{"id":31741,"date":"2018-07-26T11:58:42","date_gmt":"2018-07-26T15:58:42","guid":{"rendered":"http:\/\/cfi-blog.org\/?p=25751"},"modified":"2018-09-17T03:48:33","modified_gmt":"2018-09-17T03:48:33","slug":"beyond-inclusion-how-mission-based-small-business-lenders-in-the-u-s-are-evolving-their-definition-of-impact","status":"publish","type":"post","link":"https:\/\/cfi.accion-staging.flywheelsites.com\/beyond-inclusion-how-mission-based-small-business-lenders-in-the-u-s-are-evolving-their-definition-of-impact\/","title":{"rendered":"Beyond Inclusion: How Mission-Based Small Business Lenders in the U.S. Are Evolving Their Definition of Impact"},"content":{"rendered":"
This blog from Accion in the U.S.<\/a> was originally posted on NextBillion<\/a> and is re-published here with permission.<\/p>\n By Gina Harman, CEO, Accion in the U.S., and Liz Urrutia, CEO, Opportunity International<\/em><\/p>\n The field of microfinance arose to address a pressing problem in emerging markets: Billions of people around the globe were shut out of, or poorly served by, the financial sector. But while microfinance institutions grew rapidly around the globe, so too did economic inequality in developed countries. It was within this context that organizations like Accion in the U.S.<\/a> and Opportunity Fund<\/a> adapted the microlending model to the United States more than two decades ago, expanding access to economic opportunity for entrepreneurs who lacked the financing and resources they needed to start or grow their businesses. In the ensuing years, the mission-based lending industry has continued to expand its services across the country \u2013 even in times of economic recession<\/a>.<\/p>\n In the early days, progress toward our mission could be measured by portfolio numbers, such as number of loans disbursed and amount of capital deployed, as well as by evaluating how many of our clients were from traditionally underserved populations, such as people of color, women and low- to moderate-income individuals. However, we also understood that gaining access to financial services is only meaningful if that access places an individual on a path to greater financial stability and improved quality of life. In short, financial inclusion does not necessarily enable financial health.<\/p>\n Over time, with support from the Aspen Institute\u2019s EntrepreneurTracker<\/a> initiative, our organizations have been able to evaluate borrower outcomes such as business survival, revenue growth and job creation in the years following loan disbursement. Still, we knew that these numbers alone didn\u2019t tell the full story. That\u2019s why we kicked off a multi-year, mixed methods study<\/a> in 2015 to more fully understand the impact of our lending and advising services over a longer time horizon. This research, conducted by Harder+Company Community Research, was made possible through lead funding from the W.K. Kellogg Foundation and JPMorgan Chase & Co., with additional support from S&P Global.<\/p>\n The results of this research revealed that, by and large, the entrepreneurs we serve are thriving, even two to three years after receiving their loan. Most businesses in the study increased sales\u00a0(60 percent) and profit (57 percent). Forty percent of borrowers added employees during the study period, and entrepreneurs with employees significantly increased benefits provided to those employees. What\u2019s more, the majority of study participants specifically attributed progress toward their business and personal goals to the services they received from Accion or Opportunity Fund.<\/p>\n This study also provided unprecedented insight into the emotional benefits of mission-based small business lending. At the end of the study, 63 percent of participants expressed that support from their lender had \u201ca lot\u201d of positive impact on their confidence. In follow-up interviews, entrepreneurs discussed the demoralizing effect of previous loan rejections, sharing that the approval from Accion or Opportunity Fund was a sign that someone believed in them. As one participant put it: \u201cThe biggest thing has been the confidence that I\u2019ve gained in myself. I\u2019m really proud of it.\u201d<\/p>\n But the report also highlighted some ongoing challenges \u2013 among them, the fact that financial health remains a key need among the business owners we serve. For example, the majority of clients surveyed at the end of the study had not taken steps to prepare for a financial emergency (55 percent) and found finances to be a significant source of stress (58 percent). This was a statistically significant improvement from the beginning of the study, when only 36 percent of participants had prepared for a financial emergency and 71 percent reported significant anxiety about finances. Nevertheless, though these findings indicate that our clients are on the path to greater financial stability, they remain vulnerable to financial shocks.<\/p>\n The multifaceted nature of the study findings illuminates the limitations of a \u201cone-size-fits-all\u201d definition of impact. For instance, as the mission-based lending field moves beyond measures of inclusion to focus on borrower outcomes, traditional metrics like revenue growth and job creation don\u2019t necessarily align with entrepreneurs\u2019 own definitions of success. That\u2019s why the research employed a technique called cluster analysis, which revealed five distinct typologies of entrepreneurs, each with unique goals, challenges and successes.<\/p>\n For example, the Focused and Growing<\/i> group (44 percent of the sample) sought to grow, and succeeded. By the end of the study, they had all moved into their businesses full-time, had successfully used their loans to expand their businesses, and were experiencing increased sales and profits.<\/p>\n In comparison, the Stable and Strategic <\/i>group (12 percent of the sample) juggled multiple sources of income while carefully planning for long-term, safe business growth. They increased their financial stability over the study period, and they also reported increased quality of life.<\/p>\n For the Off Balance and Seasonal<\/i> group (9 percent of the sample), unexpected hardships and seasonal cash flow meant that their main priority was keeping their business afloat. In follow-up interviews they expressed an appreciation for the tailored support and guidance they received from their lender to help them weather financial challenges.<\/p>\n Borrowers in the Retrenching<\/em> group (19 percent of the sample), were most likely to have used their loan to start a new business. While most experienced business growth over the study period, very few reported taking a salary from the business. Nevertheless, they remained confident about their financial future at the end of the study and reported a significant decrease in financial stress.<\/p>\n For those in the Slowly Growing and Optimistic group (17 percent of the sample), key goals for business ownership included fulfilling a specific dream or becoming their own boss. Although the majority experienced increases in sales, most were not able to increase savings, and some had even drained their savings over the study period. Many of these entrepreneurs operated highly specialized businesses with unpredictable cash flows, and were looking for opportunities to diversify their offerings.<\/p>\n With the completion of this research, we have gained invaluable insights into the impact of our services \u2013 as defined by our clients. As our organizations look to expand access to high quality, transparent and affordable financial services, it will be crucial to continue to refine our definitions of success, and to iterate and design new products and services to best align with their needs.<\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" This blog from Accion in the U.S. was originally posted on NextBillion and is re-published here with permission. By Gina Harman, CEO, Accion in the U.S., and Liz Urrutia, CEO, Opportunity International The field of microfinance arose to address a pressing problem in emerging markets: Billions of people around the globe were shut out of, […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"regions":[3167],"series":[],"types":[3123],"client":[],"topics":[3181,3259,53,3327],"personas":[],"institutional_partnerships":[],"clients":[],"program_teams":[],"acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_default","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"authors":[{"ID":26571,"post_author":"1","post_date":"2018-08-20 15:28:25","post_date_gmt":"2018-08-20 15:28:25","post_content":"","post_title":"Gina Harman","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"gina-harman","to_ping":"","pinged":"","post_modified":"2018-09-06 17:30:33","post_modified_gmt":"2018-09-06 17:30:33","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/gina-harman\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":false,"acf":{"title":"CEO, Accion U.S. Network","position":"staff","social_media_links":{"email":"","linkedin":"","twitter":""},"body":" Gina Harman is the CEO of Accion\u2019s U.S. Network, the only nationwide nonprofit microfinance and small-business lending network in the United States.<\/p>\n","header":{"header_type":"people_aligned","people_aligned":{"description":""}},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""},"is_author":true},"url":"gina-harman"}],"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""},"related_content":{"cards":[{"ID":41205,"post_author":"75","post_date":"2021-01-20 13:31:12","post_date_gmt":"2021-01-20 17:31:12","post_content":"Jennifer Tescher, CEO of the Financial Health Network<\/a> and CFI advisory council<\/a> member, is used to drawing the attention of regulators, policymakers, bankers, and financiers to financial health inequities in the U.S. With the pandemic raging, these inequities have only become more evident \u2013 and the need to draw attention to them even more urgent.\r\n\r\nTescher\u2019s passion for financial health research and consumer advocacy has been at the forefront of her work since founding the Financial Health Network (formerly the Center for Financial Services Innovation) in 2004. Recently, Tescher has been hosting leaders on her EMERGE Everywhere podcast<\/a>, writing articles<\/a>, and speaking<\/a> about building financial health ecosystems so everyone can benefit.\r\n Tescher and her team often say that \u201cwhat gets measured gets managed<\/a>.\u201d A critical piece of Financial Health Network\u2019s theory of change is that there should be an easy way for companies to measure the financial health of their customers and employees; otherwise, it won\u2019t be prioritized.<\/p>\n To make financial health a priority for the private sector, the Financial Health Network spent the last eight years developing a financial health framework and measurement methodology building on learnings from the FinHealth Score<\/a>, Financial Health Pulse and eight indicators<\/a> the Financial Health Network developed. They worked with dozens of firms to test their measurement framework and help them gain a deeper understanding of their customers and employees.<\/p>\n Turning all of that experience into an end-to-end system, Financial Health Network launched the FinHealthCheck platform in 2020 to make financial health management standard practice. FinHealthCheck will help organizations improve the financial health of their customers and employees, whether through a new strategy, a new product, or a revised policy or process. The platform allows partners to survey, aggregate data, and benchmark their outcomes. Tescher and her team are looking for visionary organizations that share their mission to join a growing roster of early customers.<\/p>\n With the incoming administration in the U.S., Tescher and the Financial Health Network believe there are significant opportunities for the public sector to address the systemic issues underpinning poor financial health. Part of their 2021 plan is to develop a financial health policy agenda<\/a>, which includes how the public sector can leverage Financial Health Network\u2019s data and expertise to support financial health-oriented policies.<\/p>\n One characteristic that remains constant in Techer\u2019s writing, talks, and podcasts is that she is optimistic for the future. In Tescher\u2019s last podcast episode of 2020<\/a>, after acknowledging the tragedies we\u2019ve all witnessed this year, she shares her three \u201cpandemic silver linings\u201d\u2014 the growing energy around stakeholder capitalism, racial equity, and empathy. The challenge, according to Tescher, is to ask ourselves \u201cwhat silo-busting will we accomplish in the new year?\u201d<\/p>\n"}],"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"breaking-silos-and-challenging-inequities-in-america-an-interview-with-jennifer-tescher"},{"ID":41111,"post_author":"75","post_date":"2021-01-11 17:30:20","post_date_gmt":"2021-01-11 21:30:20","post_content":"Following nearly a year of limited direct access to the lives of the vulnerable people who are the subject of his research, Prof. Jonathan Morduch<\/a> -- economist, co-founder of the Financial Access Initiative<\/a> (FAI), scholar of the lives of the poor and CFI Advisory Council<\/a> member \u2013 has been working beside a white-hot forge of projects, continuing to help shape the global body of knowledge about the lives that inclusive finance seeks to improve.\r\n\r\n\u201cIt\u2019s been a very busy time, even though we haven\u2019t been able to do what we really want to do, which is being in the field: doing surveys, doing research, getting to know people and better understand problems.\u201d\r\n\r\nFor Prof. Morduch and his team<\/a>, co-led by Timothy Ogden, that\u2019s meant building partnerships and assembling teams for four different projects focusing on people from a range of backgrounds: from ultra-poor workers migrating to Dhaka from northwest Bangladesh, to families in Compton, California, struggling in a pandemic-scarred economy.\r\nFrom Financial Inclusion to Financial Health<\/h2>\n
How Are Our Clients Faring?<\/h2>\n
Defining Success on Entrepreneurs’ Terms<\/h2>\n
COVID-19\u2019s Impact on Racial and Financial Inequities<\/h2>\r\nAs Tescher sees it, the typical data used to gauge the overall health of the economy bears little resemblance to the financial lives of most Americans. Compare the stock market\u2019s recent rally to the rising unemployment claims<\/a> and the disconnect becomes clear. Adding in COVID-19\u2019s disproportionate impact on people of color, the ramifications of the current economic crisis -- including the loss of wealth and unemployment -- also become clear.\r\n\r\n\"What's different this time around is that we're having a conversation about systemic racism and the numerous structural challenges Americans face,\u201d Tescher said in a recent interview with CFI.\r\n
Over two-thirds of Americans are still not considered financially healthy.<\/blockquote>\r\nWhile the Financial Health Network\u2019s U.S. Financial Health Pulse: 2020 Trends Report<\/a> indicates that financial health has actually improved, Tescher highlights that over two-thirds of Americans are still not considered financially healthy, and much of the improvement can be attributed to the decade-long financial recovery finally trickling down to middle and lower-income Americans \u2013 a recovery that is now over. The report further highlights that financial health disparities have widened when considering race and income. \u201cTaking into account COVID-19, Black Americans, people with low incomes, and women are bearing the brunt of the economic burden,\u201d the report states.\r\n
\u201cBreaking Silos\u201d with the EMERGE Podcast and Platform<\/h2>\r\nHighlighting COVID-19\u2019s impact on racial and economic inequity is just one way Tescher champions the need for meaningful action to address financial health. Another way has been hosting the EMERGE: Financial Health Forum<\/a>. Given the restrictions of COVID-19, EMERGE was reimagined this year. The Financial Health Network team created a new platform for the forum and has since leveraged that platform for a range of content such as blog posts, virtual events, and the podcast.\r\n\r\nThe idea behind the podcast, as listeners quickly learn, is the need to \u201cbreak silos\u201d to further financial health. And the diversity of professionals Tescher has on the show indicates that she means it: Dan Schulman of PayPal, Mayor Melvin Carter III, Jelena McWilliams of the FDIC, and Bill Bynum of HOPE are a few of her recent guests.\r\n\r\n\u201cThe leaders that I\u2019ve been privileged to interview during the first few months of Emerge Everywhere are flourishing during these challenging times precisely because of their ability to embrace complexity, demonstrate empathy, and act boldly. They see in 3-D,\u201d Tescher points out.\r\n\r\nAlthough the topics Tescher addresses in her podcast are focused on financial inclusion, she makes it a point to discuss topics relevant to leadership, industry partnerships, gender, and community engagement. For example, in the episode \u201cBanking with Empathy<\/a>\u201d with McWilliams, the pair discuss disenfranchisement and inclusion in financial services as well as Jelena\u2019s personal and financial challenges after immigrating to the U.S. with only $500.\r\n\r\nIt may seem like there isn\u2019t much her guests have in common, but each episode includes key requirements to creating a holistic approach to financial health and (re)building the economy to work for everyone. For example, we learn in one episode that one of those requirements, feeling what it\u2019s like to go without, is taken literally for employees at PayPal: Dan Schulman requires his staff to spend a day living without digital financial services.\r\n
Tescher on CFI\u2019s Priorities in Inclusive Finance<\/h2>\r\nWith regard to CFI\u2019s four strategic priorities<\/a> \u2013 data risks and opportunities, mitigating and adapting to climate risks, consumer protection, and women\u2019s financial inclusion -- Tescher believes that although these areas could be tackled individually, the intersection and interconnection amongst these topics are what interest her.\r\n\r\n\u201cThinking about CFI\u2019s priorities together as one is where the geographic boundaries become less relevant, which creates an opportunity for the financial inclusion industry to collaborate.\u201d\r\n\r\nClimate change is still an evolving topic that Tescher and her team are thinking through. The U.S. is lagging behind the rest of the world in terms of both the ramifications -- i.e. droughts and food shortages, and risk management -- as they relate to climate change\u2019s impact on financial services and consumer financial health. When it comes to climate change, it is important to recognize the connection between physical and financial health, Tescher notes.\r\n\r\nOn gender, Tescher points out that women historically have not had the same financial health outcomes as their male counterparts, yet women have shown<\/a> they are better at repaying debt like mortgages or microloans. The challenge now is connecting women to tools that are aimed at helping them become entrepreneurs and financially healthy.\r\n\r\nFinancial Health Network\u2019s data work<\/a> continues to be one of its main policy priorities. Tescher sees the importance of data rights as a means to empower consumers<\/a> to have control over, and access to, the information they need to make better decisions and leverage data for good.\r\n\r\n\u201cConsumer protection is certainly an aspect of financial data; however, the focus shouldn\u2019t be solely on how data is used for bad, but also how to use data for good.\u201d","post_title":"Breaking Silos and Challenging Inequities in America: An Interview with Jennifer Tescher","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"breaking-silos-and-challenging-inequities-in-america-an-interview-with-jennifer-tescher","to_ping":"","pinged":"","post_modified":"2022-01-05 15:53:51","post_modified_gmt":"2022-01-05 19:53:51","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=41205","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2021\/01\/black-owned-business-covid-mask-open-USA-woman.jpeg","acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":"The founder and CEO of the Financial Health Network discusses COVID\u2019s impact on communities of color, Financial Health Network\u2019s projects for 2021, and her take on CFI\u2019s strategic priorities. "},"post_default":{"description":""}},"authors":[{"ID":33178,"post_author":"75","post_date":"2018-10-23 18:29:34","post_date_gmt":"2018-10-23 18:29:34","post_content":"","post_title":"Garrett Jaso","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"garrett-jaso","to_ping":"","pinged":"","post_modified":"2021-08-23 13:47:01","post_modified_gmt":"2021-08-23 17:47:01","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?post_type=people&p=33178","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":[{"acf_fc_layout":"testimonial","quote":"\u201cWhat\u2019s different this time around is that we\u2019re having a conversation about systemic racism and the numerous structural challenges Americans face.\" ","attribution":"Jennifer Tescher","image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2021\/01\/Jennifer-Tescher-bio-pic.jpeg","size":"small"},{"acf_fc_layout":"text_block","heading":"","quick_links":false,"heading_label":"","subheader":"","body":"
FinHealthCheck<\/h2>\n
Looking Ahead to 2021<\/h2>\n
\nShe believes there is no doubt we\u2019ll look back at this time as one that has brought to light so many persistent issues such as racial justice, economic inequality, and public health.<\/p>\nSmall Firm Diaries: Applying the \u201cPortfolios\u201d Model<\/h2>\r\nPerhaps the most visible of these so far is the Small Firm Diaries<\/a> project. Morduch, co-author of \u201cPortfolios of the Poor<\/a>\u201d and U.S. Financial Diaries<\/a>, is part of a team that will apply the financial diaries model -- collecting data from hundreds of poor households frequently and regularly over a long period of time (at least a year) -- to firms with 1 to 20 employees, in contrast to CFI\u2019s research<\/a> on MSMEs, which has been focused on collecting and analyzing survey data on COVID-19's impact on the financial health of owners of a broader range of business sizes.\r\n\r\n\u201cThere\u2019s a lot of great research available on small firms from different angles \u2013 liquidity, gender, how they use digital services... The diaries instead present a chance to look at firms holistically, without imposing a particular agenda from the start. The diaries are a way to understand the lives of firms and whom they employ, whom they serve \u2013 and whom they are served by \u2013 and try to understand them on their own terms.\u201d\r\n
The diaries present a chance to look at firms holistically, without imposing a particular agenda from the start.<\/blockquote>\r\nWith financial support from the Mastercard Center for Inclusive Growth, the Bill & Melinda Gates Foundation, and the Argidius Foundation, the team will collect data for one year from firms in Colombia, Fiji, Indonesia, Kenya, Ethiopia, Uganda and Nigeria. In addition to following cash flows, the researchers will also complete qualitative interviews in roughly 100 households per country from a variety of sectors.\r\n
From South Asian Cities: Researching Digital Remittances Back Home<\/h2>\r\nA second project Prof. Morduch is leading is digitally connected and builds on a pilot in Bangladesh<\/a> that connected ultra-poor families \u2013 whose working-aged children were employed mostly in garment factories in Dhaka and who were largely excluded from technology -- with digital networks to send money home easily. This pilot intervention revealed a 25 percent boost in money going to home villages; the team also found that consumption was smoothed during the lean season and increased overall. The project was spearheaded to fill a knowledge gap in the impact of domestic remittances. Beyond the numbers, it has also changed the way Prof. Morduch has viewed microfinance interventions, which have traditionally been about bringing resources like microcredit to grow businesses in villages.\r\n\r\n\u201cThis project shows other ways to improve rural conditions. One is to make it easier for younger people to move to cities where they can be more productive and earn higher wages. What about the people who are left behind in rural areas? They can benefit if migrants have reliable ways to send money home.\u201d In addition to introducing the technology to urban migrants and their rural families, the team translated the digital interfaces (which were mostly in English) and gave users hands-on experience. The initial result? Active use of the product went from 20 percent to 70 percent.\r\n\r\nThe team hypothesized that urban-to-rural remittances would become more frequent as a result of the digital ease of transacting. Surprisingly, the frequency remained largely the same, but the amounts grew.\r\n\r\nWhile the financial and usage results were positive, the treatment group of migrants reported worsened physical and emotional health. The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.\r\n
The team suspects that migrants started working longer hours as expectations to remit were increased by the digital technology.<\/blockquote>\r\n\u201cIt\u2019s a reminder that digital financial services can disrupt social relationships. All of a sudden, migrants are available to their families all the time, both to talk and to send money. This changes how we go through life. These technologies can be powerful, but they disturb a social balance.\u201d\r\n\r\nWith support from the Bill & Melinda Gates Foundation, the team will replicate the work in six other sites in India, Pakistan and Bangladesh.\r\n
To the Homes of Compton: A Guaranteed-Income RCT<\/h2>\r\nProf. Morduch is also part of a group that\u2019s working on a guaranteed-income randomized control trial in Compton, California, involving several hundred families whose incomes are below twice the U.S. poverty line. The purpose of this RCT is to test a premise about being poor and facing instability<\/a>: while financial services\u2019 role in smoothing consumption via saving and borrowing is critical, the poor also need a \u201cusefully large sum<\/a>\u201d from time to time.\r\n\r\nAs Morduch says, families need to both \u201csmooth\u201d and \u201cspike\u201d during the year.\r\n\r\n\u201cThese are different savings problems. We tend to focus on smoothing, but both smoothing and spiking are really hard for poorer households, and they call for different solutions.\u201d So for the duration of the experiment, some families will get a check every couple of weeks (smoothing), and another group will get a larger disbursement of funds less frequently, which Prof. Morduch and his collaborators hope will allow them to support important purchases.\r\n\r\nMorduch points out that even though the U.S. has the Earned Income Tax Credit (a de facto<\/em> lump sum payment in the form of a tax refund) and programs -- like SNAP -- to support food purchases for low-income families (a smoothing mechanism), \u201cwe never really step back and think about them as financial mechanisms, and that\u2019s what the Compton project is all about.\u201d\r\n\r\nIndeed, thinking about stability\u2019s role has been a common theme throughout his planning and executing of projects. \u201cOne of the great inequalities in life is that people who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.\u201d\r\n
\"People who have better paying jobs also have more stable jobs. People who earn the least have the least protection and stability.\u201d<\/blockquote>\r\nWith that instability and seasonality of employment for the poor, there needs to be more frequent measurements to understand poverty, be them quarterly, or monthly, as opposed to yearly. And the kind of instabilities we saw in \"Portfolios of the Poor\" are also faced by American workers as the power of labor (i.e., declining unions, monosponies<\/a>) falls away, Morduch points out. The Compton project could help inform ways to better collect data frequently.\r\n
A New Primer on Financial Inclusion<\/h2>\r\nAs if that weren\u2019t enough to keep them busy, a new book is also in the works. \"Financial Inclusion: What Everyone Needs to Know,\" by Prof. Morduch and Ogden, will be an explainer organized in Q & A form, a chance for the pair to \u201cpull together ideas and evidence that we talk about all the time, but that may be new to readers.\u201d Prof. Morduch pointed out that while organizations like CFI implicitly explain topics by offering solutions, a book that explains the problems for a broader audience will help advance financial inclusion objectives even more. The book is slated for fall 2021 release.\r\n
CFI\u2019s Strategic Shift<\/h2>\r\nIn some ways, Prof. Morduch\u2019s strategizing and planning is similar to that undertaken by CFI, for whom he has advised for many years. And the excitement is shared.\r\n\r\n\u201cCFI\u2019s strategic priorities show an organization that\u2019s truly looking forward, while also looking back. CFI is not losing sight of unfinished agendas in women\u2019s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn\u2019t yet exist a well-formulated agenda.\u201d\r\n
\"CFI is not losing sight of unfinished agendas in women\u2019s financial inclusion and consumer protection while looking forward to challenges like climate risk, where there doesn\u2019t yet exist a well-formulated agenda.\u201d<\/blockquote>\r\nFor the latter topic, Morduch urges CFI to make it clear why climate risk is important for people concerned with financial inclusion. \u201cIf everyone worried about finance also understands why they should get excited about climate risk, then they will follow CFI, and they will push CFI to push harder, and I am excited about that possibility.\u201d\r\n
Wanted: Closer Public Sector Involvement<\/h2>\r\nWhether it\u2019s CFI, FAI or other organizations advocating for inclusive finance, Morduch believes that public sector interventions need more prominence.\r\n\r\n\u201cThe microfinance ethos, in some sense, got us off on the wrong foot. It seemed very anti-government in the beginning -- a private sector intervention. Politically, that was aligned with the moment, but it cut off important conversations. Instead of minimizing connections to public action, financial inclusion should be coming alongside steps by governments to support citizens. That\u2019s one of the great omissions of the financial inclusion conversation: it has been too optimistic about the power of finance alone to address inequality.\u201d\r\n\r\nWe at CFI agree that the conversation must go beyond private sector interventions: \u201cHow are public policy, social safety nets, systemic discrimination or other underlying issues influencing people\u2019s financial health circumstances?\u201d Mayada El-Zoghbi, CFI Managing Director, asked<\/a> readers of this blog last June.\r\n\r\nAnd we\u2019re looking forward to learning and comparing what we\u2019ve discovered.","post_title":"Prof. Jonathan Morduch\u2019s Four New Projects","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"prof-jonathan-morduchs-four-new-projects","to_ping":"","pinged":"","post_modified":"2021-01-14 15:30:05","post_modified_gmt":"2021-01-14 19:30:05","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=41111","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2021\/01\/los-angeles-freeway-morduch-posts.jpeg","acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":"With the pandemic restricting direct research, 2020 was a year of planning and preparing for a busy 2021 that will (if the pandemic abates) take Prof. Morduch and his collaborators from rural villages in South Asia to Compton, California \u2013 all with a view towards further deepening our understanding of the lives of the poor."},"post_default":{"description":""}},"authors":[{"ID":28059,"post_author":"75","post_date":"2018-08-23 17:53:47","post_date_gmt":"2018-08-23 17:53:47","post_content":"","post_title":"Ezra Mannix","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"ezra-mannix","to_ping":"","pinged":"","post_modified":"2021-03-02 17:22:50","post_modified_gmt":"2021-03-02 21:22:50","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/?post_type=people&p=28059","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"prof-jonathan-morduchs-four-new-projects"},{"ID":37425,"post_author":"75","post_date":"2019-11-21 15:27:41","post_date_gmt":"2019-11-21 19:27:41","post_content":"On the outskirts of Bismarck, North Dakota, is the Missouri River Correctional Center, locally known as \u201cthe Farm.\u201d While unassuming from the outside, this small, minimum-security state prison is making huge strides to rehabilitate inmates and better prepare them to reenter society. From training service dogs<\/a> to cleaning the local zoo<\/a> to participating in charity events<\/a>, the efforts seem to be working: North Dakota\u2019s three-year recidivism rate is between 35 and 40 percent, compared to a national average of 68 percent.\r\n\r\nThe prison reform efforts in North Dakota are being led by Leann Bertsch, Director of the North Dakota Department of Corrections and Rehabilitation (DOCR). Bertsch began implementing extensive reform efforts following a 2015 trip to Norway to learn about the country\u2019s incarceration system, which is often credited as being the most humane in the world. The biennial DOCR report<\/a> following the Norway visit listed several new program offerings across all five of North Dakota\u2019s state prisons \u2013 including financial literacy training.\r\n\r\nAs we've written<\/a> about in the past, financial services are critical for the nearly 1.5 million inmates<\/a> in U.S. prisons to be able to make phone calls, send emails, and purchase toiletries and clothes. Financial literacy already a meager 57 percent<\/a> in the United States. This figure is much lower among inmates, who often come from low-income backgrounds and experience financial stressors early on in life. The income levels of inmates prior to incarceration are, on average, 41 percent lower<\/a> than those who have never been incarcerated. A 2014 study<\/a> found that incarcerated people were less likely to have ever had a checking account or credit card, and more than twice as likely to take out payday loans and three times as likely to pawn an item than their nonincarcerated counterparts. Basic understanding of how to manage personal finances and efficiently allocate earnings are crucial components<\/a> of ensuring offenders do not turn back to crime in desperation.\r\n
Financial literacy is already a meager 57 percent in the United States. This figure is much lower among inmates.<\/blockquote>\r\nIn a 2013 study<\/a>, inmates cited several barriers to financial services that contribute to their financial illiteracy. These included high overdraft fees, checking account minimum balance requirements, and a general mistrust of banks, especially by those who have obtained their income illegally. Financial literacy educators often suggest avoiding commercial banks in favor of joining a credit union<\/a>, and participating in Financial Reality Fairs<\/a> to game out real life financial scenarios.\r\n\r\nWhile North Dakota has one of the lowest incarceration rates in the country, it isn't alone in its efforts to help inmates successfully reenter society. Two years ago in Pennsylvania, a consortium of state agencies began hosting Financial Reality Fairs to help reentrants learn basic banking and money management. In February 2017, the Kewanee Life Skills Re-Entry Center<\/a> opened in Illinois to help inmates reduce their susceptibility to recidivism through three phases of required programing \u2013 one of which is financial literacy.\r\n\r\nFinancial literacy programs focus on knowledge acquisition and skill development with the goal of helping inmates understand best practices in money management, like how to save money, build credit, and budget. Many may question the use of taxpayer dollars to fund training and education programs for those found guilty of a crime. However, the cost of keeping those people incarcerated is in fact much more expensive. Inmates who receive education are less likely to return to prison, and a RAND Corporation study<\/a> estimated that for every $1 invested in a prison education program, incarceration costs three years post-release were reduced by $4 to $5.\r\n\r\nThere\u2019s lots of talk about reforming our prison system. As the founder of R3 Score<\/a>, Teresa Hodge is one of the leaders in this fight. R3 Score helps individuals with criminal records find their footing through a three-pronged approach: financial literacy, inclusive entrepreneurship, and community engagement. The company\u2019s fintech analysis tool aggregates data to de-risk people with criminal histories. This data is then turned into a score for decision makers \u2013 like potential employers \u2013 to improve access to opportunities for qualified individuals.\r\n\r\nWith nearly 90 percent<\/a> of inmates of working age and 1 in 28 American children<\/a> with a parent behind bars, it is economically and socially critical that we support rehabilitation efforts to help offenders successfully reintegrate. While financial literacy alone may not be the leading cause of reduced recidivism rates, it can equip offenders with essential knowledge to support themselves upon release.","post_title":"Financial Literacy for Convicted Felons: A Way to Lower Recidivism?","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"financial-literacy-for-convicted-felons-a-way-to-lower-recidivism","to_ping":"","pinged":"","post_modified":"2019-11-21 17:20:54","post_modified_gmt":"2019-11-21 21:20:54","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=37425","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2019\/11\/light-at-end-of-tunnel.jpeg","acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":"One way to lower the US incarceration rate could be to give inmates financial knowledge they need to get by upon reentry. "},"post_default":{"description":""}},"authors":[{"ID":26530,"post_author":"1","post_date":"2018-08-20 15:28:09","post_date_gmt":"2018-08-20 15:28:09","post_content":"","post_title":"Rachel Morpeth","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"rachel-morpeth","to_ping":"","pinged":"","post_modified":"2019-09-06 19:02:35","post_modified_gmt":"2019-09-06 19:02:35","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/rachel-morpeth\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"financial-literacy-for-convicted-felons-a-way-to-lower-recidivism"},{"ID":37138,"post_author":"75","post_date":"2019-10-22 12:45:16","post_date_gmt":"2019-10-22 16:45:16","post_content":"Mariel Cota and her three children were confronted with the prospect of starting from scratch after she left her abusive ex-husband. She had the skills to start a flower business, but as an immigrant she had limited credit history and couldn\u2019t secure traditional financing. After taking part in an entrepreneurship training program and securing a business loan from Accion serving Southern California, Mariel was able to launch Flowers by Mariel. The capital and coaching offered through the entrepreneurship program enabled Mariel to improve her credit and build wealth for her family. In the process, Mariel has grown as a role model to other women in her community.\r\n
Why Digital Financial Coaching?<\/h2>\r\nMariel\u2019s story is in line with those of similar entrepreneurs who benefit from the lending and business support services offered by Accion in the U.S<\/a>. A multi-year evaluation<\/a> study published in 2018 indicated that on the whole, Accion-supported businesses are thriving based on indicators of business strength, and they experience significant improvements in feelings of financial stability in the years following their loan. However, the study also highlighted ongoing challenges our clients face \u2013 particularly related to financial health. For example, less than half of clients surveyed at the end of the study had taken steps to prepare for a financial emergency (45 percent) and most found finances to be a significant source of stress (58 percent). This research revealed that entrepreneurs who use Accion\u2019s non-financial services (such as the entrepreneurship training program Mariel participated in) see great benefit to them. Yet, many clients don\u2019t take advantage of these opportunities. This presented an opportunity to improve how we connect small business owners to resources that can help them reach their goals, on their own terms.\r\n
A multi-year Accion study highlighted financial health-related challenges clients face.<\/blockquote>\r\nTo address these challenges, Accion launched a pilot partnership with Neighborhood Trust Financial Partners<\/a>, a nonprofit social enterprise and one of the nation\u2019s leading providers of financial empowerment services, to offer personalized, technology-enabled financial coaching through their Trusted Advisor program. The program connects clients to a personal financial coach through video or phone sessions. Participants have access to a customized online portal as well as SMS and email reminders to stay on track with their financial action plan.\r\n
Why Women Entrepreneurs?<\/h2>\r\nWe had a surprising insight in implementing this program: the Neighborhood Trust offering was particularly popular among women entrepreneurs. The majority of Accion clients who attended sessions were women (57 percent), even though women only make up 44 percent of our U.S. loan portfolio. Interestingly, this insight parallels Google Analytics data that captures aggregate characteristics of website users who access Accion\u2019s online business resource library<\/a>.\r\n\r\nAdditionally, women appeared to engage more deeply in digital financial support services through Neighborhood Trust. Of those clients who attended more than one coaching session through the Neighborhood Trust program, 65 percent were women. Women also made up 62 percent of the Accion clients who used Neighborhood Trust\u2019s online tools to track their goals. While the maximum number of sessions attended by a male client was three, female clients attended up to 11 sessions. Further, while men on average had approximately 8 interactions with their coaches (including texts, emails and coaching sessions), women had 11 interactions on average.\r\n
Women made up 62 percent of the Accion clients who used Neighborhood Trust\u2019s online tools to track their goals.<\/blockquote>\r\nWhat broader contextual factors might make resources delivered in a digital manner particularly valuable for women? First, we know that flexibility is key motivator for women to pursue entrepreneurship<\/a> in the first place. This means that women value opportunities to pursue their goals on their own terms, in a manner that fits into their busy lives. And, this desire isn\u2019t limited to women entrepreneurs. The majority of online college and graduate students are women<\/a> (70 percent and 72 percent, respectively, according to a 2015 survey), and many cite flexibility as a key factor<\/a> in their decision to pursue online learning opportunities.\r\n\r\nSecond, digital financial coaching appears to align with the ways that women already use technology in their daily lives, as well as their propensity to use online channels to connect with others. Nielsen data shows that women talk 28 percent more and text 14 percent more<\/a> than men every month, and they\u2019re also heavier users of social features on their phones.\r\n\r\nFinally, women entrepreneurs face unique financial challenges. For example, women rely more heavily on consumer credit to fund their businesses<\/a> than men. This translates to higher credit utilization rates and consumer trade counts, which can negatively impact a woman\u2019s personal credit, and thus her ability to qualify for quality business financing options.\r\n
Women rely more heavily on consumer credit to fund their businesses than men.<\/blockquote>\r\n
What\u2019s Next?<\/h2>\r\nWe were encouraged to learn that this service was valuable to the 149 business owners who took part in the pilot financial coaching offering through Neighborhood Trust. Over a period of six months, 47 percent of participants improved their credit scores, 49 percent reduced their total debt, and 52 percent of those who had an account in collections reduced the balance in collections. Participants reported taking a variety of concrete actions as a result of the coaching, including paying down credit card balances and setting up an emergency fund. The majority felt they had a more solid financial plan for their business after coaching and that the service helped them meet at least one business or personal financial goal.\r\n
The majority felt they had a more solid financial business plan after coaching.<\/blockquote>\r\nAs a result of this early success, we\u2019re expanding upon the partnership with a second pilot round to test new strategies to encourage enrollment in financial coaching. We will continue to monitor the service\u2019s value to women, and we will also offer digital resources that are particularly supportive to women (for example, by elevating the success stories of inspiring women entrepreneurs of color). We also encourage our peers who are invested in supporting women\u2019s entrepreneurship to consider how they might integrate digital coaching and resources into their programming in order to better meet their needs.","post_title":"The Promise of Digital Financial Coaching for Women Entrepreneurs in the U.S.","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"the-promise-of-digital-financial-coaching-for-women-entrepreneurs-in-the-u-s","to_ping":"","pinged":"","post_modified":"2019-10-22 14:27:25","post_modified_gmt":"2019-10-22 18:27:25","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=37138","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2019\/10\/woman-open-sign-accion-us-network-FIW.jpeg","acf":{"types":{"term_id":3123,"name":"Blog Post","slug":"blog-post","term_group":0,"term_taxonomy_id":3123,"taxonomy":"types","description":"","parent":0,"count":2142,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":"Women entrepreneurs appear more likely to take advantage of digital resources than their male counterparts, which makes them ideal beneficiaries of digital interventions. "},"post_default":{"description":""}},"authors":[{"ID":37139,"post_author":"75","post_date":"2019-10-22 12:22:17","post_date_gmt":"2019-10-22 16:22:17","post_content":"","post_title":"Lauren Rosenbaum","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"lauren-rosenbaum","to_ping":"","pinged":"","post_modified":"2019-10-22 12:22:17","post_modified_gmt":"2019-10-22 16:22:17","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?post_type=people&p=37139","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":false,"page_settings":{"":null,"email_sign_up":true,"show_related_content":true,"show_contextual_menu":false,"contextual_menu_cta":null,"replace_global":false,"hide_sticky_share":false,"hide_date_when_featured":false,"is_list_view":false,"premium":false,"preview_image":false,"description":""}},"url":"the-promise-of-digital-financial-coaching-for-women-entrepreneurs-in-the-u-s"},{"ID":33541,"post_author":"62","post_date":"2018-11-14 18:23:12","post_date_gmt":"2018-11-14 18:23:12","post_content":"For the second part of our Financial Inclusion Week 2018 podcast series, Tess Johnson, research associate at the Center for Financial Inclusion at Accion, sat down with Accion in the U.S. CEO Gina Harman for a conversation highlighting the domestic U.S. perspective on getting inclusion right. Accion in the U.S. collaborates with all four Accion U.S.-based lending organizations to reach entrepreneurs on the ground and online with the latest innovations in mission-based small business lending.","post_title":"Podcast: Getting Inclusion Right Podcast with Gina Harman","post_excerpt":"","post_status":"publish","comment_status":"open","ping_status":"open","post_password":"","post_name":"podcast-getting-inclusion-right-podcast-with-gina-harman","to_ping":"","pinged":"","post_modified":"2019-06-27 19:09:39","post_modified_gmt":"2019-06-27 19:09:39","post_content_filtered":"","post_parent":0,"guid":"https:\/\/content.centerforfinancialinclusion.org\/?p=33541","menu_order":0,"post_type":"post","post_mime_type":"","comment_count":"0","filter":"raw","featured_image":"https:\/\/cfi.accion-staging.flywheelsites.com\/wp-content\/uploads\/sites\/2\/2018\/11\/GIR-Gina-Harman-Podcast-Banner.png","acf":{"types":{"term_id":3124,"name":"Podcast","slug":"podcast","term_group":0,"term_taxonomy_id":3124,"taxonomy":"types","description":"","parent":0,"count":35,"filter":"raw","term_order":"0"},"header":{"header_type":"post_aligned","post_cover":{"description":""},"post_aligned":{"description":""},"post_default":{"description":""}},"authors":[{"ID":26368,"post_author":"1","post_date":"2018-08-20 13:50:32","post_date_gmt":"2018-08-20 13:50:32","post_content":"","post_title":"Tess Johnson","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"tess-johnson","to_ping":"","pinged":"","post_modified":"2021-03-31 16:07:45","post_modified_gmt":"2021-03-31 20:07:45","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/tess-johnson\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"},{"ID":26571,"post_author":"1","post_date":"2018-08-20 15:28:25","post_date_gmt":"2018-08-20 15:28:25","post_content":"","post_title":"Gina Harman","post_excerpt":"","post_status":"publish","comment_status":"closed","ping_status":"closed","post_password":"","post_name":"gina-harman","to_ping":"","pinged":"","post_modified":"2018-09-06 17:30:33","post_modified_gmt":"2018-09-06 17:30:33","post_content_filtered":"","post_parent":0,"guid":"http:\/\/cfi.accion.flywheelsites.com\/people\/gina-harman\/","menu_order":0,"post_type":"people","post_mime_type":"","comment_count":"0","filter":"raw"}],"meta_cta":{"download":false,"cta_button_text":"","cta_media":false,"cta_url":"","additional_links":false},"blocks":[{"acf_fc_layout":"iframe","title":"","view_more_button_text":"","view_more_button_url":"","iframe_code":"