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Financing Low Income Communities

Julia Sass Rubin

Publication Year: 2007

Access to capital and financial services is crucial for healthy communities.  However, many impoverished individuals and neighborhoods are routinely ignored by mainstream financial institutions.  This neglect led to the creation of community development financial institutions (CDFIs), which provide low-income communities with financial services and act as a conduit to conventional financial organizations and capital markets. Edited by Julia Sass Rubin, Financing Low-Income Communities brings together leading experts in the field to assess what we know about the challenges of bringing financial services and capital to poor communities, map out future lines of research, and propose policy reforms to make these efforts more effective. The contributors to Financing Low-Income Communities distill research on key topics related to community development finance. Daniel Schneider and Peter Tufano examine the obstacles that make saving and asset accumulation difficult for low-income households—such as the fact that tens of millions of low-income and minority adults don’t have a bank account—and consider solutions, like making it easier for low-wage workers to enroll in 401(K) plans. Jeanne Hogarth, Jane Kolodinksy, and Marianne Hilgert review evidence showing that community-based financial education programs can be effective in changing families’ saving and budgeting patterns.  Lisa Servon proposes strategies for addressing the challenges facing the microenterprise field in the United States.  Julia Sass Rubin discusses ways community loan and venture capital funds have adapted in response to the decreased availability of funding, and considers potential sources of new capital, such as state governments and public pension funds.  Marva Williams explores the evolution and recent performance of community development banks and credit unions.  Kathleen Engel and Patricia McCoy document the proliferation of predatory lenders, who market loans at onerous interest rates to financially vulnerable families and the devastating effects of such lending on communities—from increased crime to falling home values and lower tax revenues. Rachel Bratt reviews the policies and programs used to make rental and owned housing financially accessible.  Rob Hollister proposes a framework for evaluating the contributions of community development financial institutions. Despite the many accomplishments of CDFIs over the last four decades, changing political and economic conditions make it imperative that they adapt in order to survive.  Financing Low-Income Communities charts out new directions for public and private organizations which aim to end the financial exclusion of marginalized neighborhoods.

Published by: Russell Sage Foundation

Title Page, Copyright

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Contents

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pp. v-vi

Dedication

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pp. vii-viii

About the Authors

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pp. ix-x

Acknowledgments

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pp. xi-xii

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1. Introduction

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pp. 1-10

Access to affordable capital and basic financial services is a critical component of healthy communities. Without them, individuals cannot pay bills, save for retirement, or buy a house. Developers need capital to build and rehabilitate housing, commercial properties, and community facilities. Entrepreneurs...

Part 1. Creating Personal Assets

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pp. 11-12

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2. New Savings for Old Innovations: Asset Building for the Less Affluent

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pp. 13-71

Although the rich and poor both have the need and the desire to build financial assets to enable them to meet important life goals, there is a false dichotomy that is captured in the epigraph. Taken from an exchange with a successful financial services executive, it signifies the perception that the...

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3. Financial Education and Community Economic Development

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pp. 72-94

Over the last several years, the issue of financial literacy and financial education has risen on the agenda of educators, community groups, businesses, government agencies, organizations, and policy makers. It seems that nearly everyone is talking about it. For example, in November 2004 the GAO...

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4. Making U.S. Microenterprise Work: Recommendations for Policy Makers and the Field

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pp. 95-120

Microenterprise development is a relatively broad term that refers to the activity of supporting very small businesses through training, counseling, small loans, or some combination of these. Microfinance and microcredit, as the terms imply, are more focused on the credit aspect of supporting small...

Part 2. Building Institutions

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pp. 121-122

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5. Financing Organizations with Debt and Equity: The Role of Community Development Loan and Adventure Capital Funds

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pp. 123-158

Community Development financial institutions (CDFIs) are intermediaries that help redress the financial exclusion of low-income communities. CDFIs consist of community development loan funds (CDLFs), community development venture capital funds (CDVCs), community development banks, and community development credit unions. This chapter focuses on community...

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6. The Un-Banks: The Community Development Role of Alternative Depository Insitutions

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pp. 159-182

One of the most important functions of financial institutions is to provide services such as checking and savings accounts. These accounts are the most basic financial assets that most households own (Williams and Hudson 1999) and, when held in insured depository institutions, provide a safe place to keep...

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7. Financing Production of Low- and Moderate-Income Housing

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pp. 183-226

Housing is a central component of community development. It is critical to neighborhood vitality, to family well-being, and, indeed, to the economy at large.1 Yet low- and moderate-income households continue to face considerable obstacles locating decent quality housing that they can afford.2 Consider...

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8. Predatory Lending and Community Development at Loggerheads

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pp. 227-262

For decades, cities have invested in decaying neighborhoods, trying to revitalize blighted areas and stimulate economic growth. Where their efforts have been successful, homeowners have experienced appreciation in their homes, safer streets, and improved neighborhoods. Cities, in turn, have benefited...

Part 3. Evaluating Progress

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pp. 263-264

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9. Measuring the Impact of Community Development Financial Institutions' Activities

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pp. 265-310

This chapter reviews both attempts to evaluate the impacts of community development financial institutions (CDFIs) and methods of evaluation. Some may find it highly negative about whether the impact can be measured. I therefore begin by explaining the rationale for presenting the material...

Index

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pp. 311-332


E-ISBN-13: 9781610444811
Print-ISBN-13: 9780871547118
Print-ISBN-10: 0871547112

Page Count: 344
Publication Year: 2007

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Subject Headings

  • Consumer education -- United States.
  • Banks and banking -- Customer services -- United States.
  • Poor -- United States -- Finance, Personal.
  • Financial services industry -- United States.
  • Community development -- United States.
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