financial Services
and Credit for the Poor:
The Foundation of Asset Building
Julie Birkenmaier, MSW, LCSW
Sabrina Watson Tyuse, PhD
ABSTRACT. The financial services and sources of credit available
to poor families affect the rate at which families can be financially
empowered through building assets. This paper provides background
information on financial services, including credit sources, which are
available for low-income people and communities. Also discussed
are policies affecting financial markets and promising innovations in
delivering affordable financial services to low-income families. Implications for social work education, practice and advocacy are discussed. [Article copies available for a fee from The Haworth Document Delivery
Service: 1-800-HAWORTH. E-mail address: <[email protected]>
Website: <http://www.HaworthPress.com> © 2005 by The Haworth Press, Inc. All
rights reserved.]
KEYWORDS. Financial services, affordable credit, assets, financial
markets, credit unions
INTRODUCTION
The availability of financial services, including affordable credit, for
low-income families is emerging as an increasing practice and policy
Julie Birkenmaier is Associate Clinical Professor and Sabrina Watson Tyuse is Assistant Professor, The Saint Louis University School of Social Service.
Address correspondence to: Julie Birkenmaier, MSW, LCSW Saint Louis University School of Social Service, 3550 Lindell Boulevard, St. Louis, MO 63103 (E-mail:
[email protected]).
Journal of Community Practice, Vol. 13(1) 2005
http://www.haworthpress.com/web/COM
© 2005 by The Haworth Press, Inc. All rights reserved.
Digital Object Identifier: 10.1300/J125v13n01_05
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concern for social workers. From community development programs to
programs that provide assistance for basic needs, social workers help
clients who struggle financially to make ends meet. As social workers
seek to assist families to better their financial situations, learning about
the financial services utilized by low-income families is essential. The
financial services and credit readily available to poor families differs
from that available to middle and upper-income families and communities and significantly impacts social work practice to assist families to
provide for their basic needs and financially empower themselves.
Mainstream financial institutions often prefer to offer credit to non-minority, non-poor communities and individuals because such communities
and individuals fit more neatly into the lending structure and represent
more profitable lending activity. Rather than financial sources such as
banks and credit unions, low-income and minority populations are increasingly using alternative financial services for their financial services
needs, such as cashing checks, buying money orders and paying bills.
The use of the alternative financial industry is problematic for low-income families because it is costly and provides no incentives for saving
and investing.
Along with a shift occurring in social welfare policy, the issue of
costlier credit is gaining policy prominence. Beginning in the early
1990s with the publication of Sherraden’s (1991) Assets and the Poor:
A New American Welfare Policy, interest in a new theory of welfare
based on assets has grown at the local, state, national and international
levels. As the financial divide between rich and poor in the United
States is widening, asset building is increasingly viewed as a positive
policy step toward empowerment of the poor (Raheim, 1997; Shapiro &
Wolff, 2001; Sherraden & Sherraden, 2001).
Within this context of a wide gap in assets between wealthy and
poor households, asset building is generally viewed as a positive step
toward reducing poverty and increasing financial stability. Among
other asset-based goals, families participating in asset-building programs hope to purchase homes, pursue education and start small businesses. To accomplish these goals, participants need to access
financial capital in the form of home, car and education loans that, in
combination with savings, will assist them to build assets. The mechanism that has developed to help families develop assets is the Individual Development Account (IDA) program. This vehicle features
matching funds for family savings and financial education. Withdrawals of the funds are only allowed for specific, asset-building purposes,
Julie Birkenmaier and Sabrina Watson Tyuse
71
such as purchase of a home, starting a small business and post-secondary education. Low-income homeownership as an asset building strategy has emerged as a social and family policy priority because of the
keen interest among IDA participants in purchasing a home. While asset-development social policy has generated widespread domestic and
international interest resulting in a large growth of asset-building programs, scant research and literature has focused on the financial credit
needed to purchase assets using asset-building programs (Haveman,
2001). However, if the asset-development concept is to expand into
wide public policy, as hoped by advocates, more information is needed
to help families avoid using high-cost financial services and credit to
purchase and/or maintain assets.
This paper provides basic background information on financial services and credit, and discusses major policies impacting the financial
market. Information about community credit institutions, alternative financial services and credit programs that seek to decrease the cost of financial services and credit is also provided. In addition, we argue for the
need to focus on the financial market in conjunction with asset-development strategies and to consider strategies for creating and/or expanding
affordable credit for low-income families as an important ingredient for
asset building and achieving the long-term goals of asset-building–obtaining enduring and appreciating assets. If shifting social policy will
steer low-income families to save through asset-building programs,
then affordable financial services and capital to ensure long-term
affordability of assets must be included in asset-building goals (Dailey,
2001). Practice and policy recommendations regarding the financial
capital market accessed by low-income families are made. We conclude
with implications for social work education, practice and advocacy.
FINANCIAL SERVICES AND CREDIT
The mainstream banking and credit industries are largely absent for a
major portion of the U.S. population. Recent estimates of the numbers of
individuals who are unconnected to a savings institution (“unbanked”)
range from 10% to 20% of the population (Boshara, 2001; Caskey,
2002a) or more than 20 million people (Manning, 2000). Almost half of
all African-American families are without bank accounts. Further, 25%
of all renters and 15% who earn an annual income between $10,000 and
$25,000 are also unbanked (Stegman, 1997). Low-income families are
often excluded from mainstream financial services for banking and credit
needs for a myriad of reasons, to include reasons emanating from families
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as well as banks. Banks are under-represented in low-income and minority communities (Caskey, 1994b), require high minimum balances and
charge high fees relative to the financial resources available to low-income families. Low-income families frequently lack financial savings,
have bad credit and/or high debt-to-income ratios (Caskey, 1994a), cite
privacy concerns, have a lack of comfort with formal financial services,
lack of basic consumer finance education and are attracted to the convenience of alternative banking services.
Most banks will only cash paychecks for customers with an account
at the bank and for those who have sufficient funds in their account to
cover the check (Caskey, 2002a). Many low-income families cannot afford to keep even a small minimum balance in a saving account at a
bank and find themselves at great risk for bouncing checks, a costly
mistake. Further, banks fail to meet other financial needs of low-income
customers. For example, banks generally charge at least one dollar for
money orders, do not sell the postage stamps or envelopes needed to
mail bills, do not transmit utility payments to companies or serve as
agents for electronic money transfer services (Caskey, 2002a).
Instead of accessing mainstream financial services, those in low-income and minority communities increasingly rely on check-cashing
outlets (CCOs), small-loan companies, pawnshops, rent-to-own companies and other non-depository suppliers of financial services, such as
grocery stores and other businesses. Those who are unbanked often use
CCOs to cash their paychecks, buy money orders to pay their bills, pay
utility bills, buy stamps and envelopes and electronically transfer funds
to others (Caskey, 2002a; Carr & Schuetz, 2001). In contrast to banks,
customers can take care of all of these financial needs with one visit to a
typical CCO. Poor credit history and high debt also force families away
from banks for their short-term loan needs to handle emergencies. Instead, families turn to their social network for informal sources of credit
or to the high-cost formal sector such as pawnshops, car-title lenders,
payday lenders and small-loan companies (Caskey, 2002a).
Alternative financial services are, for the most part, under regulated
and the industry has grown tremendously in recent years. For example,
the number of CCOs doubled between 1996 and 2001 to a total of
11,000, whereas the number of credit unions, banks and thrifts decreased, especially in low-income and minority communities (Caskey,
1994b). The alternative check-cashing industry processes more than
180 million checks each year for a total of approximately $60 billion.
The growth in this industry can be attributed to consolidation among the
alternative financial services into large firms, the increasing ownership
Julie Birkenmaier and Sabrina Watson Tyuse
73
and involvement of mainstream institutions in alternative financial industries, the large numbers of banks mergers and the increasing specialization of the alternative industry in meeting customer needs. Some
pawnshops and CCO chains are now large enough that their stock is
listed on major stock exchanges (Carr & Scheutz, 2001).
Pawnshops, institutions in which loans are made at an interest and secured by personal property, have been in existence since medieval times
(Caskey, 1994a) and have increased in number in the U.S. by more than
100% between 1985 and 1999 (Hermanson & Gaberlavage, 2001). Today, between 12,000 and 14,000 pawnshops operate nationwide, outnumbering credit unions and banks. Pawnshop credit is 10 to 15 times
more expensive than consumer loans from banks. The growth of this industry likely reflects the dearth of mainstream financial institutions in
impoverished communities as well as customer demand for easy, convenient financial services. Unfortunately, the amount of money in fees
that low-income families pay to these pawnshops further impoverishes
both the families and their communities, for reasons discussed below
(Caskey, 1994a).
Although customers cite the ease and convenience with which their
financial needs can be met, the cost of credit from the alternative industry is excessively high. The average fee for check cashing from a
CCO is 2-3 percent of the value of the check, although some charge as
high as 20% of the value of the check (Caskey, 2002a). In contrast,
banks generally cash their customers’ checks free of charge or for a
minimal service charge (Squires & O’Connor, 1998). In the aggregate,
the cost of such services averages between 50% and 300% of Annual
Prime Rate (APR). Because of the high risk and high cost of delivering
services, services of CCOs are four to six times as expensive as those
of banks, with an annualized interest rate range of 100-400%. An individual with an annual take-home pay of $18,000 can spend upwards of
$400/year just to utilize basic financial services from CCOs. The annualized interest rates from informal-sector lenders, such as pawnshops, car-title companies, payday lenders and small-loan companies
range from 100-500% (Caskey, 2002a). Payday loan borrowers, who
write a check to the lending company for the cost of a short-term loan,
including a finance charge, to be cashed by the company when the next
paycheck is received, often experience serious debt through multiple
extensions of a loan when in financial trouble. The average payday
loan in Illinois is “rolled over” 13 times. Although helpful in the
short-run, extensions and regular borrowing results in high financing
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charges and the trap of a cycle of debt (Wiles & Immergluck, 2000;
Williams & Smolik, 2001).
Although the alternative financial market provides a service to those
unable to use mainstream services, the excessive fees drain capital out of
neighborhoods into corporate coffers rather than reinvesting them into
the local, distressed communities (Bachelder & Ditzion, 2000; Caskey,
1994a; Caskey, 1997; Stoesz & Saunders, 1999). These services offer no
savings products, thus providing their customer with neither incentive
nor opportunity to save (Carr & Scheutz, 2001). Pawnshops and CCOs
are expanding their sphere of operation into middle-class communities by
marketing themselves as one-stop-financial service centers (Lansing &
Casper, 2001). Proponents of alternative credit institutions point out that
low-income families receive needed financial services and that lenders
serving disadvantaged populations should be compensated for the risk
they take by lending to the poor and not conducting credit checks
(Lewison, 1999).
FINANCIAL INSTITUTIONS
Over the past 20 years, the environment for financial institutions has
changed dramatically as a result of banking deregulation. Proponents
laud deregulation as improving efficiency, increasing competition, decreasing cost of credit and producing a wider array of services in banking. However, critics point to less accessibility of affordable financial
services and credit in poor communities because of a high number of
mergers and the increased opportunity to serve more lucrative markets
in non-poor communities as negative consequences of deregulation
(Boher, 1995; Caskey, 1994a).
Three important areas have been deregulated in banking over the past
20 years: interest charges; geographic restrictions; and service offered.
First, the restriction was removed that limited the maximum-allowable
interest rate to depositors by commercial banks, allowing banks to compete through increased interest rates for savings deposits. The rise in
interest rates, in turn, increased the cost of credit for borrowers (Glasberg &
Skidmore, 1997). Second, prior to 1985, banks were not permitted to
cross state lines. However, a 1985 Supreme Court ruling allows interstate banking, which has spurred a myriad of bank mergers and interstate banking. Third, since the 1980s, financial institutions are allowed
by regulators to become involved in non-financial activities (e.g., real
estate, insurance and securities). Lastly, the increasingly global econ-
Julie Birkenmaier and Sabrina Watson Tyuse
75
omy places poor urban and rural communities in competition with investment opportunities around the globe (Boher, 1995).
Two laws have been important tools in expanding affordable credit in
low-income communities. The 1977 Community Reinvestment Act
(CRA) requires banks and thrifts (i.e., banks designed to better meet the
needs of low-income households seeking home mortgages) to meet the
needs of low- and moderate-income communities for credit in exchange
for federal deposit insurance and other public benefits and subsidies
(Boher, 1995). Although advocates have been successful in using the
CRA to press for more capital resources for disadvantaged communities
(Green & Haines, 2002), the role of CRA may diminish in the future.
The traditional banking system is becoming a weaker player in the financial market as a result of the rise of other types of companies entering into the financial services market that are not covered under CRA.
The Gramm-Leach-Bliley Financial Modernization Act of 1999 allows
mutual funds, mortgage banks, finance companies, insurance companies and pension funds to merge with and acquire one another. Mergers
and acquisitions are attractive because such entities can conduct lending
business without CRA oversight and, therefore, only focus on the most
lucrative credit markets without penalty. Early indications from institutions created by such mergers are that insurance banks are making far
fewer home purchase and refinance loans to low and moderate income
borrowers as compared to conventional banks covered under CRA (Jacob, 2003a).
The second important legislation to serving the credit needs of low-income families is the Community Development Banking and Financial Institutions (CDFI) Act of 1994. This act created a community development
fund to provide government monies for equity investments, capital grants,
loans and technical assistance. Activities can include the creation of
low-income housing, business development, financial services and commercial facilities that promote employment and technical assistance. Although CDFI programs are relatively new, they are developing across the
country. CDFIs increase access to affordable credit (Green & Haines,
2002). Current CDFI institutions include 71 banks, 333 loan funds, 20 venture capital funds, 119 credit unions and 59 micro enterprise entities that
have a primary mission of serving low-income families. In addition to government funding, they also rely heavily on investments from regular banks
and thrift institutions for loans and investments, who invest because they
fall under CRA requirements. CDFI-capitalized ventures result in shopping centers, affordable housing projects, new small businesses and other
needed financial and social infrastructure in low-income areas that other-
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wise would not occur because of the lack of ability of conventional financial institutions to offer credit to such projects (Jacob & Bush, 2003).
COMMUNITY CREDIT INSTITUTIONS
AND PROMISING FINANCIAL SERVICES
Innovations
Advocates for affordable financial services that better assist low-income families to build assets have been active in promoting alternatives to the informal financial services market. Mainstream credit
unions are a viable option for low-income families for affordable financial services and credit, although some evidence suggests that
mainstream credit unions make only limited efforts to reach low and
moderate income households and assist them to build their savings
and assets, as well as improve their financial management practices
(Caskey, 1999).
The development of community credit institutions that focuses on
specific geographic communities is a newer and promising approach
to financial services for low-income families. Community credit institutions include community development credit unions (CDCUs) and
banks, revolving loan funds (RLFs), community development loan
funds and microenterprise loan programs (MEP). These institutions
and programs can more adequately provide credit for disadvantaged
populations and communities because of their closer ties to specific
communities and a mission to meet both financial and social objectives for the community (Green & Haines, 2002). Many researchers
have concluded that community credit institutions offer the greatest
promise of all efforts to increase access to financial markets for disadvantaged communities (Burger & Zellmer, 1995; Caskey, 1997).
Community development credit unions (CDCUs) function as other
credit unions in that depository and lending services are provided and are
governed in a cooperative fashion by a board of directors. However,
CDCUs deviate from other non-community development institutions as
lending is limited to specific communities. CDCUs provide education,
support and incentives that enable and encourage low-income families to
become banked, improve finance management skills and save and develop assets. Both CDCUs and community development banks (CDBs)
Julie Birkenmaier and Sabrina Watson Tyuse
77
hold great promise as financial services and lending institutions. Recent
data show that CDBs in the Chicago area outperform other lenders in providing home lending resources to lower-income and minority communities as compared to other home lenders (Nieman & Bush, 2003). CDBs are
growing in number, size and performance (Bush & Smith, 2003). Further, a
few innovative CDCUs are offering affordable alternatives to payday
loans for their customers. Specifics vary, but members with a relatively
short deposit history and a regular paycheck can establish a revolving line
of credit that can be utilized as an alternative to a payday loan. The interest rate, terms and fees charged by the CDCU are reasonable and make
such loans more affordable than those from payday loan companies. Further, financial counseling is available to members who seek assistance
managing their finances (Williams & Smolik, 2001).
Community development loan funds are programs within nonprofit organizations that make loans to specific populations, namely, low- and moderate-income persons, women and minorities, in their efforts to obtain
housing and employment. These loan programs accept funds from socially
motivated investors and reinvest in community projects and nonprofit organizations that pose a higher risk than is acceptable for traditional financial markets (e.g., land trusts and cooperative housing developments).
Because of the ease with which they can be formed and the availability of a
wide funding base, RLFs are the most widely adapted and successful community development credit institution. RLFs, funded primarily through
government sources, provide funds for both housing and business development with highly favorable terms relative to conventional banking. Loans
through RLFs tend to be larger and present a lower risk than loans through
microenterprise programs (Green & Haines, 2002).
The use of microenterprise loan programs (MEPs) is another strategy
utilized for asset building (Sanders, 2002; Stoesz & Saunders, 1999).
Microenterprise loan programs, located within nonprofit organizations,
provide financial counseling and small short-term loans to start small
businesses to those who are not eligible for traditional bank loan products because of weak or poor credit histories or (lack of) collateral
(Servon & Bates, 1998). The MEP strategy is to promote self-employment and economic self-sufficiency among the poor through small business ownership. MEP programs in the U.S. were originally modeled
after MEPs in developing countries and are now found nationwide, targeting mostly women, welfare recipients, minorities, low-income per-
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sons and those with limited assets (Sanders, 2002; Schreiner, 1999). In
fact, from 1987 to 1999, the number of these programs grew from less
than ten to more than 300 (Langer, Orwick & Kays, 1999) and by 2002
to 650 in all 50 states, the District of Columbia, Puerto Rico and the
Mariana Islands (Aspen Institute, 2002). Examples of typical small business started through MEPs include clothing alterations, beauty shops, catering, daycare, desktop publishing and janitorial cleaning services
(Banerjee, 2002; Sanders, 2002).
Since the late 1980s, researchers have considered microenterprise
programs to be an effective anti-poverty strategy to help poor U.S. families escape poverty as proved by the growing popularity of the program
(Schreiner & Woller, 2003; Banerjee, 1998). For example, the Aspen
Foundation’s analysis of the Self-Employment Learning Project found
significant household income gains for microenterprise families, ranging from an average income gain of $13,889 to $22,374 and that 53% of
families were able to escape poverty (Clark, Kays, Zandniapour, Soto &
Doyle, 1999). Other researchers have not reached such positive conclusions. Servon (1997) found that MEPs are disproportionately assisting
those at the margins of the mainstream economy, instead of those who
are the most disadvantaged and isolated from mainstream society and
the mainstream economy. Light and Pham (1998) concluded that most
people being served by MEPs are not the truly disadvantaged, but rather
those with some college education and viable credit histories, which
may help to explain the positive findings of some researchers. Moreover, Howell (2000) concludes that microenterprise programs are an ineffective antipoverty strategy for those without adequate resources,
education, skills training and social networks that are vital to business
success.
In sum, these alternative community credit institutions are emerging to
fill the credit needs of communities not adequately addressed by government programs and the market. Although important, the availability of
these credit sources is not yet adequate to meet the demand for affordable
credit or sustainable over the long-run, even with foundation and government support (Green & Haines, 2002). Larger, sustainable support is
needed to replicate these institutions and programs to a much larger scale.
Another promising advancement is the development of bank/CCO
hybrids that offer fee-based check-cashing services in concert with consumer banking services. A small number of banks and credit unions are
offering check-cashing services at branch offices or offering banking
services at CCOs. These type of arrangements offers customers the ease
Julie Birkenmaier and Sabrina Watson Tyuse
79
of the CCO and introduces them to the idea of opening bank accounts
and saving. While helping with the profitability of banks and CCOs,
hybrids also offer the possibility of bringing unbanked households into
the banking system (Caskey, 2002b). Other banks are partnering to develop “lifeline” banks for low-income customers, wherein customers
may open an account without a credit check for ten dollars or less, have
no minimum balance and no monthly service fee and other features
which can appeal to low-income customers. Further, banks offering
lifeline banking programs partner with nonprofits to provide financial
literacy workshops and counseling and conduct outreach to market such
programs (Williams, 2000).
Policy Implications and Recommendations
Much policy and practice work needs to be accomplished to provide
affordable financial services and access to affordable credit for low-income families. Those measures that are working to increase the supply
of affordable financial services and credit need to be strengthened. The
budget of the CDFI Fund in the U.S. Department of the Treasury has
been cut over the past several years and is threatened with future budget
cuts. Advocates need to work to maintain and increase the budget in this
Fund so that the investments to CDBs and other sources of community
development initiatives can be expanded. Additionally, efforts are underway to weaken the stringency with which banks are examined for
CRA compliance, which would serve to lessen the incentive of lending
institutions to invest in CDBs (Bush & Smith, 2003; Nieman & Bush,
2002). CRA is weakened to the extent that nonbank entities, such as insurance banks, securities firms and mortgage companies that engage in
banking activities, are not obliged to comply with CRA requirements.
This loophole must be addressed to ensure that these banks provide resources to low-income communities and that the same regulations apply
to any entity engaging in banking activities. The elimination of this
threat would strengthen the community development industry and offer
more resources to low-income families and communities (Bush &
Smith, 2003; Jacob, 2003a). To ensure a service focus on low-income
families, advocates also suggest that the Federal Credit Union Act
should be amended to include the requirement that credit unions serve
low-income families and that the Community Reinvestment Act be
amended to include credit unions (Jacob, Bush & Immergluck, 2002).
Regulation of the alternative financial services industry must also be
a policy focus. Legislation at the state and federal level must address the
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problems with payday loans. Specifically, a maximum interest rate
should be set that allows for reasonable, rather than excessive, profits.
Further, a limit to the number of times a loan can be rolled over and a
waiting period between loans of at least 30 days must be enacted to
eliminate repeated borrowing. Extensive data about the industry should
be made available to the public. Finally, regulation at the federal level is
important because of the prospect of partnering arrangements between
banks and payday loan operations in states with loose or no regulations
(Wiles & Immergluck, 2000).
In sum, policy advocacy is needed in the following areas: (a) equal regulation and monitoring of all areas of the alternative banking industry and
lending markets and the financial markets and institutions serving predominantly middle- and upper-income households; (b) the exploration of
alternative, non-profit delivery of alternative banking through nonprofit
organizations; (c) making deposit institutions (i.e., banks or credit unions) accessible, affordable and attractive to low-income households in
low-income communities; (d) exploration of alternative policies that include partnerships between the mainstream banking industry with CCOs
such that CCOs serve as agents for banks/credit unions and accept deposits; and (e) the exploration of federal government as a provider of banking
services to low-income communities, and other possibilities (Caskey,
1994a).
Implications and Recommendations for Social Work Practice
and Education
Social workers must have at least a basic understanding of credit and
sources of credit to effectively work with low and moderate-income clients. Social workers must also understand the relationship between assets and poverty and the need for the accumulation of wealth as a means
of escaping poverty. Social work activities related to this area can include such activities as the following: (a) working with individuals in
economic empowerment programs (such as IDA programs); (b) working with community groups to establish such programs; (c) working
with community organizations to establish partnerships with banks and
credit unions to provide affordable financial services; (d) providing financial literacy for low-income customers; (e) budgeting with clients;
(f) advocating for affordable credit for clients at the local level and policy advocacy at the state and national level; and/or (g) educating clients
about the technological advances, such as ATMs, telephone banking,
electronic bill payment, electronic funds and benefits transfer (EFT and
Julie Birkenmaier and Sabrina Watson Tyuse
81
EBT) and other measures that have reduced the cost of providing financial services (Williams, 2000). Given the increasing focus on assets and
the support for low-income families to utilize credit to build wealth, efforts to connect the unbanked with lower cost financial services and
availability of affordable credit must expand. Therefore, social work
programs must include financial and credit content within the curriculum to educate social workers.
Undergraduate and graduate social work curricula should include content about financial services and sources of credit for low-income families, the link between assets and poverty and information on IDAs as
asset-accumulation strategies being implemented around the country.
This material can be included in elective courses on community, poverty,
housing, and wealth and/or dispersed throughout the curricula in discussions of vulnerable populations in HBSE, diversity or practice courses.
To provide this content, social work faculty could collaborate with public
policy or business faculty members who are knowledgeable about financial services and credit. In addition, social work students should receive
training in agencies working with vulnerable populations and asset-building programs. Specifically, social work programs should offer practica
opportunities in agencies providing IDAs, homebuyer and mortgage
counseling and financial literacy to further develop students’ knowledge
and skills in working effectively with low-income and minority populations who are seeking to utilize credit to build assets. Students should
have opportunities to work with community organizations that are involved in providing financial literacy and who work with financial and
lending institutions to advocate for financial services and products geared
toward low-income families. Classroom knowledge about financial services and credit combined with opportunities for fieldwork in agencies
involved in this topic will serve to educate future social workers to work
toward financial empowerment for their clients.
CONCLUSION
The focus on formal and alternative financial institutions is long
overdue by the social work profession. Many social policy forces are at
work that are shaping the financial services market toward offering expensive services and credit for low-income families. Attention is
needed to both the policies that help to create affordable financial services and credit and those policies and regulation initiatives that will
serve to remove incentives to invest in low-income communities. Fi-
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nancial services and credit have a major impact upon the lives of low-income families and social workers would make a valuable contribution
to the economic empowerment of their clients to educate themselves
and become more involved in advocating at both the policy and service
levels for low-income families.
While the “first-generation” of asset-development policy has focused
on the concept of accumulating financial resources toward building assets, program implementation of asset-building programs and evaluation of such programs, the “second generation” of such policy must
focus on the financial market families utilize to build and maintain assets. Asset advocates must be interested in policy and practice that supports not only asset accumulation, but also asset affordability and
post-purchase maintenance so that the effects can be enduring. Beyond
financial literacy for consumers and a focus on actual loan products,
(e.g., home mortgage loans, car loans, student loans and small business
loans), advocacy regarding public policy that affects credit affordability
and availability must be strengthened and increased for low-income
households to maximize their limited financial resources toward saving
and investing. Without attention to the financial capital market accessed
by families, families may find themselves in the awkward position of
acquiring assets that they can ill-afford in the long-run. For long-term
benefits from asset development, the devil is in the financial details.
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