A Guide to Implementing Individual Development Accounts (IDAs) in Community Development Credit Unions
Prepared by: National Federation of Community Development Credit Unions
Purpose of this Guide:
Individual Development Accounts (IDAs) are a new strategy for mobilizing savings and building assets for the poor. As restricted access savings accounts that offer matching funds for each dollar saved by a low-income person, the IDA provides both structure and incentives for saving. Because community development credit unions have a 60 year history mobilizing savings among low-income members and reinvesting this savings within the community, they are an ideal vehicle for delivering IDAs to low-income people. Over three years ago, the National Federation of Community Development Credit Unions launched an IDA Research and Demonstration program to help interested credit unions to initiate IDA programs for their low-income members. The research explored how credit union members do save, obstacles they face and what would help them to save more. Through a demonstration program launched between the National Federation and the Corporation for National Service, the Federation was able to put this research to work by training and placing full-time VISTA*Corpsmembers in credit unions to implement IDAs. This guide represents a collection of the lessons learned both on savings patterns in community development credit unions and the best practices for CDCUs implementing Individual Development Accounts.
Acknowledgments:
The National Federation of Community Development Credit Unions has received considerable assistance and support throughout the development of its IDA program. The Corporation for Enterprise Development (CFED) has provided on-going support in training and materials development. For a more complete guide to IDAs, please consult CFED’s ―Individual Development Account Program Design Handbook: A Step by Step Guide to Designing an IDA Program.‖ We would like to acknowledge the extensive contributions of Daniel Silverman, who led the research on savings patterns in low-income credit union with the generous support of the Charles Stewart Mott Foundation and J.P. Morgan Guaranty Trust Co. Finally, important contributions to this guide were provided by the 1997-1999 NFCDCU IDA AmeriCorps*VISTA Members. We acknowledge the ongoing support and assistance of the Corporation for National and Community Service and Kelly Daly, VISTA Program Manager in particular.
Table Of Contents
I. II. III. IV. V. VI.
CDCU Experience in Savings Mobilization Implications for Individual Development Account Seven Questions to Ask When Designing Your IDA Program Learning the Goals and Savings Potential of Participants Identifying Potential Participants Establishing Savings Purposes and Account Features
VII. Policies and Procedures for Managing IDAs and Program VIII. Fundraising: Strategies and Sources of Funds IX. Marketing and Outreach: Selling the IDA
I. CDCU Experience in Savings Mobilization
In 1996 NFCDCU began laying the groundwork for a program to help our member credit unions bring Individual Development Accounts (IDAs) to their communities. The first step was to explore how and why CDCU members currently save, which long-term goals they save for and what support or assistance would be needed to achieve that goal. To this end, we launched a research initiative in July 1996 to study the savings patterns and preferences of low-income CDCU members and potential members. In tackling the research project, we focused initially on savings levels among CDCU members and tested how savings is influenced by factors such as credit union size and age, income level in the community and products and services offered. Then we surveyed CDCU managers to gauge their impressions on the goals and incentives that would increase savings levels among current and potential low-income CDCU members. Lastly, we surveyed and conducted focus group interviews of CDCU members (and potential members) to determine what they save for, what prevents them from saving and what would help them to save more. The information obtained remains preliminary. A more complete set of credit union data from 19851996 has been compiled which will provide greater information on trends in savings levels over the years. The survey information, while extremely useful in identifying attitudes and behavior toward saving, does have an urban bias. Focus groups were conducted in two locations in the Northeast and the Southeast among urban and rural people. Background Research Analyses of wealth distribution in the United States reveal a disturbing pattern and expose a pressing need for asset-building strategies. In their book Black Wealth/White Wealth: A New Perspective on Racial Inequality, Melvin Oliver and Thomas M. Shapiro find that nearly half of U.S. households do not have enough savings to survive at the poverty level subsistence for three months. These figures are even more extreme when considering low-income, minority communities served by CDCUs. Among AfricanAmericans and Latinos, 79% and 73% of households, respectively, could not live off of their savings for more than three months. Oliver and Shapiro demonstrate that while income inequalities between black households and white households remain significant (for every dollar earned by white households black households earned sixty-two cents), whites possess nearly twelve times as much median net worth as blacks, or $43,800 versus $3,700. When considering the net worth of American households, it is important to note that only 12% of overall personal wealth is held in savings accounts at financial institutions. Approximately 45% of personal wealth in the United States is held in a home. This underscores the critical role that Individual Development Accounts (IDAs) can play in assisting low-income households to not only build personal savings but to use this savings toward increasing personal wealth.
Figure 1 describes the composition of personal wealth in 1993.
Figure 1: Distribution of Net Worth by Asset Type 1993
Interest-earnng assets at financial institutions 12% IRA/Keogh accounts 7% Own home 45% Stocks and mutual funds 8% Vehicles 6% Businesses 6% Other real estate 11%
Other 5%
Key Research Findings CDCUs are frequently the only financial institutions serving low-income, urban and rural communities. Despite limited means, members of CDCUs have for more than 60 years accumulated savings to achieve their goals. This long history of savings mobilization make CDCUs ideal for learning about why people save and what may affect a person’s ability to accumulate savings. Of the 137 Federally chartered CDCUs studied, there was an average savings per member of $1,598 at year-end 1995.1 Interestingly enough, the average savings per member showed no correlation with the income level of the community where the CDCU was located. Some factors that did show a strong positive correlation with savings were the age of the credit union and the number of full-time and parttime staff. Essentially, the average savings grew over time as the credit union matured and increased its capacity. This positive relationship between savings levels and the CDCUs’ maturity and capacity is found even when controlling for the average age in the community served. See Appendix – for research data. Another significant finding was the existence of a positive relationship between savings per member and the interest rate (or dividend) provided by the credit union. There were also higher average savings levels at credit unions offering certificates of deposit and IRA accounts. These findings indicate that higher rates of return or matching funds for Individual Development Accounts may influence the amount that a person is willing or able to save. Overall NFCDCU has found in this preliminary review of credit union data strong evidence that:
1 The mean savings per member at CDCUs is $998 if a large North Carolina credit union is not included. Silverman (1996).
Low-income people can and do save when given opportunity and access to financial institutions and savings products CDCUs provide a long-term vehicle for building savings in a low-income community Higher returns on savings and structured savings accounts may influence the amount that people will save
Credit Union and Individual Surveys After reviewing this overall data, NFCDCU distributed surveys to credit union members and nonmember residents of low-income communities. Despite growing savings, people surveyed held negative net financial assets. The table below demonstrates the current levels of savings and debt reported by survey respondents. The median respondent reports $500 in savings and $1,875 in debt or net assets of negative $1,375.2
Current Levels of Savings and Debt
Total savings (entire sample) Mean Median Std. Deviation Maximum, Minimum Total debt (entire sample) Mean Median Std. Deviation Maximum, Minimum Total savings Mean Median Std. Deviation Maximum, Minimum Total debt Mean Median Std. Deviation Maximum, Minimum $4,544 $500 $10,638 ($80,000, 0) $6,485 $1,875 $11,018 ($60,000, 0) Workers $5,587 $1500 $12,032 ($80,000, 0) Workers $6,891 $3,000 $10,950 ($60,000, 0) Non-workers $1,720 $70 $4234 ($20,000,0) Non-workers $5,476 $500 $11,239 (50,000,0)
Respondents with higher incomes have on average more savings and more debt. Of all income categories, only the lowest and those earning between $25,000 and $30,000 a year have, on average, nonnegative net assets.
2 Net asset levels should be viewed with care since respondents were not asked to include nonfinancial assets such as home equity in their descriptions of total savings.
Median Savings, Debt, and Net Assets Levels, by Household Income
Income Categories Median Savings Median Debt Median Net Assets Observations
Less than $10,000 $10,000 - $14,999 $15,000 - $19,999 $20,000 - $24,999 $25,000 - $29, 999 More than $30,000
$35 $0 $340 $1,000 $500 $4,000
$0 ($2,000) ($3,000) ($1,500) ($615) ($5,000)
$0 ($1,400) ($3,000) ($995) $150 ($1,500)
33 13 18 17 11 53
Interest and Desire to Save More Overall people indicated that while they may need some assistance or support, saving for a goal is within their capacity. Regardless of income or social status, nearly all survey respondents and discussion participants indicate that savings is a proper goal for people like them and can be done. More than 75% of all survey respondents disagreed with the notion that savings is, in principle, beyond them or unnecessary. In some cases, people did feel limited by current conditions beyond their ability to control. For example, 49% of survey respondents receiving government benefits indicated that they would save more, but the government would cut their benefits if they did. In determining reasons why people save, we found that close to 90% of survey respondents feel they need to save to make sure they have enough when money is not coming in. Nonetheless, when asked to indicate what they would do if they had more money in savings, 45% said they would use it for their childrens education, and 35% said they would use it to purchase a home. Additionally, 43% would like to use savings toward retirement. Almost one out of five said they would save to open or expand a business.
If you had more money in savings, what would you do with it? Choose the four most important uses you have for savings. (n=198) Pay for children’s education 45% Keep it for retirement Improve your home or apt. Buy a home or apartment Travel or take a vacation Buy food and clothing 43% 38% 35% 33% 30% Open or expand your bus. Purchase health care/insur. Buy furniture or appliances Funeral costs Put a deposit down for an apt. Other Pay for child care Buy birthday or holiday gifts 19% 18% 17% 14% 10% 9% 7% 7%
Pay for your ed. & training 24% Purchase a car 20%
Barriers to Saving
Through the focus group discussions we learned that many people would like to save more but feel they need some help. The major obstacle to saving cited was there simply was not enough left over after paying bills. One discussion group participant from North Carolina explained, We don’t get enough money to suffice our needs. Our everyday basic needs. But we’ll sacrifice these needs for a common goal... Many low-income people [can] save towards buying a lot. Buying a house. They just saved. But to get them to save on their own, it looks like it’s impossible. Another obstacle to saving cited by participants was family and other obligations. Discussion group participants indicated that it is difficult to turn down family members wanting either a loan or assistance/support. One participant referred to her aunt claiming “if she knew I had money, she would be borrowing from me all the time.” This is a factor in depleting what savings people are able to accumulate. Another factor influencing people’s savings behavior is basic financial education. Several discussion group participants said they thought saving would increase if there was guidance or direction on how to budget so as to have extra money to save and how long it would take to reach their goals. In addition, direct deposit was widely recognized as an important aid to savings. Nearly half of survey respondents (49%) said direct deposit would make it easier to save. Focus groups discussed linking direct deposit to a restricted access savings account. One discussion group participant noted, I was working, and saving 25 dollars out of my paycheck. And I got paid twice a month. No once a month. Before the 20th of the month I would go get it out because I needed it. But had I saved 5 dollars, I wouldn’t have gotten it. And I would have gotten in the habit of saving. So I think it’s the teaching of how to do it. And it wasn’t the amount. I never got into the habit. But had I done 5 dollars. I would have forgotten it was coming out of ... it was payroll deducted too. Had I done that, and forgotten it was there, I would have gotten into a habit of saving 5 dollars. Then I could have increased it. Because, like I said, it wasn’t the amount it was getting into the habit. Finally, governmental restrictions posed substantial barriers to saving. Forty-nine percent of survey respondents on public assistance say they would save more, but the government would cut their benefits if they did. While some of these restrictions may be changing, the perception remains that in order to maintain public assistance benefits, savings is impermissible. A teen mother from Newark explained, I had opened up my savings account when I was in high school. And I had at least 2000 in it. I had been savings since like 9th grade. And when I applied for welfare ... That money was for me to get in college and stuff like that. For emergency use only. And they had asked me did I have a savings account. And I told them yeah. And they asked me how much. And I told them about over 1000. But they told me you can’t apply for welfare having a savings account. So I had told them that I had um closed that account. And it took me a while to get on welfare because they would not let me get on welfare with having a savings account.
II. Implications for Individual Development Account
Through this research, the National Federation set out to discover the barriers people have to savings and methods to overcome these barriers. In this section, we outline four areas to consider when designing the IDA program. 1. Access to savings products and higher returns affect savings patterns. The research indicates that there is a positive correlation in credit unions offering higher dividends on savings and the average amount saved by credit union members. In addition, credit unions offering more varied savings products such as club accounts and IRAs had higher average savings than credit unions that did not. In focus group discussions, several participants responded favorably to limiting access to the savings not only to restrict their own access but also to limit their ability to access the funds for family members or friends needing to borrow money. This indicates that making structured savings programs available is half the battle in lowincome communities. Savings patterns among the poor are affected by rates of return, indicating that match levels may be a deciding factor for potential participants. Lastly, limiting access to funds appears to be an added plus to the program, provided individuals are reassured that they may access their own savings in emergencies. Goal setting and financial planning education is critical. To assist people to build savings over the long-term, establishing achievable goals and providing financial counseling are critical. Credit union members and managers have pointed to difficulties low-income people face when trying to save. However, focus group participants described their dreams of owning homes, returning to school or running their own small business. By setting realizable goals and developing a plan to achieve these goals, people are more motivated to save regularly. Nonetheless, people indicated a strong need for guidance and support in reaching their savings goals. One focus group participant remarked, ―I believe the best way is to create the budget. A good budget. Knowing exactly what your expenses are and what is your income. And work hard to [stay to] that budget. Another participant responded, ―You have to have goals… You have to think about what do you want. Then you have to start make payments to your goal. You have to.” A third participant pointed out, ―You have to review your expenses. And start cutting down those ones that are unnecessary.” 2.
3.
Consider how to link to direct deposit.
Nearly one-half of the respondents to NFCDCU’s savings survey believe direct deposit would make it easier for them to save. Particularly, direct deposit into an IDA account would allow people the opportunity to make the choice to save just once and not with every paycheck.
Focus group participants echoed this sentiment. In general, if people know they have $10 or $20 less per month, they arrange their budget and spending around that. One focus group participant stated,
I know for myself. I have direct withdrawal from my paycheck. So I don’t even see it. I don’t even see the money because it comes out of my paycheck. And I’ve learned to live on a less amount of money. Even though I always thought I didn’t have that money. You know when I had the money, I didn’t know where it was going. And now it’s going someplace, I know where it’s going and I can still live on less amount of money which I never thought I could. But until that happened, I didn’t realize that I could actually save a substantial amount of money per month. Because it got here in my hand and I thought oh I don’t have any money and I need to do this and this and this.
4.
Public Assistance Asset limits removed or raised.
A major obstacle to saving for people on public assistance has been the asset limits placed by the Department of Health and Human Services on savings. People with savings that exceeded asset limits would receive less assistance or could be cut-off from public assistance entirely. These asset limits created a tremendous disincentive to savings. While these limits have been raised in most states (including many state plans allowing IDA savings to be excluded), the impression that increased savings can affect welfare eligibility persists both among welfare recipients and caseworkers. Increased asset limits and excluding savings generated in an IDA account are critical to help people begin to build savings and transition from public assistance. However, simply raising the limits are not enough, people must be given accurate and complete information on what they can save and how. For more information on asset limits in your state, contact the state department of social services.
III. Seven Steps to Designing Your IDA Program
1. Learn what goals members and potential members will save for.
A key component of the IDA program is working with members to set goals and save toward that goal. In general, IDAs help people save toward high-return, community development goals like homeownership, small business creation, education and/or vocational training. In the beginning, the credit union may wish to focus on starting IDA accounts for one purpose at a time, such as homeownership. Other uses for the IDA may be added on as the program proceeds.
2. Estimate the average amount a person would need to achieve the goal(s).
Depending on what use people will use their IDA savings toward, the amounts they will save will differ significantly. Find out what a typical saver would need for the purposes chosen. What is the average down-payment and closing costs for a home in the community? How much are vocational/training colleges? What kind of investment on average would be need to start a small or micro-business? Providing this information ahead of time to IDA participants will allow them to set realistic plans to save for the desired goal.
3. Determine the amount a typical IDA program participant save per month. Knowing how much the average participant can put aside each month will help you to design the rest of the IDA features. This may vary substantially depending upon the population you target. Finding out the ability of potential IDA holders to save will ensure that your IDA fits the needs and abilities of the community you plan to reach. Surveys, focus groups and interviews with individuals will give you an idea of average savings per month. However, each IDA account holder should be given the opportunity to establish their own savings schedule. When participants start the IDA account, they should set out what a realistic savings schedule is ask them to consider what they commit to saving each month and encourage them to stick to it.
4. Set the match rate and program duration.
Based upon the average amount that participants can save per month and the cost of the ultimate goal, you can establish the IDA program features such as match rates, and length of time. If a typical downpayment on a home is $2000 and credit union members on average believe they can save $40 a month, they could reach that amount in two years with a 1:1 match.
Decide what an average length of time that participants will remain in the IDA program before setting your match rates. Will members open IDA accounts for 1 year? 2 years? 3 years? Will this vary depending on what people are saving for? For example, a member who is saving for college for their children may have a different saving schedule than those saving for a downpayment on a home. When establishing the program time limits, some flexibility is necessary. One program that established a rigid 36 month savings plan found that many account holders dropped out of the program for failing to meet one month’s savings goal. The process of making up the difference in subsequent months proved too difficult. Other programs require no time limits on savings. This allows the greatest flexibility to the account holder but may cause administrative difficulties for the credit union or partner organization at a later date. It is advisable to set target time limits for reaching the savings goal the IDA but creating a process for redesigning the savings schedule when crises or emergencies emerge.
5. Develop a plan to integrate the IDA with other products and services the credit
union offers. The IDA represents not only a valuable program for credit union members but an opportunity to develop future customers for credit union loans. The IDA program should therefore be fully integrated into other products and services the credit union offers or plans to offer. If IDA participants are saving for downpayments on a home, the credit union may consider developing its capacity to make home mortgage loans. As the members save toward the downpayment they can be working on qualifying for the mortgage by cleaning up credit histories, attending homeownership training classes, etc. Similarly, if members are saving toward capitalizing a business, the credit union can consider increasing its products and services to businesses and microenterprises. Focus groups and surveys indicate substantial interest among potential IDA participants for linking the IDA account with direct deposit options.
6. Seek other resources in the community available to IDA account holders? Education is a vital part of a successful IDA program. This includes not only financial literacy and budget counseling but homeownership counseling, small business training and technical assistance, GED classes (if necessary for higher education.) Identify community groups that provide this assistance. Approach these groups either individually or collectively to determine their interest in developing a partnership 7. Set Policies and Procedures for administering the program
IDAs are generally developed through collaborations of two or more community organizations. During the design phase, duties and responsibilities should be clearly
defined. A lead agency or organization should be designated and contracts arranged with each participating organization. Chapter xxx shows several models for structuring these collaborations. Credit unions may choose to either play a limited role as the financial institution holding the accounts or may choose be the lead agency. This will depend on the capacity and interest of other organizations. Currently state and federal legislation require that applications for matching funds be made by a 501 c(3) organization. This makes it more difficult for credit unions acting as lead agencies to access these potential funds. NFCDCU is advocating to allow CDCUs that are either low-income designated or certified as a community development financial institution (CDFI) to apply directly for funding.
IV. Learning the Goals and Savings Potential of Participants
Establish a process to learn what are the goals, needs and potential of your membership and community. This process may include: surveys of the credit union’s membership, focus groups of current or potential members and forming a steering committee with potential participants. This will help you learn what your members want, as well as dispel incorrect assumptions before policies are set. Based upon local conditions, you may choose any combination of these strategies, as outlined below.
1. Surveys Develop a simple, one-page survey to distribute to members through mail or in person at the credit union. Although a sample is included, you should test your survey out first to make sure it is clear and relevant in your community. The survey should ask members about their goals, how much they feel they can save per month and how long they wish to save in order to meet their goal. It can include questions on income and expenses each month, long-term savings goals, what would make it easier to save more and what if any interest is there in counseling. The survey is an opportunity to ask additional questions regarding training or other support services needed by prospective participants and how the training should be delivered (ie, training seminars, peer-group meetings, one-on-one counseling). Allow opportunities for people to comment and provide feedback. For more in-depth information, surveys can be complemented by focus groups or steering committees. These provide a forum for individuals to discuss their goals and the challenges they face in greater depth.
A Community Survey: Shelby/Bolivar County FCU Shelby, MS Mischell Reed of Shelby/Bolivar County FCU conducted a community survey project in 1998, spearheaded. Some initial feedback from her initial survey informed her the survey was number-specific and did not give enough opportunity for comments. Once she incorporated the changes, Mischell recruited 3 local volunteers to help her: a youth volunteer, a social worker and long-time community activist, and the director of the Shelby County Human Services Department. Mischell and her team distributed over 700 survey and received 250 completed responses in one month. The team attributes their success to interest among the local community, as well as a thorough strategy. The team conducted surveys at a community health clinic, the local Walmart, the credit union and outside local churches after services. SBCFCU compiled survey results to produce a report for their Board of Directors outlining community members’ self-identified needs (including budgeting) and savings goals (greatest interest was in home purchase). The data collected through these surveys was invaluable in helping credit union staff design an IDA program that will best serves the interests of their community.
2. Focus Groups
Focus groups provide an opportunity for people to discuss their goals and their challenges in greater depth than allowed in a survey. If you find that surveys are not working in your community, try focus groups. They may enable you to obtain more qualitative information in a shorter amount of time. A focus group facilitator should have a list of open-ended questions that will kick off the discussion. Facilitators should be prepared to guide the discussion back to the primary questions you want answered but allow participants to respond to each others remarks. The ideal size for a group is 5-10 participants. These group discussions can be held informally at the credit union or as part of other workshops offered in the community. Food and refreshments should be provided.
Surveys vs. Focus Groups: Genesee Co-op FCU Rochester, NY Rachel Foran of Genessee Coop held IDA orientation sessions which served as mini-focus groups and developed a survey. The sessions were held with a group of members over a period of several weeks to discuss reactions to an IDA program and get input on how to structure it. Rachel also conducted one-on-one surveys with credit union members and to local organizations and businesses. The project originally scheduled for one month, evolved into more than three. The process yielded important information. Home-ownership is the highest priority among community members. People also wanted help building savings. Of those surveyed, 79% had never received assistance with budgeting, 68% would attend classes if offered by the credit union, and 50% wanted individual counseling. In response, the credit union developed a money management course. Staff attended courses in financial counseling and money management enabling them to train member volunteers to act as mentors/counselors. The volunteer aspect of the program has been a key to its success. The credit union has been able to implement a successful financial education counseling system at a relatively low cost. Upon reflecting on her steps in designing an IDA program, Rachel states when it gets down to planning the program, input from the community and potential participants is integral.”
3. Steering Committees
The Central Appalachian Peoples FCU in Berea, KY took a slightly different approach. This credit union involved potential participants in the process of planning and designing the IDA program. They did this by forming a steering committee to consider the steps to designing the program and develop recommendations. Through the steering committee, credit union staff found that participants make a longer-term commitment to the program and feel more invested in its success. The input of participants raised issues the credit union might otherwise have overlooked, such as the need to provide transportation for IDA participants to monthly meetings. It also dispelled incorrect assumptions before IDA policies were set. Marcus Bordelon of CAPFCU explains, the credit union first thought about using the IDA to help people purchase new houses, but those who joined Pathways ended up working to fix their present house.
Creating a Steering Committee: Central Appalachian People’s FCU Berea, KY Central Appalachian Peoples Federal Credit Union (CAPFCU)’s IDA program, Pathways to Prosperity, has more than 30 open accounts for homeownership, small business development, secondary education, home remodeling and repair. What makes Pathways unique is that a steering committee composed program participants designed the program and created policies. Before starting, a community meeting of more than 100 people was. Potential participants were recruited to help design the Pathways project and make recommendations to local legislators. The group also focused becoming self-sufficient. The Pathways group made recommendations which included: Participants’ savings (at least $15.00 per month) will be matched at a rate of 6:1 over a 24-month period. No more than 25% of participants may be at 125% of poverty guidelines. 75% of participants must be at or below 100% of poverty guideline. Childcare and transportation to meetings will be provided to participants. Participants are expected to attend all meetings. Those missing three or more meetings without good reason forfeit membership in the program. Financial literacy classes are held once a month and accommodate work schedules.
V. Identifying Potential Participants
Identifying the potential participants is a crucial first step to implementing the IDA program. A community development credit union may identify its target population based upon either its current membership, the needs of the broader community or both. Eligibility Criteria IDA programs are designed and targeted to low and moderate-income individuals and families. Existing IDA programs in CDCUs generally base eligibility on federal poverty guidelines (150% -200% of the federal poverty level.) Attachment A shows these guidelines based upon family size. The exact parameters set depend on the credit union's vision. These income guidelines may, however, increasingly be pre-established by public and private sector funding sources. The federal Assets for Independence Act establishes matching funds for the savings of IDA participants with incomes 150% or below the federal poverty level. Consider, too, what income guidelines will reach those in greatest need while also allowing for an adequate number of participants. Some credit unions decided to raise their income ceiling from 150% to 200% of the federal poverty level due to lack of applicants in the lower income range. The Board of Directors of your credit union should determine early on how flexible the program will be if faced with similar situation. There may be a dichotomy between targeting those members in greatest need and what is feasible within the credit union's membership. You may want to implement different eligibility criteria for each asset use. For example, many programs have set income guidelines for IDA participants at 150% of the federal poverty level for education or microenterprise IDAs, but because of high housing costs allow incomes up to 200% of the federal poverty level if the individual is saving towards homeownership. Targeting the IDA In addition to general income guidelines, you will want to decide whether your program will give priority to certain groups of applicants. For example, some IDA programs give priority to individuals already participating in self-sufficiency programs, such as welfare-to-work, Head Start and more. Other programs offer educational IDAs to youth who will be the first in their family to attend college, largely irrespective of their family's income (?). Partner organizations may also serve as feeders for participants, depending on how the partnerships are designed. Several credit unions have established mutually beneficial relationships with other community organizations. An example would be partnering with an organization that provides homeownership training; the organization refers clients to credit union to open an IDA, and in turn provides homeownership counseling to all IDA participants. Other important choices include whether the IDA program should target people currently participating in specific programs (such as micro-enterprise training, welfare-to-work programs, youth programs, etc.) or whether it should be available to all in the community who are low-
income.
VI. Establishing Savings Purposes and Account Features
In general, IDAs help people save toward high-return assets that promote community development, such as homeownership, small business creation or expansion, education and/or vocational training. However, depending on your members' needs and your credit union's resources, you may want to allow IDAs for additional purposes, such as retirement. When determining what IDA accounts may be used for, you should consider: members' self-identified needs goals that promise a high-return (in physical or personal assets) the capacity of the credit union and/or partners to support savings toward this goal potential restrictions imposed by funders.
Participants' asset goals may vary regionally. For example, in rural Ohio an IDA program allows IDAs for car purchase. Although cars depreciate in value over time, owning a car is arguably an asset as it may enable an individual to obtain and get to a job. Similarly, in New York City, where the possibility of owning a home is largely precluded by an expensive and predominantly rental housing market, IDAs for homeownership made little sense to one credit union. Instead, this CU identified a desire among its members to save for such uses as purchasing a computer and re-constructive dental surgery in order to prepare to enter the workforce. Depending on the credit union’s staffing, expertise and existing community partnerships, the IDA program may begin on a small scale, offering just one savings purpose. For example, a credit union with a strong relationship with a microenterprise training organization offer IDAs solely for microenterprise initially. Other uses for the IDA may be added as the program proceeds, partners added and the supply of matching funds grows. The Board of Directors should review recommendations and establish priorities and direction for the program. Finally, funding opportunities may restrict permissible uses for the IDA affecting the ability to develop IDAs beyond traditional purposes of homeownership, microenterprise and education. However, new IDA uses may also open up new funding possibilities from local corporations, civic institutions and philanthropists. 1. Identify the average amount required for goals. The amount required to attain goals will differ substantially. Research typical costs for different goals. This information will allow the credit union to develop feasible savings schedules and match rates for each goal, as well as project the number of accounts that can be handled with matching funding over a given period of time. By understanding the local housing market, tuition fees and capital needs for different microenterprises, it will help to offer participants realistic
notions of the time and savings amounts required to reach these goals. To begin this research contact local colleges, vocational centers, homeownership and microenterprise organizations. Through meetings and discussions with these institutions, potential partnerships may also develop.
2. Set realistic monthly savings goals and match ratios. Based upon the survey, focus group or steering committee approach the program should have an idea of how much the typical participant is able or willing to save each month. If a typical down payment on a home is $2000 and your members on average believe they can save $40 per month, they can reach that amount in 2 years with a 1:1 match. Monthly deposit guidelines generally range from $10 to $40 per month. Many IDA programs choose not to set a minimum deposit. Participants may exceed monthly minimums, but generally caps are set regarding the maximum amount matched per participant, per year. Many community development credit unions will match a maximum of $500 per account each year. Working with members at the outset to determine realistic savings goals will help them to understand what it will take to achieve their goals. Understanding the cost of the asset and the capacity to save will also assist the credit union also to determine appropriate match amounts. To date, experience has shown that IDA programs offering match rates of less than 0.5:1 have a difficult time attracting participants. Those that offer rates higher than 4:1 may be limited to operating on a small scale for lack of adequate funding. It is possible to develop different match ratios based on different costs associated with each asset. However, offering different match rates for participants based on their incomes has generally proven to be unpopular with participants and funders.
3. Set savings schedule. The length of time it will take for someone to save for their asset will be determined by how much match the credit union can offer and how much members can save. A monthly deposit of $20 and match ratio of 1:1 will have a longer savings period than higher monthly deposits and match ratio. The program can allow flexibility to participants in the length of time it may take to reach their savings goal, as it may vary according to the savings goal. Someone saving for college tuition may have a different schedule than someone saving for a home. IDA programs are generally designed with some flexibility to allow at least one emergency withdrawal from the IDA. When establishing program parameters, permissible emergency withdrawals should be clearly defined.
VII. Establishing Community Partnerships
Depending on the financial and educational resources of the credit union, it may offer an IDA program solely, in partners with other organization(s) or by offering matching funds to another credit union's IDA program. A table of different credit union IDA program models can be found in Appendix ?. Many credit unions partner with community organizations to provide education to IDA participants. Education includes not only financial literacy and budget counseling, but also homeownership counseling, small business training and technical assistance, and GED classes. In addition to providing education and training, partnerships can be designed to help your credit union raise funds and recruit IDA participants. To identify partners, credit union staff should research organizations and resources in the community. This research can entail formulating a list of potential partners, an assessment of the organizational strengths and capacity, former experience working in partnerships and the interest of the potential partners in IDAs. The type of partnership and the roles and responsibilities should be agreed upon by all partners at the outset, and preferably be in writing.
1. Tips for Establishing Partnerships Decide whether “partnerships” or “subcontracting” work best for the credit union. If the credit union plans to manage and administer the IDA program, it may choose to subcontract with an organization to provide educational services such as budget counseling. This can be arranged through a contractual agreement in which the level of assistance, payment and expected results are clearly detailed. Credit unions working with partners that want to play a greater role in designing and administering the program should decide up-front the responsibilities and staffing levels pledged from each organization. Make sure the IDA concept is consistent with the partner organization's mission. Asking an organization to commit time or resources to a project they know little about, or which is unrelated to their programs and services, will not yield a strong partnership. Credit unions have found greatest success when partnering with agencies which serve low-income clientele, promote self-sufficiency, and offer services that IDA participants could utilize. Some of these are listed in later in this section under ―Where to Find Partners.‖ Knowing the organization’s reputation and areas of expertise. It is important to conduct research on the quality of the partner’s work. When developing a partnership with a microenterprise training organization, interviews with entrepreneurs who have utilized their services is essential. Review the organization’s history, the success rate of clients, reports and other related information. Partnering with an organization that provides poor training
or inadequate assistance is a disservice to the participants as well as the program. Credit unions should expect the same level of scrutiny by potential partners in return. Dealing with partners up-front about the costs. All decisions about raising funds and budgets should be made before the partnership begins. A projected budget should be drawn up that includes the total costs of operating the program. This should include expenses such as staff time (both in administering and raising funds), materials, new equipment or software required, teller time, etc. for each participating organization. Establish parameters of partnerships and sign contracts. Successful partnerships have a detailed plan of each partner’s responsibilities ahead of time including: marketing, fundraising, monitoring accounts and participants. Drafting signed agreements and scheduling periodic reviews of the partnership helps to ensure that all partners are fulfilling their responsibilities. This will also ensure that the organizations’ directors leaders are signed on to the project. This is a commitment between organizations and not just individuals.
2.
Where to Find Partners
Researching the local community to find organizations and resources is the best place to start. City agencies, local churches and/or community foundations may help. National networks of community organizations can also provide information on local affiliates. Here is a partial list of national networks: IDA Network: an interactive network of IDA practitioners established by the Corporation for Enterprise Development. Contact the IDA Network website at www.idanetwork.org. Neighborhood Housing Services (NHS): a national network that provides seminars to first-time homebuyers, targeting low-income communities. Consumer Credit Counseling Services (CCCS): a national network that provides budget counseling, credit repair and more. Cooperative Extension Programs: programs offered through Universities that provide a range of training topics, including money management, purchasing a home and starting a business. Association for Enterprise Opportunity (AEO): This national organization represents more than 300 microenterprise training and development institutions around the country. AEO has developed a national microenterprise directory in conjunction with the Self-Employment Learning Project at the Aspen Institute.
VIII. Policies and Procedures for Managing IDAs and Program
How are participants recruited? What follow up is required? What happens if a participant misses a deposit? Or three or four months deposits in a row? Should the participants complete money management classes before opening an IDA account? These and others questions are answered in the IDA program’s policies and procedures. 1. Policies Policies for the IDA program, like all credit union policies, serve as the concrete guidelines or ―rules‖ of the program. Policies should be kept broad and simple because they are for the benefit of the Board of Directors and examiners and are not easily alterable. Some issues to cover in the Policies Income guidelines for IDA participants: Match rates: Type and manner of training required: Emergency Withdrawals: This determines whether participants will be able to make early withdrawals from their IDA for emergency purposes. IDA programs generally will allow some level of access to the participants own savings but not to the match is only granted at the successful completion of the program. An emergency withdrawal policy should include: whether and how many emergency withdrawals will be permitted before the account is closed permanently; purposes that constitute ―emergencies‖; and whether participants can reenroll in the program if their first account is closed for excessive withdrawals. Leave of Absence: Additionally, you should consider whether your IDA program will allow participants to take an emergency leave of absence from the program. If so, develop appropriate policies and paperwork for this in order to avoid ―losing‖ people in your program.
2. Procedures Written procedures outline the credit union plans to implement policies in day-to-day operations. Whereas policies are general and describe the ―what‖, procedures are specific and describe the ―how‖. These are steps that outline exactly how the program works. Some issues answered by procedures include:
how is income verified: how match is determined, administered, reported and released:
how training is provided: Procedures outline whether participants are required to obtain training from one source or may choose their own course of training. In the former case, the credit union will generally work through a partner organization. In the latter, the credit union may provide a list of training providers. The difficulties with allowing the participant greater freedom to choose their training is in quality control and monitoring. This may result in greater staff time and costs. how emergency withdrawals and leaves of absence are approved - Many credit union managers suggest creating a ―Withdrawal Committee‖ to evaluate requests on a case-by-case basis. Managers also recommend that an emergency withdrawal policy balance the need to be flexible with an interest in making it effective. 3. Drafting Policies and Procedures There are a host of issues to consider when determining policies and procedures. Primarily, the program features should focus upon attracting and retaining participants. It is important to consider the credit union’s capacity, as well as partner organizations, to administer the program and monitor participants. The more complex the policies and procedures, the more administrative duties and expenses the program will likely incur. For example, adopting flexible savings and training requirements enables the credit union to customize the program to fit each participant’s needs. However, the trade-off lies in greater staff time and costs required to monitor many each participant’s accounts separately.
Checklist for Policies and Procedures: Permissible Uses for IDA Savings Schedule for Participant Minimum Monthly Deposits, Maximum Terms Match Rate and Amounts Matched Maximum
Training Requirements Account Structure Staff responsibilities
The core of the policies and procedures will come from following the Seven Steps outlined in Chapter III. In addition, you may refer to sample IDA Policies and Procedures in Appendix (…)
Case Study: Alternatives FCU - Ithaca, NY Contributed by: Edmond Ryan, AmeriCorps*VISTA Member and IDA Coordinator Participants in the Alternatives FCU IDA program first receive a self-evaluation form and an application. The application contains personal and financial information about the applicant. If eligible, participants meet with the IDA Coordinator to verify income and other information, to open an account at the credit union, and most importantly, to explain the program and requirements.
To ensure that the program is communicated effectively, the credit union has a number of forms which are read and signed by participants. The first form is a letter of agreement between the participant and the credit union stating the responsibilities each party has in the IDA Program. This defines the policies and procedures of the program, including what training and savings requirements participants must meet. If the participant agrees to complete a money management program, attend monthly continuing education classes, and make deposits of at least $20 a month for at least one year before accessing matching funds it is stated in the agreement. By reading the agreement aloud, there is the opportunity to ask questions, as well as to ensure that the participant understands their requirements. The other form is a consent form allowing us to collect and use data for the evaluation. Participants are required to attend monthly continuing education sessions to build on the skills learned in the money management course and to work in a peer group on related topics. The level of involvement required in the continuing education sessions is left up to the participants. Participants collectively decide how frequently they must attend, how mandatory the sessions are, and how the sessions will be used. To date, the groups have decided that participants must attend 8 out of 12 monthly sessions, and may not miss more than three sessions in a row. They have decided on a “three strikes, you’re out” rule. The sessions also are a valuable tool for follow up with participants and for hearing participant feedback. One change in the program came directly from participant feedback. Originally, we allowed only one account per family. This was an attempt to reach the widest pool of applicants and to allow for greater diversity. As we tried various recruitment strategies to attract youth participants, we were hearing from the adult participants in the program that one of their children would be perfect for the program, and that could they sign up. After continued recruitment difficulty, and with continued discussion with the participants, we decided to allow one adult and one youth account per family.
IX. Fundraising: Strategies and Sources of Funds
Raising money for both matching funds and to offset administrative costs will be a critical and ongoing part of developing the IDA program. As with all fundraising efforts, raising money for IDAs is a challenging and time-consuming process. Considering that IDAs are still a relatively new concept, it takes some legwork to educate funders. This chapter intends to assist your efforts by outlining some fundraising strategies that have proven successful for credit unions and other IDA practitioners. The ultimate lesson from credit union IDA projects: leave no stone unturned. From bake sales and talent shows at the credit union to grants from national foundations, credit unions have found innovative (and fun) ways to bring in the money.
1. Motivations to Support IDAs When targeting potential supporters of the IDA program, it may be helpful to consider groups that may have special motivations to support such a program. The benefits of contributing to an IDA program extend beyond your credit union and IDA participants to the donors themselves. Some benefits to donors include: Tax deductions. Donations to IDA programs are tax deductible as long as the credit union has a partner 501(c)(3). CRA. Banks are required under the Community Reinvestment Act to meet the financial service needs of their market area. Banks that have made donations to IDA programs, and any contribution to low-income credit unions have qualified for credit under the CRA investment test. Increased economic worth of neighborhood. IDAs help generate new businesses and homeowners in community, which appeals to residents, business and home owners and other stakeholders in the community. Publicity. Donors should be informed that their contributions will be acknowledged in IDA program materials, at credit union events, and more. Supporting someone they know. Credit union members may want to sponsor certain individuals or families among the membership. Individuals may be inclined to support friends, family, fellow church parishioners, employees, clients, etc. rather than a general program.
Supporting a fellow credit union. Larger credit unions, State Credit Union Leagues and Foundation Networks may be supportive of credit union IDA programs, especially at smaller community development credit unions.
2.
Sources and Strategies
Small Contributions Credit unions have financed their IDA projects through small donations ranging from $10 to $5000. One advantage to smaller scale fundraising is that it enables more people to contribute, with fewer restrictions, if any, on how money is used. The majority of current IDA funding sources, including the Federal Assets for Independence Demonstration Program, are earmarked for matching funds. Unrestricted funds become that much more valuable, as they can be used to pay staff, materials and other operational or program evaluation costs. The disadvantage is the need to raise many small donations to add up to a substantial pool of funds. Solicit donations from local banks, local businesses, large credit unions, organizations foundations and individuals that have contributed to the credit union in the past. Raise below-market deposits and dedicate the interest earned to IDA matching accounts. Credit unions can attract member or non-member deposits at a lower interest rate than the normal cost of funds by informing the depositor that the difference will be invested in matching IDAs. Local banks, businesses and organizations may have smaller pockets but they will have a stronger commitment to supporting local development initiatives. Some utility companies have community service departments that support areas such as education, health and human services, and civic and community affairs. Local chain and retail stores like WalMart and Kmart have foundations or a community development department. Locally-owned businesses may offer support as well, or perhaps sponsorship of one or two community members, clients or employees. Contact churches and other religious institutions in your community. Parishioners of local churches may be eligible to join the IDA program. Churches can also make announcements during services or advertise the IDA program in their bulletins. Approach Teachers Unions to request support for IDAs for their members, employees or their children. Hold a fundraising event at the credit union. CDCUs have raised small but important amounts of funding for their IDA programs through talent shows, auctions, raffles, and other special events. These are opportunities to invite funders to show off local fundraising efforts. Seeking press coverage for the event may bring in other funds.
Community foundations have the capacity to support IDA programs in a large or small way. They may also have ties with other donors and giving programs in the community which they can suggest to you.
Larger Contributions Foundations: Foundations that have supported IDAs through large grants include: Ford, Charles Stewart Mott, Kellogg, and Annie E. Casey. They tend to be interested in programs with national scope; however, it may be helpful in your local fundraising efforts to discuss the involvement of these major players. Federal Government: Assets for Independence Act provides Discretionary funding is also available through several federal agencies or departments. Examples: Department of HUD allows discretion in how cities use Community Development Block Grants (CDBG), including for IDAs. Department of Health and Human Services has money through Community Service Block Grants (CSBG) and Job Opportunities for Low-Income People (JOLI).
Where to Conduct Local Research The Foundation Center helps nonprofit organizations identify funding opportunities. They operate a web-site: www. Public libraries may be able to offer funding resources, including magazines and Internet access. Community Foundations may have information on local and national funders interested in asset development Internet web-sites offer an opportunity to get to know the goals and missions of funders Ask existing supporters/funders to host funding breakfasts or other events. Contact local legislators to see if they can point you in the right direction.
State Government: Funds are available for IDAs through state TANF and welfare-to-work funds. States with CDFI programs, include Indiana, Ohio, Iowa, Maine, Pennsylvania, New York, North Carolina and others. Consult the IDA network for current lists of states with IDA programs. Pursuing In-Kind Assistance
Consider ―in-kind‖ contributions as well as direct grants. In-kind contributions could include items such as computers, postage, or room space for an IDA meeting, or services such as printing materials, canvassing community with flyers or providing free training to IDA participants. Other suggestions include: In-kind ―match.‖ Bethex FCU in the South Bronx, NY secured an in-kind match from two local dental schools. The ―match‖ is provided in the form of discounted dental work for participants saving for re-constructive dental surgery. Other opportunities for in-kind matches are through colleges or universities providing special tuition assistance (reduced tuition) for IDA program graduates. VISTA and other volunteer or intern programs are a valuable resource—effectively, full-time personnel—for the IDA program for up to three or four years.
Business Savings and Investment Program (BSIP): Vermont Development CU Burlington, VT Vermont Development CU in Burlington, VT obtained funding support from the Vermont Division of Vocational Rehabilitation, a division of the Vermont Department of Aging and Disabilities. The support is targeted to IDAs that promote self-employment for disabled persons. The project, known as the Business Savings and Investment Program (BSIP), provides a 1:1 match to participants. Twelve accounts have been opened through BSIP for small business development since August, 1998. The credit union hopes the program will be expanded by Voc Rehab into a permanent statewide program in the coming years. This pilot program is unique in that it is targeted exclusively to disabled microentrepreneurs.
Tips to Approaching Funders Call or write letter requesting a meeting between credit union management or board and potential funder. Bring in IDA participants or aspiring participants. Hold a telephone discussion or in-person meeting before drafting a formal proposal, in order to test the idea and identify any of the funder’s concerns which you can then address in the proposal. Know your audience! Research the foundation and its giving programs and craft your proposal to demonstrate how IDAs can help funders meet their goals. Before approaching funders you should have a grasp of: their mission and community, program areas they are most interested in, and which organizations and programs they have supported in the past. Also, find out how much grants have been in order to gauge what an appropriate asking amount would be. Ask for feedback from funders. If your proposal is denied, use the opportunity to ask funders what the application’s weaknesses were, what recommendations they would make to strengthen it for your next potential donor. Recognize the variety of areas IDAs supports in addition to asset development and present the concept to individual funders accordingly. If your program will serve youth, Latinos, Native American, disabled or other populations, approach organizations with an interest in serving these communities. For example, high school administrations, Parent-Teacher Associations and other groups may support IDAs for their students. Similarly, local colleges and Universities may support education IDAs for local youth, especially if presented in terms of supporting future students.
Tips from successful fundraisers on drafting a winning proposal Define IDAs—they are still a new concept that funders may not be aware of—and describe the needs your IDA program will seek to fill. Among the numerous benefits of an IDA program are: increased levels of homeownership, creation of small and home-based businesses, higher rate of education, job training, promoting financial literacy, increased savings, bringing low-income people into the financial mainstream, introducing low-income people to financial institutions rather than check cashing stores, pawn shops, loan sharks and others. Depending on the funder’s interest you may want to tailor your presentation or offer them the option of supporting IDAs for their particular area of interest. Describe your organization and mission, and how the IDA program will complement this mission. Describe the mechanisms already in place to help make this a successful program—budget counseling, club accounts, share draft accounts and other services that CDCUs have provided low income individuals for decades. Identify who the IDA program will serve. Will program target exclusively credit union members or will this be a community-wide development project? Coalition-building may prove helpful to fundraising both because the concept is appealing and because funders may have ties to other organizations. Describe the goals of the IDA program, and the impact it will have on the community. Include a budget for the IDA program—staff time, matching funds, materials…. And specify what area their money will support. (see sample budget in Appendix X) Include stories and anecdotes about IDA participants if you have already opened accounts; otherwise stories from other IDA programs or credit union members who have saved through club accounts, financial counseling or other.
X. Marketing and Outreach: Selling the IDA
Matched savings plus financial planning assistance and support services—it sounds like you will have a flood of applicants to your IDA program to choose from, right? Unfortunately, this has not been the experience of most IDA programs around the country. In fact, recruiting is often the most difficult step to developing an IDA program, for a number of reasons. IDAs are still unknown and most community residents will never have heard of them before. Some IDA programs report skeptical responses from residents to whom such a program sounds too good to be true. Also, saving for very low-income people is often difficult and a structured savings program may seem overwhelming to some, even with the incentive of matching funds. Last, while the restricted nature of IDAs is appealing to many low-income people, it may turn off others who have other savings goals not eligible for IDAs. An effective marketing plan to attract the attention of members and other potential participants is one of the most important components of any successful IDA program. CDCUs have found that the most effective method for promoting IDAs is through community development networks. The credit union should not be the only voice spreading the word to potential applicants. The vision should be for all organizations and agencies working with low-income people, including housing, social service, health care, child care, educational, job-training and other organizations, to understand the basic concepts about IDAs and where to refer their clients. CDCUs have successfully used this networking approach as opposed to blanket mailings to community members. 1. Targeting a Population For a CDCU, it is essential to consider the target population before discussing methods for recruitment. The worst case scenario would be to get people excited about the program that ultimately would not be able to participate due to field of membership limitations or income guidelines. As noted earlier in ―Identifying Potential Participants,‖ focus efforts on those who can benefit most from the IDA program. Outreach will be much more successful if the program staff works with members and partner organizations who have the greatest need and who match with the specialties of the program (e.g. youth, homeownership, etc.). This approach will allow IDA presentations to have direct relevance to potential participants and attract interest immediately.
2. Marketing IDAs to Current Membership Outreach to members of the credit union removes the burden of establishing trust in the institution with the potential participant. CDCU staff should also have a better idea of who to target for the IDA program based on their knowledge of the individual’s needs and future goals. To accomplish this, CDCU IDA programs have used several methods to introduce IDAs to their members.
Some have chosen the one-on-one approach to inform members by calling them at home or speaking with them when they come to the credit union on personal business. This builds on trust already established with the membership. In discussing the IDA program, CDCU staff can emphasize how the IDA account will fit in with other CDCU resources such as financial counseling, lending and existing savings products. For broader discussion of the program, the IDA program can be described in newsletters, at annual meetings, in announcements and fliers in the credit union or through personal contact with staff members. In an organization such as a CDCU, that is ―member-owned‖, it is important to do broad marketing so that no member is left out of the process.
3. Community Network Outreach Model Many CDCUs have promoted IDAs through community development networks of partner organizations. An ideal network consists of several organizations and agencies within the field of membership that work with low-income people, including housing, social service, health care, child care, educational, job-training, and other social needs. These organizations can be a good source of information and referrals to the IDA program. Such an approach has proven to be the most successful means of identifying potential applicants and spreading other CDCU services throughout the community. Other methods, such as blanket mailings and advertising, have proven less effective because they do not identify specific groups that would benefit the most from an IDA nor do they spawn trust in the CDCU that they get when it comes through an organization with which they are already affiliated. Contact Local Community Organizations Promoting the IDA in conjunction with community-based organizations helps to legitimize the program in the eyes of potential members. CDCUs often have relationships with a range of community-based organizations. The IDA program also allow the CDCU to build new relationships by encouraging their clients to take part in the program. In either case, the initial step should be to contact the director and administrators of the non-profit and inform them of the new service and offer to give a presentation. These presentations stress the importance of assetbuilding for developing self-sufficiency and to increase the overall wealth in the community.
Maintain an Active Exchange Between the CDCU and the Network Organizations In order for the feeling of trust and collaboration to persist after the initial contact, encourage the organizations to continue referring their clients and offer to send CDCU members who might benefit from their services. Hold meetings with all the organizations the CDCU is working with on the IDA program to allow them to interact and further extend the network. Bethex Federal Credit Union: Bronx, New York Contributed by Sarah Starbuck, AmeriCorps*VISTA
Since opening its first account in the Summer on 1998, Bethex FCU’s IDA program has become a popular and fast growing program in the South Bronx of New York City. Establishing the program within the community, however, has been a struggle for program staff. Following the community network outreach mode), we made efforts to establish partnerships with local community development organizations. These efforts have had varying degrees of success. One of our most successful partnerships has been with New Settlement Apartments, a housing development which provides low cost housing as well as all kinds of other resources for its tenants. After making a detailed presentation to the director and two other community development staff people, they were convinced that IDAs would be perfect for their clients. At the first meeting we mapped out a plan to target the greatest number of both tenants and staff. We developed a flyer together which was distributed to all of the residents with their rent bills. They advertised the IDA program, and encouraged people to attend one of the three informational sessions. These flyers were posted again the week of the presentations. The presentations were held in a comfortable room with refreshments and they were held at three different times to target the most people. After these presentations, NSA schedules three days for us to set up a table to sign up members and take deposits. This campaign resulted in 15 new members and participants in the IDA program. NSA followed up by scheduling several presentations for staff members. We have plans to set up another round of presentations as well in order to target specific community groups that function at NSA. I attribute the successful partnering between Bethex and NSA to the dedicated staff people who knew their organization’s population and their needs. If Bethex had not first gained their support, we would never have had the success that we did. The importance of having administrative support is well illustrated by a less successful partnership effort between Bethex and Saint Benedict the Moore, a transitional housing center for recovering alcohol and drug abuse patients. Bethex was anxious to target the residents of Saint Benedict’s, an unserved population that could greatly benefit from IDAs. We met with the administration who agreed to set up times for Bethex to give presentations to their clients. The clients were very excited about the credit union and especially about the IDA program and nearly all filled out IDA applications. However, when Bethex tried to set up a follow-up meeting to start the accounts for the clients, the administration became uncooperative. They did not return phone calls, and canceled scheduled appointments. Most importantly, the staff did not act as advocates by referring people to the IDA program. After several failed attempts, Bethex finally gave up. Despite real interest on the part of the clients of Saint Benedict the Moore, Bethex did not have the committed support of the administration and therefore wasted hours of valuable staff time to pursue a population that was unreachable without the help of the program providers. Unfortunately, it is much more difficult to reach the people that most need the IDA program. Central Appalachian People’s Federal Credit Union: Berea, Kentucky Contributed by Daisy Faye Gray, AmeriCorps*VISTA
The Central Appalachian People’s Federal Credit Union began its IDA program through a collaboration with Mountain Association Community Development (MACED), a non-profit sponsor. CAPFCU’s program is unique in that it has a steering committee called Pathways to Prosperity that is comprised of clients and administrators from partner organizations. It is designed to coordinate the program. The other partners in Pathways along with MACED are the Owsley County Action Team, Workers of Rural Kentucky (WORK), and the Corporation for Enterprise Development (CFED). MACED serves as the lead agency in this project, with the Action Team being the local point of contact for Pathways. WORK provides consultation and a strong link to the low-income community. CFED has funded MACED and the Action Team as part of its national American Dream Demonstration. CAPFCU has established a satellite office in Owsley County and is managing the Individual Development Accounts. These organizations have traditionally had a mutual recruiting relationship as every member of the CDCU must also belong to at least one of the local partner organizations (WORK or MACED). In return, these organizations have referred their clients to CAPFCU for its financial services. As the IDA staff planned their marketing strategies, they took into account the social characteristics of their rural environment. The population of Owsley County is small and closeknit. People know one another and word of new programs and opportunities spreads quickly. As a result, when the presentation was made at the Owsley County Action Team meeting to local organizational management, special attention was paid to offering the program to those who would most benefit from the program and who the services were appropriate for. Interest in the program was immediate, but the interaction with the other organizations was necessary to identify those most in need of an IDA account. Many of the IDA participants were already members of the credit union and were selected by the task force comprised of members from all of the partner organizations. Other participants were attracted through the presentations as well as marketing materials at the CDCU and other local agency offices. In a small community such as the one in which CAPFCU works, relationships with partner organizations are inevitable. The collaboration that has come with the IDA program has been successful because each organization was used to identify potential participants and the most appropriate for the program were recruited. Marketing Tips Recognize your target population and tailor marketing efforts to single them out Be honest about policy guidelines and restrictions when presenting the IDA program so people are clear on their eligibility and opportunity for participation Compile a list of local organizations within your field of membership and identify those which best complement your program goals Focus on organizations that seem the most interested and capable of working effectively with the CDCU Develop a separate marketing strategy for current members of the credit union
Micro vs. Macro Marketing Strategies: New Community FCU - Newark, NJ
New Community Corporation (NCC) is a community development corporation in Newark, NJ with an extensive network of services for low-income people, including job training, child care, affordable housing and a credit union. The IDA administrator’s first approach to marketing the newly formed IDA program was mass mailings to residents in the area. She mailed IDA brochures and announcement about upcoming information sessions to thousands of people. Only ten people attended the first meeting, which spurred the IDA administrator to find alternative marketing approaches. The newness of IDAs and complexity of the program, she decided, makes communicating solely through mailing difficult. She needed to reach people through existing networks. The NCC network is vast, and the IDA administrator realized that staff have their own priorities and responsibilities. Sending them mailings was similarly ineffective in generating substantial interest, so she set up meetings with administrators in the many different departments. Staff became excited about IDA, and realized their potential, particularly because the multi-faceted nature of IDAs ties them into the many services NCC provides. Eventually NCC staff were placing IDA notices on their office bulletin boards, spreading the IDA concept by work of mouth, and keeping the IDA administrator informed of meetings that would be particularly well-suited for IDA promotion. The result has been much better attendance at information sessions and a generally more knowledgeable base from which to recruit participants.