Financial Inclusion

Peter Edelman, professor of law at Georgetown University and author of the new book So Rich, So Poor, has an opinion piece in Sunday's New York Times looking at the persistence of poverty in the U.S. Edelman does what so many have failed to do, which is to outline the notable success of government action, saying,

"[W]e have done a lot that works. From Social Security to food stamps to the earned-income tax credit and on and on, we have enacted programs that now keep 40 million people out of poverty. Poverty would be nearly double what it is now without these measures..."

And yet, poverty remains widespread. Edelman identifies four key reasons why:

The television show “MythBusters” is a television show where two stunt and special effects experts (note to kids: science is awesome) determine if long-standing claims are fact or indeed a “myth.” Last week the Pew Charitable Trusts did their own mythbusting! They released a well-designed study that surveyed thousands of payday loan borrowers.

Originally posted on nextbillion.net

With a third of the global population today under the age of 19 and 90 percent of these young people living in developing countries – 45 percent living on less than $2 a day—there is an urgent need to create easy and efficient savings mechanisms for the young.

Crossposted from CGAP

In a recent New York Times article, Nick Kristof told the story of Alfred Nasoni, a farmer who pulled his eldest son out of school and cultivated only part of his plot due to financial constraints. Yet, Alfred also happened to spend a considerable amount of the family’s budget on alcohol, cigarettes, and women.

Americans need to build up their savings, but what can be done to make that task easier? Reid Cramer laid out a number of policy ideas in his piece, "The Assets Agenda," in the current, special issue of The Washington Monthly.

The Asset Building Program is looking forward to convening a panel of experts this coming Tuesday to look at savings product innovation geared toward low-income U.S. consumers. RSVP to attend in person or watch live starting at 12:15 Eastern time on Tuesday July 31.

Saving for a rainy day is an increasingly important priority for Americans of all income levels, but with limited resources to set aside, saving is a daunting task particularly for lower-income people. Unfortunately, the prevailing features for many basic savings accounts, such as minimum balance requirements and limited distribution, may not support the savings goals or meet the needs of many lower-income people.

The field of economic development has gradually come to the realization that poor people save in different ways, leading to a proliferation of research on the financial lives of the poor. This research has dispelled some of the most common assumptions about the poor, and has allowed the development of financial products targeted at poor individuals. Unfortunately, a dearth of research in the field of youth development and financial inclusion has led many to make similar assumptions about the lives of low-income youth.

Youth savings accounts are emerging as a potential poverty reduction and youth development tool, with initial evidence indicating that children and youth who save in accounts earlier in life begin to think positively about their futures. Researchers have observed asset effects, or as the YouthSave Consortium defined the term in a 2010 publication, the “economic, social, behavioral, and psychological impacts of asset ownership,” in a number of studies. For example, qualitative findings from the SEED (Saving for Education, Entrepreneurship, and Downpayment) Initiative, a national demonstration of 1,171 child development accounts in the United States, showed that, in addition to gaining financial savings, participants had higher self-esteem, hopes for the future, financial knowledge, and security.

On July 23, 2012, the New America Foundation submitted a comment to the Consumer Financial Protection Bureau (CFPB) in response to a request for feedback on General Purpose Reloadable (GPR) cards.

Giving cash to low-income households is a great first step to help them toward self-sufficiency and improved life outcomes. However, for some time it has been clear that those in extreme poverty need more. For these families, as stated in a recent report by BRAC Development Institute and the Mastercard Foundation, government support “only succeeds in keeping [households] afloat – managing to avoid starvation or even death.” However, “in the absence of exit strategies, such as wealthy, influential families to draw productive resources from [or] adequate economic opportunities…these extremely poor households have been unable to ascend out of their poverty.”