SaveTogether

Sorry for my extended absence, but I have exciting news. When I first started blogging here, I was beginning to navigate my way through the world of asset-building, inclusive financial services and microfinance. I ended up in Ghana working for Kiva. By the time I returned, I realized I needed to make financial services more inclusive here at home. As I continued to blog here and explore the idea, I became more and more fascinated by the concept of creating an internet platform where individual donors could match the savings deposits of working families. To me, it was a natural extension of the Kiva model. Kiva is focused on enabling microloans. Someone need to use a similar model to encourage microsavings as well. Out of this idea, SaveTogether was born. Please check out SaveTogether and the SaveTogether blog. In the meantime, I will be blogging from SaveTogether as I decide how to divide my blogging duties.

Bank on Seattle-King County

If you build it, they will come. That really should be one of the mantras that get all of us motivated in this space. Here in Seattle, we have approximately 52,000 households that are unbanked. And while I don't believe we will necessarily get all of these households into formal financial services, it would be nice to get most of them involved.

Thanks to the hard work of many in the region, an initiative called Bank on Seattle-King County, in cooperation with the Seattle-King County Asset-Based Collaborative, has developed a two year goal to get 10,000 of these households into formal financial services. And to do so, they have already signed up 20 banks and credit unions in the last six months. Each has committed to making real efforts to get households involved by reaching out to new customers, educating these customers and making their products affordable and attractive.

It is through efforts such as Bank on Seattle-King County where forward-thinking groups reach out to financial institutions and introduce them to a new market that we can start to build the products and tools for the unbanked. I'll be looking forward to how many of the unbanked come to the house that the Bank on Seattle-King County has built.

The Interplay between Asset-Building and MicroSavings

During my recent Kiva Fellowship in Ghana, I recognized that their was a natural synergy between two growing concepts in the poverty alleviation world - microsavings and asset-building. For some time, microcredit has received wide acclaims in the development world at the expense of microsavings. Similarly, in the US, income-based poverty alleviation policies (i.e. welfare payments) have been the focus of policymakers at the expense of innovative asset-based programs.

Yet, the tide is shifting. In both the international development and U.S. poverty alleviation circles, microsavings and asset-building programs are reaching a new consensus. Here in the U.S, we've had several commentators and even ex-Presidents talking about the power of asset-building. Similarly, there is a growing sense that microsavings needs to be explored further (see the recent USAID teleconference - Savings - The Forgotten Half of Financial Interventions). Now, according to the Wall Street Journal, a major paradigm-shifting player, the Gates Foundation is making a similar bet on microsavings.

In the months ahead, I think these two communities need to start talking to each other. I hope to facilitate this discussion here and elsewhere - stay tuned.

Minimum Income Standards

The undercover economist at Slate recently wrote about a pioneering effort by the UK's Joseph Rowntree Foundation in the UK to devise a new poverty standard. Unlike America's basket of goods standard and Europe's 60% of median income standard, this foundation posed a different question - What level of income is needed to allow a minimum acceptable standard of living? But, unlike the standards used today, the foundation asked a pool of participants what they "needed" to have a minimum standard of living. After this list of needs was devised, the foundation priced the needs to identify an income standard.

As to be expected, the results indicate that people need more than just food, warmth and shelter. They also need access to prescription drugs, child care, and transportation. And, in not unexpected fashion, a British person needs an occassional beer and a cellphone. While there is plenty of room for joking, I think this standard needs to be taken seriously. It indicates that poverty is more than just food or a percentage of income. It is about how an individual can participate in their society. It is not a perfect standard but it is much more mature than some of the standards being used today.

On a sidenote, I believe the foundation made one error that is all too common for those of us interested in broadening the perspective of poverty policy. The foundation was focused on "income" policies, but failed to consider how the participant's answers could be used to inform policy-makers about asset-building policies.

Interestingly, the report quotes several participants who make comments about viewing poverty as a long-term process rather than a short-term one. The participants talk about how an acceptable minimum standard should be able to support acceptable standards of living over time. This is a prize quote here, " Isn’t it a case that all those extra bits are for the well-being of the individual? Rather than being – keeping them alive – it is that degree of comfort that they can function and continue to function and effectively grow and mature. Health, education, that is all part of going on. The ability to move is also going on. Because life itself is a journey, so therefore there has got to be a sense of progression within it and, if you have only the absolute minimum living standards, you don’t progress, you survive."

Sadly, this report could have introduced the concept of assets, not income as being an essential tool for sustainable standards of living. It is the long-term quality of assets, after all, that could provide the progression so many need.

Brooks on Hammers and Nails

Coming in the wake of yesterday's post, David Brooks, who is increasingly writing on our debt culture, has followed up on the Times' piece on the debt trap. Brooks slices through the social structure vs. individual behavior argument that fuels the debt trap and presents a third option about individuals subconciously mimicing societal behaviors. A nice middle ground and one that would probably feel at home with the authors of Nudge.

To Brooks credit, he writes with an optimism that I welcome. It is time for us to begin creating communities that allow individuals to mimic (and yes ultimately choose) healthy financial behaviors. If we can dig holes, we can build mounds too.

Given a Hammer and Nails, Americans Will Build Their Future

That's the New York Times headline I imagined. The headline I read, however, was "Given a Shovel, Americans Dig Deeper Into Debt." In a interactive feature entitled the Debt Trap, the Times walks readers through an analysis of how we have found ourselves in this worsening credit situation.

While the sobering statistics about rising credit card debt and mounting mortgage losses are not shocking, I found the story a bit under-analyzed. Where is the analysis of the shovel? There is some reporting on how credit card companies have lobbied for more stringent bankrupty laws and securitized and pawned off mortgages to investors, but I would have preferred more insights into the institutions and incentives that have been established to encourage people to take out more debt.

After all, if credit card companies and mortgage companies can create shovels, can't financial institutions and community organizations create hammer and nails using the same marketing tools.

Microfinance in China

Since I've returned from Ghana, I have been networking in the microfinance and asset-building community here in Seattle. One organization that has popped up on the radar and I'm now volunteering for is Wokai. Wokai is an organization much like Kiva that is creating an internet, peer-to-peer microfinance model. The catch. They have made the strategic decision to focus on one country and do it well. Their target - China.

I believe the Chinese market is an appropriate place for this focused approach. First, it is obviously a large country with a massive low-income population. Second, this low-income population has been swept under the rug and needs a voice. And, finally, the Chinese market presents a series of unique intricacies that require an organization with a special dedication.

Wokai is set to launch this fall and it will be interesting to watch the market respond. There's been so much talk about the newfound riches in China that I'm hoping Wokai will be a powerful tool that not only finances entrepreneurs but also educates the world about the hushed voices of China's silent, but struggling poor.