Economic Development Ministries for the Church in North America When Helping Hurts Webinar 5 December 10, 2009.

Economic Development Ministries for the Church in North America

When Helping HurtsWebinar 5December 10, 2009

You can submit questions at any time. I will answer some of these toward the end of the webinar. I will focus more on questions dealing with the 3 economic development ministries I will be talking about.

Jobs for Life

FocusVocationally Centered “Life Journey”

Key Themes How to view work

Makes one more “fully human” Allows one to:

Provide for others Give financially Serve others

Vocational planning-”Life Journey Map” Career Possibilities: Interest, Skills, Realism Vocational Plan Roadblocks

Education/Training needs Character issues Social context

Job Acquisition Job search

Sources Informational interview Intentionality

Job Acquisition (cont) Resume Interviewing

Telling your story Behavioral interview questions Hidden Questions

Job Retention/Advancement Satisfying Employers

Culture Punctuality Teamwork Conflict resolution

Key Components Good Learning Principles

Relevant, expedient, active, safe

Biblical Insights Linking social capital Support

Group setting Champions (mentors)

Designing and Implementing a Financial Literacy Ministry

What is Financial Literacy?

The Knowledge, Attitudes and Practices (KAP) that promote appropriate stewarding of household resources

Provides the foundation for further economic development

Why is Financial Literacy needed Economically poor can be unaware of money

management options or not taking full advantage of them

Culture of consumerism is hard to resist The lion that seeks to devour: Predatory

Lending Practices

Predatory Lending

Strips billions in wealth from low-income consumers and communities in the U.S. each year.

Borrowers lose an estimated $9.1 billion annually due to predatory mortgages;

$3.4 billion from payday loans; $3.5 billion in other lending abuses, such as

overdraft loans, excessive credit card debt, and tax refund loans.

Who Do They Target

Blacks, Latinos and other minorities 4X more likely on home purchase loan 3X more likely on refinance loan 3X more likely in high income black

neighborhoods Seniors Single mothers Military

Payday Lending What is a payday loan?

Short term loan, usually 2 weeks Small loan, usually $300-500 VERY high fees, ex. $45 every 2 weeks Annual interest rate of 400% +

Looks like easy money, until you have to repay. 75% have to rollover their loans

90% of the payday industry's revenue growth comes from making more and larger loans to the same customers

Payday lenders encourage consumers to borrow the maximum allowed, regardless of their credit history. If the borrower can't repay the loan, the lender collects multiple renewal fees

Some Comparisons

Transaction Fees/Month APR

$255 payday loan $90 391%

$255 bounced check $43 202%

Late fee on $255

credit card bill $30 141%

Late fee on $800

mortgage $32 48%

Late fee on $600

rent payment $30 60%

Late fee on $300

car payment $15 60%

Other Predatory Lending Practices Tax Refund Anticipation Loans

Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR.

Car Title Loans

A typical car title loan has a triple-digit annual interest rate, requires repayment within one month, and is made for much less than the value of the car.

Rent-to-Own Contracts

Rent-to-Own companies "rent" merchandise, although the structure of the transaction is more like a loan because of the interest and credit insurance involved. The store does not have to report how much it is charging in interest. If a borrower is late with a payment, there is no legal limit to how much interest the store can charge in finance charges, although the company usually repossesses the rental property

Key Issues in Designing and Implementing a Financial Literacy Ministry Appropriate Resources

MaterialScope of Content Educationally sound

-Relevancy: Socioeconomic and Cultural Fit-Immediacy-Active-Pace right to really promote behavioral change

Biblical Integration

Some sources Faith and Finance by Gary Nederveld Crown Ministries

http://www.crown.org/Tools/ Brenda Armstrong material for single mothers

Dave Ramsey material http://www.daveramsey.com

New Focus Historically required training to access their curriculum http://www.newfocus.org/pages/page.asp?page_id=76127

The National Endowment for Financial Education (NEFE) http://www.nefe.org/EducatorsandFacilitators/tabid/88/Default.aspx

Money Smart http://www.fdic.gov/consumers/consumer/moneysmart/overview.html

Financial Mentoring http://www.financialmentoring.net

Managing My Money http://www.managingmymoney.com

HumanTechnically and culturally equipped trainers and mentors

Financial

Who pays for trainers, material, childcare and misc. expenses?

Group vs. Individual Focus

It is hard to change alone

Honoring household relationships Scope of Ministry

Depth/breadth of intervention

Linkage to other ministries/programs

Limitations of Financial Literacy Ministry Doesn’t directly address policy change Often doesn’t work as a stand alone intervention

Individual Development Accounts

Why is Asset Building So Important to Reduction of Economic Poverty?

A household’s ability to cope with financial shocks is largely a function of the extent to which it has built up its assets.

Assets also enable us to purchase other assets that we want or need: Buy a Home Pursue an Education Start a Business Prepare for Retirement Buy a Car

Assets will be more important in the future as labor market becomes increasingly volatile.

Building assets requires and fosters different attitudes and behaviors than earning an income:

Denial of instant gratificationDiscipline for extended time-periodsAn orientation toward the futurePlanning skills

According to a study by Wolff (2001), in 1998:

26% of U.S. households had net financial wealth(net worth minus home equity) that was zero or negative.

40% of households headed by a 25-54 year-old had sufficient net financial wealth to survive for less than 3 days at their current consumption levels.

Matches are only made for qualified purchases of assets (typically homes, post-secondary education, business capital, etc.)

Savings are matched at ratios that usually range from 1:1 to 3:1 but can be higher

Matching funds can come from federal and state governments, financial institutions, foundations, churches, and individuals

IDAs are matched savings accounts for the economically poor

Examples of Savings and Match Accumulation

1 year 2 year 3 year 4 year

$25/month saved2:1 match rate

Savings 300 600 900 1,200

Match 600 1,200 1,800 2,400

Total 900 1,800 2,700 3,600

$40/month saved2:1 match rate

Savings 480 960 1,440 1,920

Match 960 1,920 2,880 3,840

Total 1,440 2,880 4,420 5,760

1 year 2 year 3 year 4 year

$25/month saved4:1 match rate

Savings 300 600 900 1,200

Match 1,200 2,400 3,600 4,800

Total 1,500 3,000 4,500 6,000

$40/month saved4:1 match rate

Savings 480 960 1,440 1,920

Match 1,920 3,840 5,760 7,680

Total 2,400 4,800 7,200 9,600

Examples of Savings and Match Accumulation

Components of an IDA Program

Components Processes

Program Orientation Recruitment

The Accounts Enrollment

Financial Education Savings and Participation Period

Case Management Monitor Progress, Oversee Withdrawals

Mentoring Support, Encouragement, Accountability

Asset Related Services

Asset specific training

US Economic Development Ministries: A 4 week distance course offered by the Chalmers Center in June 2010

Note that there is a pre-req for this course: US Foundations for Holistic Ministry

Take as a 4 week distance course facilitated by Steve: next offering May 2010

Do as a self-study

For more info on all training options see www.chalmers.org

Learning Opportunity

International Economic Development Ministries

Today at 12:30-1:30 EST (i.e. in 30 minutes!)