Alexandra's Community Economic Development blog

Belated Congrats to GW's Amir Abdallah!

2012-02-08T06:49:00.001-08:00

Almost exactly one year ago I posted about the George Washington University's new focus on financial literacy. Dr. Annamaria Lusardi was hired to lead the way with a new Global Center for Financial Literacy and two MBA students, John and Amir, took it upon themselves to engage their classmates in this new initiative.

Amir Abdallah went above and beyond what might have been expected. He established the GW School of Business Financial Literacy Program (FLP) which helped numerous students go into the DC community to teach about financial management and empowerment. Since its inception, this program has generated approximately 269 volunteer hours by 42 volunteers, and reached approximately 340 individual, including many children and young adults in low-income areas of DC. I'm impressed not only by these statistics, but also by the quality of leadership and organization Amir has displayed, and the fact that as he prepares to graduate, he is already working on a transition team.

Last weekend, GW honored Amir and the FLP with the Business Gives Back Award. This recognizes the impact and importance of the FLP and also provides funding for continued operations. I am very pleased the school selected Amir as this year's recipient, and I believe it bodes well for GW's Global Financial Literacy Center.

For a picture of Amir and an explanation of the GW Business Gives Back Award, check out this Washington Post article. Dr. Lusardi has also written an excellent post about Amir's work on her blog.

Repost: Financing Your Love

2012-02-07T15:32:00.000-08:00

Reprint of my post on CFED's Inclusive Economy blog

With Valentine’s Day around the corner, I’m taking the opportunity to discuss one of the least sexy aspects of being in a relationship: finances. Chocolate and flowers may be nice, but romance is unsustainable without some kind of mutual understanding about money.

In a recent blog post, Bill Varettoni, financial planner and founder of the financial service organization Community Ladders, espoused the many virtues of open communication about household economics. I fully support all the solutions Bill proposes, and would like to add a few reflections of my own.

First, showing affection doesn’t need to break the bank. This is seems obvious, but flies in the face of the logic used in the majority Valentine’s Day ads. Diamond commercials, in my opinion, are among the worst offenders because they show an altered reality in which buying expensive jewelry is the best (and maybe the only) way to prove your love. I’ve often found myself yelling at the hypothetical male audience: “Just do the dishes!” The key is to find a way to show your partner you love and honor them, and there are numerous ways to do this. Some are free – like doing exactly what you said you’d do – and some can just cost moderate amounts of money, like taking your significant other to a restaurant they adore or a show they’ve been wanting to see (even if it’s not your favorite).

Second, changing financial behaviors might require an adjustment period. Bill Varettoni talks in his post about specific solutions like allowing slush funds for each party and setting clear expectations about how to manage finances. As with many things, this is easier to talk about in theory than to implement. Actually cutting back on your own spending or saving more each month can be quite difficult. It’s really not too different from going on a diet; companies like Dave Ramsey’s exist precisely because sticking to the plan isn’t easy. Don’t beat yourself up if there is a little awkwardness in the early stages. Keep at it and remind yourselves of the bigger goal: a happy, honest relationship.

The Cost of Materialism

2012-01-18T06:56:00.000-08:00

So not too long ago I was cooking dinner and my roommate was watching one of her reality tv shows. Normally, when she's watching these things I retreat to my room as these shows inspire too much schaudenfraude for my comfort (the wonderful German word for happiness at the misfortune of others, as per the fabulous Avenue Q song). This time, though, I found myself strangely curious.

The show, called Extreme Clutter, follows a sharp-tongued narrator (Peter Walsh) who shows his clients how to quickly remove disturbing amounts of stuff from their homes and their lives. As the show is part of the Oprah Network, the idea is for people to learn to "live their best lives" free of the piles of clothing/toys/paper that literally block their path. In the episode I watch, Mr. Walsh was counseling a married couple with two kids -and $45,00 in credit card debit - how to declutter two important spaces in the home: the living room and the bedroom.

For me, what differentiated this show from most reality shows is Mr. Walsh's emphasis on his client's stated goals (generally something like "happy marriage" "cleaner home" "a space to work/sleep"). I appreciated that he took the time to explain how, for example, the shopaholic wife's takeover of the bedroom contributed to a sense of marital inequality and how the dining table needing to be clear so everyone could eat as a family (see clip here). Of course, his methods were harsher than what I would have liked - certainly not what I learned in my NeighborWorks coaching class!

Overall, I was surprisingly engaged and impressed by Extreme Clutter. I was sad, though, that there was almost no discussion of how the couples finances played into marital strife and the children's future. Undoubtedly these topics have been well-covered elsewhere, but sometimes it's important to state the obvious - constantly buying new stuff cost money. This stuff was very clearly harming their marriage and so the money was not only wasted (i.e. not building assets) but spent on items which adversely affected the buyers.

I would have liked Mr. Walsh to point this out to his clients and encourage them to think of their children's educational future and financial safety net every time either of them felt compelled to purchase another disposable consumer item.

Social Money Management

2011-12-01T18:30:00.000-08:00

So the weekend before Thanksgiving I went off and taught my first completely independent CAAB Money Management 101 class (in case you've missed my other posts on how fabulous these classes are, well, read here). I thought it would be easy since all my other classes had been straightforward. But there was a wrinkle.

There's a part in the first lesson where I ask everyone if they've ever changed a behavior before, like eating better or going to the gym more often. The idea is for them to think about how they made a successful change in the past and use those success stories to change their mentality about money management.

Two students in the class responded eagerly, but the stories were actually failed attempts rather than successes. In both cases, the student had attempted the change on her own. Detecting that both students felt alone, I asked who in their lives might be able to help them make changes in the future. I suggested, as an example, that they might have a friend who also wanted to cut spending, and they might brainstorm cheap entertainment ideas together. This was the kicker. Neither person could come up with anyone who they felt could support them.

I can't tell you how sad this made me. I mean, did they really not have anyone in their lives who would help them out? Who would say, "I know you're trying to save money, so let's cook dinner together instead of going out."? I don't know the answer, but it raises a key point.

We adopt the habits of those around us, whether they be keeping a clean house, eating a bag of chips for dinner or maintaining a regular budget. It's not impossible to go against social norms, but it is very challenging. The easiest way to get yourself on track for a change is to find an ally. Even someone who doesn't share your goals will likely respect them - and respect you for sticking to what you believe is important.

The thing is, you have to be assertive and you have to have faith that your friend or loved one will accept the change. This means being direct about what you need to meet your goals, and bearing some of the burden for alternative ideas ("let's watch a movie and have dinner at home instead of going out" or "let's go to a free concert I heard about"). Of course, there is some cost - if your former lifestyle was all dinners out and new clothes, it might not be appealing to stay at home and play board games with friends - the students, apparently, thought my geeky lifestyle was not for them. Still, even ordering fewer drinks and appetizers instead of entrees can make a difference. If you don't have someone in your life who can make some compromises, you need to find someone who can, and, in the meantime, to be confident your goal is worthy of the cost.

The Politics of Your Money Continued

2011-10-30T13:09:00.000-07:00

Quick update on the last post:

It appears I'm not the only one thinking about moving money out of large financial institutions. I recently learned that November 5th (Guy Fawkes Day in the U.K.) is being targeted as "Bank Transfer Day" by many members of the Occupy Wall Street movement. The name and idea seems to have originated from the sonorously named Kristen Christian of Los Angeles, CA. Although she claims no particular support for the Occupy movement, the movement has rallied behind the idea. There is now a Bank Transfer Day Facebook page with over 31,000 followers (and what I think is an overly dramatic logo showing the U.S. flag over a Guy Fawkes mask). I hope this inspires people to put their money where their mouth is and give business to more community-oriented institutions.

Some things to think about:

If you are considering moving your accounts, you may want to review some of the questions in the Center for Responsible Lending's Bank Guide here.
You may want to wait to a month or so to close your old account so you have time to change your direct deposit information (with your employer) and any automated payments (student loan, cell phone, etc). It may take a full cycle for the transfers to go to the new account.
Remember that your credit score is affected by both the number of (credit-related) accounts you hold and average age of those accounts - see FICO's explanation here. Closing accounts for credit cards or loans and opening new ones could lower the average age of your accounts, and have a small negative impact on your score. In addition, there's a small hit if you authorize your new financial institution to pull your credit report/score (hard hit). The impact to your credit may be greater if you have a "thin" file a.k.a. a limited credit history. NOTE: Generally, closing and opening savings and checking accounts won't affect your score because creditors are most interested in how you repay what you've borrowed, not how you manage what you have.

The last link (the pun was just too good to skip)

Rather entertaining article here on why one House representative likened changing banks to ending an abusive relationship. Of course, it's a politically motivated piece, but she's a politician so I can't fault her too much.

The Politics of Your Money

2011-10-02T15:14:00.000-07:00

The 2008 Financial Crisis and the ongoing recession have provided powerful reasons for all of us to reconsider where we stash our hard-earned money. Films like Maxed Out and Inside Job (documentary on the financial crisis - not, as my boyfriend thought, an action movie), provide disturbing examples of the gross injustices large financial institutions have perpetrated. Now that many of these companies are overtly adding fees (instead of just slamming you unexpectedly) customers have financial, as well as social motivations, to take their business elsewhere.

Before I go on, I should clarify that “gross injustices” is not the sort of phrase I use regularly. I deliberately use it here because I believe the financial crisis was caused by a relatively small number of people and companies using experimental financial products in an attempt to increase their own profits at the expense of others. Yet this group has not suffered the brunt of the hardships which followed the collapse of the markets. Certainly, there are cases where Wall Street types have gone to court over past malpractices, but many have not been held accountable. Meanwhile, huge numbers of lower- and middle-class Americans who did little, if anything, to cause this Great Recession have had to resort to things like raiding retirement funds to pay for rent and food. This, at least, is what I believe based on what I've learned - and why I'd like to reduce or eliminate the amount of my money that supports such injustices.

Changing banks is something I wanted to do for a long time, but which I continually put off. The primary cause of my procrastination was uncertainty around better alternatives. I mean, sometimes it seems like everyone got tied up with CDOs, and predatory lending. That’s why I was so pleased to learn about Move Your Money (wow, that sounds straight out of an infomercial). The website helps the average person find a new financial institution with the ease of a zip code search. The fact one of its search engines is run by Hello Wallet, a community-minded website for money management, lends credibility to the selection of community banks and credit unions. With that said, the smaller institutions it supports are not necessarily financially sound or clean of their own contributions to inequality. To find out a community bank's soundness rating, you need to do a separate search powered by an independent bank ratings firm called Institutional Risk Analytics.No resources are offered to investigate the social responsiblity levels of the banks. Still, it's a good site to visit if you're ready for a change - and at least the institutions listed didn't get a federal bailout. Plus, I hear many of them have fewer fees.

Author's Note:
In case anyone was wondering, yes, I have started to move my money. I chose my new institution independently of Move Your Money, though, if I'd known the site existed, I would certainly have visited it as part of my research.

Maxed Out

2011-09-02T18:48:00.000-07:00

So I know I'm a little behind, but I just finished watching Maxed Out, a 2006 documentary about credit card debt in America, and, I gotta say, it's still both relevant and disturbing.

The film does a great job of showing the complexities of the consumer debt problem. It's not simply that people took on too much debt (which many of them did). It's also that people didn't understand the consequences of dealing with very savvy, and very profit-focused institutions. Traditionally, credit is offered to individuals because those people appear to have the resources to pay the debts back. The thing is, customers who pay back on time and in full don't make money for the credit card companies. Missed payments and minimum payments rack up fees, and this is where high interest rates and fees can provide the kind of capital of interest to managers and investors. Hence the targeting of first year college students and post-bankruptcy consumers. The profits from these customers are often then funneled to politicians and others who can keep the regulatory system operating in a manner beneficial to the companies.

Ok, so you've heard this already. Why does this documentary still matter? A few things.

One is that we have done very little to address the credit scoring system in this country. It's still a secretive process that lowers your ratings for things like having too few accounts, and not enough debt (not covered in the film, but still an issue). Further, the companies running these top secret scores often make mistakes that are extremely difficult to correct. In Maxed Out an older couple is penalized (and ultimately traumatized) when the mother's credit score is conflated with that of her deceased daughter. The couple can't get a loan, and they are forced to repeatedly prove their daughter is dead. No parent should have to relive such a painful experience - especially not for some credit scoring agency that can't keep its records straight. The laws require the agencies to be more responsive now, but we consumers still bear the burden of monitoring our reports for accuracy.

The film also has very moving segments about mental health and financially-related suicides. I assume people don't mention this topic because it's morbid, but it needs serious attention. Families struggling to pay down debts could lose not only their jobs and their homes, but they could potentially lose each other. It frustrates me that our culture shuns open discussion of finances. We are as reluctant to talk to our children about money as we are to speak with them about sex. Parents need to teach kids about good financial behavior before they go off to college, and couples need to address their financial situation as early as possible. Not everyone is going to make a final choice when they get into financial trouble, but I bet we'll see higher divorce rates and other unpleasantness as a result of our sustained economic downturn.

Finally, there is a great section of the movie touching on the national debt - still, obviously a hot topic. Amid all this talk this summer about the debt crisis, I didn't hear anyone mention how many other Presidents have made risky decisions to pay off just the interest on our country's debts - starting at least with President Reagan who borrowed $300 billion from social security. This isn't to critique Reagan (that's a whole other topic for me), but rather to indicate this problem has been creeping up for multiple decades while no politician has had the courage to fully address it (yes, cutting spending AND raising taxes). Furthermore, director James Scurlock points out that our country's interest rates are going to continue to rise, so this problem is just going to keep getting bigger. In a dark sense, that's good, because politicians unify best when they hand is forced by crisis. Still, not something I'm looking forward to.

So, if you're in the market for a financial education video, or just something that will get you mad, I recommend Maxed Out. And if those two things aren't motivating, maybe you'll be interested in the movie's narrator: a Harvard professor by the name of Elizabeth Warren.

Are Daily Deals Hurting Small Businesses?

2011-07-09T11:29:00.000-07:00

As a budget conscious working professional, I've been subscribing for some time to daily deal services like Groupon. I mean, who doesn't want a massage for 50% off? But I've also heard a lot of hype about Groupon and Living Social, and I was wondering if there wasn't a giant crack somewhere in the business model. So when I saw "Why Groupon Is Poised For Collapse" in my RSS feed, you can bet I read it.

It turns out author Rocky Agrawal isn't concerned about warning future Groupon stockholders so much as protecting small businesses from what he sees as lopsided sales agreements. He argues daily deals may cost more than they're worth over the long term. Some deal buyers, Agrawal says, are already customers, and others will only visit once to redeem the deal. Meanwhile, small businesses will be giving away their products or services at a loss. The primary benefit to small businesses is cash up front, but some businesses treat the daily deals like credit cards, using the cash from a second deal to pay off lost revenue from the first.

This post and Agrawal's subsequent blog series, has garnered thousands of social media hits and prompted at least one counter-response. CEO Vincius Vacanti of Yipit, a daily deal aggreagator site, argues Agrawal's data is too anecdotal, and offered his own data showing how the deals can, in fact, be profitable. But Vacanti and Agrawal agreed on one thing: businesses need to run the numbers for themselves - and this may mean some tough negotiations with the daily deal providers. This can be difficult for entrepreneurs, many of whom may lack negotiating experience and the background to make good estimates of things like coupon redemption and repeat visit percentages. Compounding this problem,
some daily deal sales staff pressure businesses into making deals that can ultimately lose them money.

In the end, I think daily deals are neither inherently good nor bad. But the questionable incentive system definitely has me concerned for both small businesses and the longevity of daily deal firms.

Subsidizing Microfinance

2011-05-31T18:05:00.000-07:00

This year’s Microfinance USA conference included some excellent plenary sessions that pushed me to think about many things, but none more so than the issue of subsidy.

One of the best panels at the conference was a debate over the private vs. nonprofit approach to microfinance, moderated by Planet Money’s Adam Davidson. Opportunity Fund CEO Eric Weaver argued that subsidy is necessary for positive economic impact in the United States. Panelists Errol Damelin and Carlos Daniel, leaders of for-profit microfinance companies, countered that subsidies are inherently unsustainable and cannot reach the scale of the need for loans.

At the heart of these issues are disagreements over what constitutes positive economic impact, and differences in organizational goals. I suspect that Damelin and Daniel define impact in terms of repeat demand for loans, repayment rates, customer referrals and similar metrics. However, Weaver and some of the other nonprofit leaders are pushing for a set of loftier goals: improved financial management skills (short and long term), increased financial assets for families, greater numbers of successful small businesses and, ultimately, lower poverty levels. As Berkeley professor Ananya Roy pointed out, we have high expectations for what microfinance can do. For Opportunity Fund and other nonprofits, microfinance is really one piece of a larger set of financial empowerment tools, and it’s better to reach fewer people than to charge high interest rates or fees. For companies like Compartamos, Wonga ,and Confianza, microfinance is the whole business, and they want to take their model to the maximum number of people possible. Subsidy could almost be defined as the financial gap between these goals.

Despite the presence of these two private-sector microfinance leaders, the attendees as a whole seemed to favor the former set of objectives – not surprising given that Opportunity Fund hosted the event. The real question seemed to be how much subsidy and how it should be best used. Premal Shah of Kiva and Ben Mangan of EARN separately commented on the need for a study on the marginal impact of subsidy. Given this interest, I wonder if Microfinance USA is really the right conference title. The true mission of attendees seems to be broader financial empowerment. In this context, I hope next year’s conference will bring in affordable housing groups and other more traditional community development actors so the new passion for microfinance/financial empowerment can combine with the wisdom gained from older approaches to poverty alleviation.

The Village Support Model of Financial Behavior Change

2011-05-17T18:31:00.000-07:00

The hardest part of financial education is convincing participants to change behavior. We have a lifetime to develop bad financial habits, so changing them can be as challenging as losing weight, or even quitting smoking.

For this reason I appreciate that CAAB's Money Management classes embody a community support approach to financial behavior change. At last Saturday's class, the instructor modeled budgeting by discussing the hypothetical grad school expenses of one of the participants. The goal was to have the young woman (we'll call her Jenna) go to law school and save enough to live near campus - without taking on debt. After discussing the cost of various pieces, the total budget came to a whopping $2900/month.

After a moment of collective heart attack, the instructor moved us to an activity called "scrubbing the budget," where class participants suggested ways that Jenna could save. Everyone jumped in with suggestions about roommates, specific locations that could be cheaper, low cost ways of getting groceries, scholarships available for living expenses and books, deferring school for an additional few years to build savings, and on and on.

For me, these suggestions created a powerful atmosphere of support. Even though the goal was hypothetical, the instructor and the other participants offered sincere personal advice to Jenna, as if she were a close friend or family member. This changed the class from a theoretical place of learning to a village of peers, each teaching each other and offering real advice for real goals. It wasn't just CAAB saying participants should save; it was a whole group of people from similar backgrounds who believed the goal could be achieved. Since this was only the first session, I imagine that the bonds will grow every stronger by the end. These bonds may serve as potent motivation to pursue financial goals that would otherwise seem out of reach.

Unfortunately, the class is only 5 sessions. What I'm hoping is that the participants develop some personal ties that may keep them going afterward. I also hope that one of the next classes will cover the balancing act of current spending and saving for the future. The only way I see change as sustainable is if we can use at least a little money to enjoy the present while putting aside as much as possible for long-term benefits.

Teaching Myself First

2011-04-10T06:09:00.000-07:00

After much anticipation, last Wednesday finally arrived and I was able to start my volunteer service with the Capital Area Asset Builders (CAAB ). Along with fellow GW students Amir, Ellen, Corrine and John, I attended the Train-the-Trainer workshop for CAAB's Money Management 101 course.

Linda Stroman, CAAB's Director of Financial Education, led a thought-provoking three hour overview of their program. We were asked to answer the same questions as the future class participants - how do we manage our money? what do we know about credit? what kinds of institutions are insured? and a variety of other questions that highlighted how much we did and did not know about important financial concepts. Linda explained that the class participants (or "customers" as she often referred to them) are not shy about asking teachers to discuss their personal finances, and that we will be more effective as teachers if we manage our own money well. This is perhaps no surprise, but I like that it was explicitly mentioned - a sort of nudge to the volunteers about expectations.

Even more than this, I appreciated that Linda was well-informed about adult learning styles and that she emphasized the importance of empowerment over advice. There are legal reasons for volunteers not to advise clients, but there's also a functional one: the most powerful lessons are those we teach ourselves. Like EARN in San Francisco, CAAB favors a coaching model over a counseling one. In this model, individuals make their own decisions about how to manage money, even if those decisions go against what coaches believe to be the best course of action. One example, relevant in light of my previous post on fringe banking, was that of a client who uses money orders to pay his bills. Although an instructor might believe the client should open a bank account, the client may be more adept at managing cash. It's important to offer information, but to leave the final choice to the clients.* Linda says that if clients thank her for her help, she always responds by reminding them that they did the real work.

I have a good deal to learn before I start teaching, but I am looking forward to auditing the next series of classes and to continually improving my own finances and financial knowledge. I expect that some portions of this will be difficult. For example, I found myself on edge after class when a fellow student (a banker) told me I should switch to a different type of IRA account. I had been so proud of myself for contributing money and felt instinctively defensive about someone saying I was "doing it wrong." But conversations like these shed light on the challenges to the behavioral change at the core of financial education (by changing, I admit my old method was wrong, and that, perhaps, I was not managing my finances optimally). The growing pains I feel are likely going to be shared if not magnified by clients who have less income than I do and greater responsibilities (husband, children, mortgage, etc). So really, the more awkward moments I have with my own finances, the better I will understand the perspectives of those I aim to educate and empower.

*In this case, I think it would be fair to point out the benefits of opening a bank account, but to emphasize that paying bills on time and effectively managing money are the top priorities.

Fringe banking and Broke USA

2011-03-18T20:07:00.000-07:00

So I'll be brave and admit it: when I first heard about check cashing and payday lending I thought, "What's the big deal?" Some people don't like banks - a sentiment we can all appreciate these days. Maybe they prefer to go to a smaller place that has a more "community" feel to it, people who know your name and treat you like a respected customer even if you shop at thrift stores. And, of course, there's the issue of access: alternative financial institutions have more branches in low income areas and they stay open later, which is important if you are working two jobs or commuting via public transit. I figured as long as we kept pushing for traditional alternatives and equal access to traditional financial products, people could take their pick.

Then I started reading Broke USA by Gary Rivlin. Now I seriously wonder if loans sharks might be a better choice than these fringe finance companies.

These guys have earned their "predatory" label with more than a few questionable tactics. Back in the 1990s, it was a common practice for subprime lenders to target individuals with high equity in their homes, typically uneducated women who lived on fixed incomes. The predatory targeting was accomplished by reviewing residential tax records to see who had fallen behind in tax payments. Cross reference with obituaries and, voila! potential customers identified. This business approach makes me squeamish, but the truly revolting part is what happened after loans were made. People who should have been enjoying well-deserved retirement, were forced to go back to work or even to give up their homes to pay off the exorbitant fees of their loans, fees they did not understand when they signed because they got lost in the paperwork.

Now you might be thinking: "Subprime? Hidden fees? Foreclosures? This is old news. Haven't we figured all that out with Dodd-Frank?" Well, no. The financial crisis exposed subprime mortgage practices, such as those I describe above and worse, but payday lenders are still thriving in all parts of the country. They loan out small amounts of money, typically $350, and a fair number of customers get trapped in the loans. They become repeat debtors because they live paycheck to paycheck and the fees never give them room to recover. Some people end up borrowing from multiple companies after they get in too deep the first time - and at that point they need a third party cash infusion if they ever want to break the cycle. So maybe mortgage regulations will get back on track, but there's still whole industry profiting off America's most vulnerable.

I think regulation will help with these issues, but it's no panacea. People have a right to make poor financial decisions. The words and the fees should be clear, and safer, more reasonable products should be available (see the latest Bank on San Francisco paper), but the only thing that will stop bad decisions is greater financial awareness. Unfortunately, building this awareness requires fundamentally altering consumer behavior, and that task is enormous. In the interim, I think the best way to solve the issue is to stay politically involved and to volunteer with organizations that provide at least a small injection of awareness into the next generation.

< Shamelsss plug: support my Junior Achievement Bowl-a-Thon team on March 26th! >

GW's new focus on financial education

2011-02-21T19:50:00.000-08:00

We all know that there is a serious lack of financial education in this country. It's not in schools and it's not the sort of thing you can count on the private sector to provide in a fair and unbiased way. No, most of the time financial education is passed down from parents, and that doesn't work out too well for kids whose parents never learned the basics. But where do you start with this sort of issue? I'm not a financial guru, at least not yet, so making a difference here was relegated to my "To Do" list...until I met John and Amir.

These two GW MBA students have started a volunteering program that connects their classmates directly to members of the DC community. The idea is not that the students will be financial experts, but that they will serve as catalysts for discussion about financial matters and investment in education. Each volunteer will serve with a nonprofit partner (Capital Area Asset Builders, Junior Achievement or Operation Hope) and then share their experiences with their classmates. The latter piece is critical as it allows John and Amir to guide discussion about innovation in financial education and financial behavior.

This volunteer program was in no small part inspired by Dr. Annamaria Lusardi, a recognized expert in financial literacy and a new addition to GW's faculty. During the February 16th launch event, Dr. Lusardi gave a fascinating and concise overview of how the societal shift to defined contributions gives workers increased financial responsibility without giving them additional training in financial matters. Her study of financial literary, which she presented to the Financial Crisis Inquiry Commission in 2010, reveal a disturbing 70% of Americans cannot correctly answer basic questions about finance. All in all her presentation was a sobering call to action.

But the kickoff session left me feeling optimistic. Over twenty students packed the room, sitting on tables, standing in corners and overflowing into the hallway. This type of interest might be understandable for a new club the first week of school, but not for something starting several weeks into second semester after it's become clear what it means to take five simultaneous graduate level courses (the requirement for the first three modules of GW's MBA program).

During my time at GW there was precious little interest in financial education or problems of domestic inequality. I was the only person in my year who wanted to pursue a career in domestic community development. So for me, John and Amir and all the students in that room represent a new direction for the school, a direction that includes meaningful community service opportunities and more attention to the financial disparities that divide DC and this country.

Poverty at home

2011-01-03T20:50:00.000-08:00

So way back in 2010 Rachel Black wrote a great post for New America cleverly titled, "Financial Insecurity: It's Not Just for Poor People Anymor e." In the article she discusses the sobering results of a December report entitled "Standing on Shaky Ground: Americans' Experiences with Economic Insecurity." Black makes an apt metaphor comparing financial insecurity to a sort of creeping series of setbacks, the type that might make you late for work in the morning and then spiral into a really bad day and a worse week. The financial "buffer zone" like that morning "time buffer" diminishes, then goes negative, then spills over into every aspect of our lives as work, love and personal lives are all thrown into disarray.

Black couches her post in terms of recent statistics, but it strikes me that the economic crisis is merely highlighting a problem that most people don't think about during the economic good times: the increasing level of poverty in the United States. Tempted last week by Mint's Twitter feed, I took a look at their graphic on poverty in the United States (conveniently embedded at the bottom of this blog page). It's quite disturbing. All the social progress we've made in terms of equal rights over the past 50 years, is not enough to right economic disparities. In fact, those seem to be growing. All of this is to say that people right now aren't so likely to say poor people should just "get a job." But if the economy recovers this year, as we all wish it would, let's not forget what we've learned about how all of us can be vulnerable financially.

Exactly who are we helping again?

2010-09-23T18:15:00.000-07:00

So I've always been a big fan of using business practices in the nonprofit sector. I've subscribed to the Stanford Innovation Review, listened to podcasts, attended lectures and taken a class to learn more about concepts like "social enterprise" and "scalability". I've enjoyed all of these things and I value what I've learned, but lately I've been thinking about something else: does all the focus spent on these things distract from the real mission of serving the target populations?

Since graduating from college I've worked or volunteered at what I consider to be many of the most cutting edge nonprofits out there. These are places that are looking to set new standards for tackling difficult socio-economic issues, and which have garnered recognition from some pretty darn important people and organizations. Yet, I only met with a handful of the people who I was working all day to serve - and lately I've started to think that's a problem.

Most of this is my problem for not finding a job in direct service, but there is also a real way in which the distance from the target population threatens to undermine even the best-intentioned ideas. For example, if you are trying to create a national impact with a new program, do you sell your ideas to those at the top or do you build locally? The latter is a really painfully slow process that could sap your budget before you get off the ground, but going to the top might mean you're designing a solution that fits your idea of the problem, but may not fit the reality.

I mean, maybe you want to reduce depression among the elderly by giving everyone a pet. You make people happy, you get animals out of the shelters. It sounds great! No one has ever pulled it off and you'd be the first the tackle two huge issues at once. You make a dynamite presentation to the president of the ASPCA, you get funding from a rich elderly cat lady in Long Island and all your surveys of the target population show they want animals. But then later it turns out the Chihuahuas and tabby cats you've given out are not nearly as effective as low cost prescriptions of Prozac. You might have been interested in that as a solution back in the day, but it wasn't sexy and you weren't going to win any awards for that. It's also not scalable because it depends on some kindly local drug manufacturer (try not to laugh) that doesn't produce much.

So my question is, when we spend all our time pushing for new and exciting solutions, are we really serving who we say we are? I worry that the need to be "scalable" or "innovative" can be a distraction and can box us into solutions that aren't really right for those in need. I don't mean to imply that nonprofits should stop caring about any of the concepts I've mentioned - quite the contrary. I do think, however, that it's important to regularly communicate with those who we serve and to really listen before we get wrapped up in ourselves.

Financial reform legislation is here! Now what does it mean?

2010-07-19T18:24:00.000-07:00

So I was wrapped up in work and life last week and despite waking up to NPR every morning I somehow still feel I need more information about the giant financial reform bill (H.R. 4173) that passed in Congress last week. This bill is a really BIG deal. Some relevant summaries are here and here. Highlights are below:

It creates the much-anticipated Consumer Financial Protection Bureau within the Federal Reserve. This includes an Office of Financial Literacy.
It enables consumers to get a free credit score as well as a free credit report.
Interchange aka "swipe" fees are likely to be regulated soon.
Borrowers will be required to document their income.
It theoretically protects against "too big to fail" by assigning regulators more responsibility and by focusing on large financial institutions, not just banks.

The first three components seem the most positive. The borrower documentation rule is quite logical, but I wonder how low income workers paid in cash or paid irregularly, will fare with access to credit. The last bit is a large task, and an interesting Huffington Post article is available here. Author Richard Reich takes a cynical view of the new legislation's ability to prevent taxpayer bailouts in the future.

Personally, I am torn about this legislation. On the one hand, it's important to make big financial institutions accountable and to have an office charge with the responsibility of consumer welfare. On the other hand, this could just be another layer of weak laws and redundant set of financial education tools that does nothing to fundamentally shift the balance of powers between taxpayers, low-income workers, and giant financial firms. Part of the problem seems to be that this law has diverse goals: to both chastise corporate wrongdoers and to devise a better government consumer watchdog. These things may be related, but they require fundamentally different approaches since they serve two different audiences.

Time will tell, but as happy as I am about the general idea, the details are what will matter in the long run. The CFP Bureau will need some serious insider support if it is to make a significant impact on social and financial dynamics in America.

Nickel and Dimed

2010-06-27T21:41:00.000-07:00

I don't know why it took my so long to read this book. I guess I thought it was be a long, angry political piece. Instead, this book is a funny, honest, engaging book on the complexity of poverty at home.

Author Barbara Ehrenreich, a writer by trade, gave up her creature comforts to work in three different cities in the United States. These jobs, by themselves, were grueling and thankless. She gained great insights into the ways that exhaustion of mind and spirit contribute to negative changes in attitude and character. She also found a huge basic financial problem: housing, transportation and medical costs always outweighed what she could earn. This was in spite of making extremely economical choices in her purchases. The math just didn't add up. In all three cases she quit without being able to consistently achieve income levels higher than her monthly expenses. Saving, especially long term saving, was out of the question (EARN and Opportunity Fund staff might disagree with this statement, but, then, matched savings accounts are popular precisely because they offer you the ability to save more than you actually have).

This economic fact is startling because her experiment took place before the current recession (the book was published in 2001). It is an unpleasant to think about what her stories would be now. Ms. Ehrenreich makes the wise observation that much of anti-poverty policy is directed toward jobs when, really, it can only be effective if the whole mess of systemic failures (housing, health, jobs, transportation, child care) are addressed simultaneously. This is a tall order. It is unsurprising that no one giant government program has successfully managed to execute this type of policy. Yet, there could be better results if agencies coordinated better. This is an area that has long been under discussion, and I will need to research if any progress has been made.

For more information about the Nickel and Dimed, check out Ms. Ehrenreich's website, especially the book FAQs.

Marketing domestic development

2010-06-09T18:10:00.000-07:00

Last night I accompanied a friend of mine to an information session for the Acumen Fund Fellowship. Most people who have heard of Acumen Fund know it through the book "The Blue Sweater" which describes the founder's journey into a career in international development and social enterprise.

The constant references to the book made me think about awareness of international development, and how the appearance of catalytic books might be playing a role in the international community development movement, particularly in microfinance.

When I hear someone mention The Blue Sweater or Banker to the Poor the person is usually passionate about the causes described therein. It is not the writing that mattered, but the content and the awareness that comes with having read about people and places very unlike your own. The great need described in these types of books is a welcome call to action for young people who are seeking meaning in their professional choices.

So my question is, are there equivalents of these stories for domestic development? The movie Precious touched upon some of the themes of poverty in the United States. The book Nickle and Dimed highlights these issues in a more intellectual and more comprehensive manner. However, these stories don't speak to the entrepreneurial spirit latent within many of the aforementioned young professionals. I think the U.S. microfinance movement needs its own book about the great struggles that still exist in this country and how small businesses are creating opportunity, spreading hope, and building community. The latter is key because it is optimism that inspires people to change their lives, to give up what they have for the chance at a better society. Grameen Bank is famous because people feel they embody microfinance abroad, which itself symbolizes a new and successful way of addressing poverty.

I think a well-known group like ACCION USA might be able to offer a fitting lense through which these stories could be told nationally and internationally. However, even a small nonprofit that has direct service experience might be able to tell this story in a way that would make the message "stick".

The most fascinating part of last night's discussion was how Acumen trains its fellows: one of the exercises is to have the fellows, who are from all over the world, access U.S. social services. They are given $5, a metro card and a blank check for donations. They have less than 24 hours to find and use social services. This exercise would be a good publicity opportunity for a nonprofit that had a volunteer and good writers on staff.

Take-aways from Microfinance USA

2010-05-23T12:10:00.000-07:00

After 2 days of listening to great minds speak about domestic microfinance, my head is swimming with lessons learned and thoughts about the future of the field. A few thoughts are:

1. US microfinance desperately needs marketing assistance.
Many of the conference participants were there, oddly enough, because they were interested in international microfinance. Their questions revealed that US microfinance continues to be poorly understood. Many people do not comprehend the depths of poverty here. As a result, they do not see the importance of US microfinance, let alone other asset-building strategies like IDAs.

2. Much more research needs to be done on why low- and moderate income people choose alternative financial services like payday lenders.
Many organizations at the conference have made great strides in this research. However, I wonder if we have spent too much time trying to change behavior and not enough understanding why it exists. My specific concern is that LMI people are assumed to be homogeneous. As Andrea Levere of CFED remarked, there are perhaps as many reasons for poverty as there are people who are poor. This task is not easy. It may be very important in the future to try end segment the various types of low-wealth individuals before drawing conclusions.

3. Great innovations are happening in our own backyard.
I was thrilled that Mayor Newsom spent so much of his speech discussing Bank on SF, that Ben Mangan of EARN brought up prize-linked savings accounts and that the behavioral economics panel presented so many interesting studies on how to increase savings. With a goal like "poverty alleviation" we will always have work to do, but the tireless energy of those in the field is inspiring.

Microfinance USA Conference tomorrow and Friday!

2010-05-19T13:20:00.000-07:00

My apologies for the delay in this latest post. A little thing called graduation intervened.

For the second year, Opportunity Fund is spearheading an effort to bring together domestic microfinance providers for a big conference on the subject. The conference will feature all the key players including:

ACCION USA
Kiva
Silicon Valley Microfinance Network
First Lady of California Maria Shriver
Mayor Gavin Newsom of San Francisco
Self Help (Martin Eakes previous profiled in this blog)

For some background on the conference and some of the hot topics in the field - Kiva's lending to organizations vs. individuals, fair interest rates per the NY Times article, and more - check out today's KQED segment on Forum: http://www.kqed.org/radio/programs/forum/

The piece is great because it features Eric Weaver, CEO of Opportunity Fund, and an Opportunity Fund client who discusses the lending and learning process. Sean Foote of the Davis-based Freedom from Hunger also discusses some of the big events in the field. Foote also touches upon the limits of microfinance as a tool to "alleviate poverty".

Nonprofit Enterprise class has come to an end

2010-04-29T17:54:00.000-07:00

I am both sad and overjoyed to be at the end of my GW classes. My final Nonprofit Enterprise class last night was the perfect way to end the academic adventure that has been the last two years in b-school. I came here wanting to do social enterprise, but to first improve my quantitative skills. In the first semester I learned accounting, statistics, Michael Porter models, best practices in PowerPoint, and why pools of risky mortgages don't deserve high bond ratings.

After a grueling first year of 5 classes per module, a nonprofit internship, a consulting project at Tonic Restaurant, and a seat on the Net Impact Board, I was ready for a break. Or so I thought. The call of San Francisco was too much to resist. I spent a summer doing market research on small businesses and learned why paper checks are so hard to get rid of. Fall of 2009 was by far the biggest challenge with 20-25 hours/week of work and about 4.5 classes, including Corporate Finance and Financial Statements with the fabulous Prof. Kang.

But I made it through to take the kind of courses that had brought me here in the first place: Nonprofit Enterprise and an independent study on the Community Reinvestment Act. I have surprised myself with my ability to take on so much and do so well. The people I have met have inspired me to find my inner awesomeness and to go do big, wonderful things in the world. This, of course, is not an end but rather a beginning. I am grateful to my friends and classmates who have helped me on the way and to my mother for patiently listening. It seems that the biggest challenges really do bring the biggest rewards.

Ceremony for first ever GW Certificate in Responsible Management

2010-04-15T20:18:00.000-07:00

Tonight was yet another first for George Washington University School of Business - right in line with last year's launch of a new more socially responsible curriculum was a new Certificate in Responsible Management (CRM). The certificate is modeled after the 6 Principles of Responsible Management Education (PRME) as laid out by the United Nations. In its current form the CRM includes requirements for at least two semester-long classes in courses relating to these principles, 50 hours of service learning, and 15 hours of extracurricular activity for 3 semesters. It also includes regular blogging about these activities.

This idea was the brainchild of the amazing Ari Isaacman, Net Impact club co-President. She worked with the equally civic-minded Lisa Manning of the MBA Association to develop a concrete set of guidelines for the certificate and to get them approved by our Dean Murat.

This year new Net Impact Board Member Eliza Roberts has worked tirelessly to bring to program to life. Her latest innovation is the group blog where applicants can talk about their good deeds and class lessons.

And finally, after everyone's hard work, we were able to give away the first certificates, one of which has gone to yours truly. I am grateful for everyone who put such hard work into making this opportunity possible, including Professors Fort and Forrer as well as the GWU administration. I hope that this event is the start of more programs like it at schools around the country. I also want to express appreciation, once again, for all my fellow Net Impact Board members from last year. I know you all probably did enough to merit a certificate, even if you didn't apply for one.

Readings in philanthropy

2010-04-11T07:57:00.000-07:00

This week's Nonprofit Enterprise class focuses on philanthropy: what it is and how it relates to the nonprofit sector. The specific focus is on "high-engagement philanthropy," and related trends to make nonprofits more efficient. The latter is generally focused on taking business strategies and applying them to nonprofits. For now, an overview of what philanthropy is:

Peter Frumkin argues in his book, Strategic Giving: the Art and Science of Philanthropy, that there is an important distinction between charity and philanthropy. The former is an unconditional gift to the needy, while the latter is about addressing the root causes of the problem and creating the opportunity for self-improvement. He puts forth five purposes for philanthropy:

Create social and political change from the status quo
Support innovation by funding demonstration projects that can be brought to scale
Redistribute wealth
Support pluralism, i.e. perspectives on problem-solving that many not reflect the views of business or government
Meet the personal and psychic needs of the donors

He acknowledges the controversy of the last statement, but argues that it is necessary to the continued success of philanthropic giving. The danger, which he discusses, is that individuals make philanthropic actions to further their own reputation without a regard for the higher purposes of the causes they fund.

I agree that this last purpose is important for discussion because ignoring it distorts the reality of why people give and limits the discussion to complaints about the whims of donors, rather than permitting a larger scale conversation about how to meet both donor needs and the needs of the cause. In this sense, donations are like partnerships, where both parties should derive some benefit from the interaction. Granted, the donor should ideally subordinate his or her personal desires to the larger needs of the cause. However, personal desires fuel great initiatives and it would be unfair to think the donors are simply check-writing machines with no personal feelings. Their passion for the cause in question can help overcome obstacles and bring new resources to the table.

Katya Andresen visits Nonprofit Enterprise class

2010-04-05T20:27:00.000-07:00

Well, tonight may have been our best Nonprofit Enterprise class so far. Prof. Worth has yet again called in a great speaker. This time it was the author of "Robin Hood Marketing", Ms. Katya Andresen, who I wrote about in an earlier blog.

Ms. Andresen treated us to an inspiring talk about how to refocus nonprofit messaging on the audience(s) and even gave us specific advice on our specific challenges at work. My mission is now to convince my boss that, yes, we do need a thank you message in that weekly email and a few words about the success of our campaign thus far -- even if we haven't yet reached our goal of getting legislation passed. Other classmates asked about topics like reaching a new donor demographic and crafting messages for cultural nonprofits.

To tell the truth, I was surprised when class ended 20 minutes past our usual time. I am re-energized to take a fresh look at my own nonprofit messaging and the messages I pass on the metro everyday. I also have plans to read about behavioral economics, a topic that has interested me for some time. Ms. Andresen suggested the following books:

Switch by Chip and Dan Heath
Priceless by William Poundstone
Predictably Irrational by Dan Ariely

Community Reinvestment Act research

2010-03-19T17:53:00.000-07:00

This last day of my Spring Break wraps up what has possibly been the busiest 10 days I have had all year. Between meetings for my case study on Kiva and Opportunity Fund, I found time to do three interviews for my independent study project. The interviews included talks with an industry expert and two large bank professionals who have experience in CRA compliance. Large banks are defined by the CRA to mean banks with assets of $1 billion or more.

All parties were supportive of CRA and the role it has played in raising awareness about the existence of a market in lower income areas. However, all cited compliance as a significant difficulty. From a bank's perspective, CRA can be a rather large burden, though no one explicitly said that. The process of examining a Large Bank, as identified by the FFIEC, takes around two years. That's right, years. Examiners come from Washington DC, usually with a background in compliance/auditing, and check off boxes and run numbers for a few months, then go home to finish their analysis. What I disliked was that I heard little about examiners actually talking to community members. It seems they rely on the numbers and the written statements of the banks to justify their final decisions. Now, I am still compiling data, but these are definitely areas I will continue to explore.

The observation that has surprised me the most is the general lack of clarity about a) how CRA works since only professionals really know this, and even the government regulations aren't clear and b) that there don't seem to be clear ideas of what an effective CRA Investment Test would look like. By the latter comment I mean that there don't seem to be clear, universally agreed-upon measures of how to tell if the regulation is actually improving the lives of the populations that are supposed to benefit. This issue is one I plan to explore more in my upcoming conversations with nonprofit organizations a.k.a. advocacy groups since they may have some specific ideas about what the community might look like post-CRA assistance.

I am encouraged, however, that there seemed to be a good deal of support for regulatory changes and the Community Development Test for large banks. This is the same test currently applied to intermediate small banks and it would replace the Investment Test, which may not be as effective as desired (this is the question of my paper). Enterprise Community Partners has written a letter to the FFIEC which advocates for this reform among others.

Clarification of how Kiva lends to domestic borrowers

2010-03-16T11:43:00.000-07:00

Last week I met Giovanna Masci who spearheaded the aforementioned partnership between Kiva and Opportunity Fund. After speaking with her I feel obliged to correct a statement in my last blog.

I said that borrowers were being asked to trade privacy for a loan they would not otherwise receive. This is innacurate. Loans are given and then it is up to the borrower to decide whether he or she would like to be profiled on Kiva's website.

ACCION USA and partnerships

2010-03-09T05:26:00.000-08:00

On February 26 I had the opportunity to speak with the lovely Elizabeth Garlow of ACCION USA, who kindly donated her time to speak about ACCION's financial education program and corporate partnership with Sam Adams/The Boston Beer Company.

I was impressed that there was so much consistency between the organizational strategy outlined in my previous ACCION USA interview and the strategies discussed today. ACCION USA has a staff size that is small enough to facilitate communication, but still, it is impressive considering the array of programs they operate.

The corporate partnership is entitled "Brewing the American Dream" and it has two main parts: a loan fund and a networking/coach event program. Both are focused on New England entrepreneurs in the food, beverage and hospitality industries. The latter is especially exciting for me because it goes beyond funding to the all-important "meeting the right people" part of business. Sam Adams, like the good corporate partners we discussed last week in class, offers the skills of its employees for the benefit of the entrepreneurs. This helps builds support for the program within Sam Adams and motivates their employees, all while performing a much-needed community improvement function. ACCION is able to offer higher quality networking and professional services, which contributes to successful small businesses who may wish to use ACCION USA as a future lender. The events also build trust between the nonprofit and potential clients, again increasing the probability that ACCION USA may be selected in the future as a lender.

I am not yet clear on the initial terms of the partnership, but from what I heard there is a strong likelihood that it will continue to expand over time. It has all the hallmarks of a win-win partnership, which should increase its durability. Of course, the true test is what happens when the key team members step down and someone else makes the decision to maintain or discard the partnership. However, given all the positive press both companies have received (Fast Company, CNBC, CNN), any new person would be motivated to keep things going.

Net Impact and the Board Fellows Program

2010-03-08T21:08:00.000-08:00

Before I even arrived on the GW campus in 2008 I knew I wanted to participate in the Net Impact club, not just as a member but as a member of the leadership team. Net Impact is a chapter-based nonprofit organization dedicated to using business skills to advance social causes - a perfect fit for me and my career ambitions.

Before the annual elections I became involved by participating in the Board Fellows Committee. The committee was new to our chapter, as was the entire Board Fellows program. Second year MBA student proposed the idea to a group of us, and we quickly decided to push forward with the idea. My friend Danielle, future VP of Public Engagement, quickly took the lead, although you might not know it from her humble description in her blog.

A second year MBA, Nikyia Rogers, and first year MPA student, Mehreen Hossain, headed up one of the most important parts of the committee: nonprofit engagement. They promoted our cause by reaching out to our community contacts, explaining the program, and soliciting applications.Meanwhile a MPP candidate, Erin Meter, worked with me to advertise the program to potential student applicants at the public policy and business schools.

What was so great about the process was that it brought together two separate schools on campus into a common program. It also helped nonprofits learn about GW, and students to learn about practical applications of academic lessons. One of the most useful pieces of our program was the monthly meetings that selected students held with each other as they went through their placement. Their dialogue allowed them access to a variety of ideas from other students, as well as a support network if problems arose. As Danielle notes in her post, it was a highly successful first year and we have continued the program under new leadership this year.

Kiva, poverty, and the public eye

2010-02-19T12:59:00.001-08:00

Recently I have had the great opportunity to speak with staff at both Opportunity Fund and ACCION USA, who have helped me learn more about the year-old partnership they each have with Kiva.

The thing that has surprised me, but which makes perfect sense, is that some clients don't want to participate in the Kiva loans. Why would an low-income entrepreneur turn down access to credit in this economy? Because Kiva clients post their name, photo, and location on their website.

Gina Harman, CEO of ACCION USA, launched a giving campaign last year entitled "It's Not Charity" which makes the business case for this type of economic development through lending. So the Kiva partnership is not about charity, but clients identify Kiva with indigent people in foreign countries. Kiva, in many people's minds, is branded as "helping the poor". For some small business owners, this is not an association they seek. Their reputation as independent may be very valuable in the community, but [corrected lines] being profiled on Kiva may support their business. In some ways it seems unfair to ask for this, but the truth is that pictures and personal stories are a big part of what has made Kiva successful. The concept is that we are more likely to give or loan money to an individual we can see than one we cannot. Specific details, especially names, photos, and stories, create a shared bond between potential lender and borrower.

What's the answer to this situation? In some sense this is just another business decision for the entrepreneur. But in another sense, this choice creates a barrier between those being helped and those doing the helping. This is because there is a public admission of need, which leads to a feeling of inequality between lender and borrower. The need is being met, and the entrepreneur has agency to decide the best path -- but, would you do it?

The reality is that wealthier people have wealthier friends who are sources of capital in tough times. In contrast, poorer people have poorer friends and thus require someone or some entity to fill the gap. Is the answer more mixed-income communities? Perhaps. But then we choose friends within our income bracket partly because inqualities can lead to tension, distrust and conflict, as a New York Magazine article outlined.

It is a tricky social puzzle to navigate, and just one of the many pieces that makes community development so difficult.

Financial education in the classroom

2010-02-15T15:54:00.000-08:00

The financial behavior I studied last summer started long before our research group entered the adult world.

Children are not always taught about money, especially not the more complicated aspects of building assets and obtaining and maintaining credit. Yet, if they do not learn this behavior in school, then one must hope their parents can educate them, which we know is not always the case.

Last Spring my classmate Karan and I taught five one-hour financial education sessions to children at Key Elementary School in Maryland with the help of Junior Achievement. I will admit up front that we were hardly able to teach the 1st graders about IRAs or credit scores, but it was a valuable (and fun) experience for all of us.

Karan and I laid the foundations for more advanced concepts by discussing "Our Community". Junior Achievement developed the curriculum so that all we needed to do was read through the lessons in advance, and then bring the required materials with us. Activities ranged from eliciting definitions of the aforementioned concepts to placing stickers on community maps and, my favorite, demonstrating assembly line production.

The lessons were fairly simple, but some students definitely caught on more quickly than others. The first day only a few definitions of "business" and "community" approached a real understanding of the concepts. However, by the end nearly everyone could give a more detailed and confident response.

Will our five lessons make these students into excellent money managers? Probably not. However, if this type of education were to continue, especially in the higher grade levels, then it would certainly have the potential to change behavior. APLUS targets college students because students often make very important choices about finances between turning 18 and graduating from college. Poor decisions can lead to massive credit card debit while good ones can establish a credit history and enable the student to find housing more easily.

This is a good targeting strategy for immediate financial lessons. However, it would be most powerful combined with a program like Junior Achievement that establishes a care of money at an earlier age. Without that mindset, and the attitude that a person can successfully enter the workforce and go on to college, more specific instruction about IRAs and credit scores is quite difficult and the effects may not last beyond the crisis period. Ideally, parents would be educators and role models for how to manage money. However, the reality is that many children do not receive this education, and that they participate in consumerism without awareness of the consequences. Since the effects of poor financial decisions can last a lifetime, I believe every child should learn about money outside of the macro lessons presented in economics class. That would help equalize opportunity early on, before cycles of debt and poverty block upward mobility and financial security.

Our local Junior Achievement's newest project is a finance park for middle school students. I can't pretend I know how effective it will be, but I am supportive of any serious capital investment that raises the standards for financial education.

Martin Eakes, Self Help, and what I dId last summer

2010-02-06T08:38:00.000-08:00

Yesterday I listened to an absolutely amazing podcast lecture given by Martin Eakes, CEO of Self Help. Mr. Eakes is a Southerner with a great accent and an even better sense of humor and humanity. He grew up amidst poverty and racial strife and has made the decision to use his charm and intelligence for the good of Americans who have not had the same opportunities as himself.

The first part of his lecture describes some of the problems with payday lending and check cashing, and this reminded me of my research work last summer with Bank on San Francisco. As I have mentioned in previous blogs, Bank on SF is an innovative program designed to give lower income San Franciscans access to credit and fair financial services. By fair I mean that the program is developing products tailored to the needs of this economic group, with the help of financial institution partners like Bank of America, Wells Fargo, and local credit unions.

My research last summer centered on payroll methods. Check cashers are able to operate, even in community-minded places like San Francisco, because employers of low-income and middle-income workers pay their employees in paper checks. Thus, the Bank on San Francisco team decided to research the potential for conversion to electronic payroll methods. This would mean that employees would open bank accounts, perhaps through the Bank on SF program, and thus gain access to credit building, money management, and savings programs. The program is made possible through a network of private-public-nonprofit partnerships.

It turns out that that two big barriers to direct deposit are trust related:

Distrust of the traditional banking system, often due to previous bad experiences like high fees for bounced checks or debit card overdraft.
Distrust of electronic payments. Employees feel more financially secure when they physically hold their paycheck even though this may put them at risk for theft and require additional resources (time, bus fare, check cashing place) to turn into cash.

A third barrier is costs to employers. Sometimes payroll companies charge more for direct deposit even though it may cost them less. thus, employers lack incentives to learn about direct deposit and try to educate their employees.

So any solution to the problem of check cashing is going to require trust building and education, both of which are quite difficult. Luckily, two fabulous CFED Innovators-in-Residence are working on the problem: my former manager, Eugenie Fitzerald and behavioral economist Mindy Hernandez are continuing work on the project. This blog will be updated when more information is available. This could be as early as Spring of this year.

Overall, this was a good experience that developed my capabilities as a future professional in the community development industry. My biggest learning experiences were around managing and developing complex partnerships. Our project had even more stakeholders than the existing Bank on SF structure so it was a valuable and challenging exercise to map out how to gain buy-in from everyone.

CRA and the Investment Test

2010-01-31T07:21:00.000-08:00

MBA students are not required to do a thesis at GW, but being the former liberal arts major that I am, I have invented a psuedo-thesis for myself in the form of an independent study. Why, you ask, would I do such a thing when I could be relaxing in a Negotiations or Corporate Strategy class?

There are many reasons I have taken on this task, including an inexplicable desire to do difficult things. However, the fact is that my interest in domestic community development is not widely shared on campus and this is one of the only ways for me to learn more about the mechanisms by which community development occurs in this country. The 1977 Community Reinvestment Act is one of the most important pieces of legislation in this area, because it requires banks to "give back" and this is often accomplished by bank investments in Community Development Corporations (CDCs) aka those nonprofits which have inspired me to complete my degree and make a difference in the places I call home.

I have chosen to focus on the Investment Test, one of the three tests that constitutes the CRA (the others are Lending, 50% and Service, 25%). There is already a good deal of research on lending data, but it is unclear how exactly banks comply with the Investment Test. Sometimes they makes grants to CDCs, other times they use Mortgage-backed securities, and often they use investments in affordable housing via mechanisms like the Low-Income Housing Tax Credit. My goal is to look at two of the Big Four, Bank of America and Wells Fargo, and understand what they chose to do in California, my home state.

Like many researchers, I have struggled with access to data. CRA Performance Evaluations are public information, made available through the FDIC, OTS, OCC and Federal Reserve. However, while the PEs report the total amount of the Qualified Investments, the percentage breakdown is less obvious. I plan to comb through the text of different Assessment Areas and break out the available numbers. Then I will compare the results of the two banks as well as the differences in results between Assessment Areas.

It may not sound like the riveting project you would have designed for yourself, but I am happy to learn more about this important topic, and to have an excuse to talk to industry professionals about their opinions of the regulation's effectiveness. Stay tuned.

Robin Hood Marketing

2010-01-31T06:41:00.000-08:00

This week in Nonprofit Enterprise we are reading Robin Hood Marketing by Katya Andresen. Why Robin Hood? The subtitle is: "stealing corporate savvy to sell just causes."

What I like about the book is not the gimmicky folktale reference, but rather the emphasis on understanding the audience rather than selling the cause. Too often we become self-absorbed, thinking we have all the right answers and we simply need to convert others. This can be especially powerful in a group of likeminded people, as is often the case in nonprofits.

While nonprofits do have many useful answers (I avoid the word "right"), the conversion approach is limited. If, for example, we want to motivate people to stop drug trafficking in Latin America, it would be a daunting task for our audience to learn about the history of this trafficking and all the mechanisms that make it work. Instead, we need to identify who exactly we are trying to motivate and what can motivate them to act. Andresen suggests focusing on low-hanging fruit, so perhaps college students or politically active constituencies with ties to Latin America would be a good start.

For motivation, I found a different example compelling: sending teens messages that smoking is bad not for its own sake, but because Big Tobacco was co-opting them for profit. This transforms the meaning of smoking and works with natural teenage rebellion, instead of against it.

One of the book’s more controversial arguments is that the intended audiences don't need to fully understand the issue; they simply need a reason to act and a concrete idea of what that action is (writing to Congress on X bill, for example). In some ways, this is disappointing because nonprofit professionals seek to educate their audiences and spread their passion. Yet, Andresen is correct that only a limited number of people can truly be converted. Most people want to act and then move on with their day, going back to the thousands of other things that make demands on their time and energy.

Ultimately I agree with Andresen's points, especially for issues that require a large volume of people to act. There are issues where a small, better-educated group might be more persuasive (scientists studying the effects of a particular environmental issue, for example), but, for appeals to the general public, a shallow understanding is better than none.

Most importantly, Andresen reminds us that for any cause, it is important to continuously check in with the target audience (after having defined it). Too often we think we have a solution to a problem and later our solution turns out to be insufficient or ineffective. Yet, by that time, we have become invested in our way of doing things and distanced ourselves from the people we claim to serve. If readers take nothing else from the book, at least they can remember that the core of any successful organization is adaptability and responsiveness to key constituencies.

Nonprofit Enterprise class

2010-01-23T06:49:00.000-08:00

As part of my application for the new GW Certificate in Responsible Management, I am writing about coursework related to the goals of PRME. I am just starting a great class entitled "Nonprofit Enterprise" which deals with business strategies in the nonprofit sector.

This week we will discuss a fabulous book entitled Nonprofits and Business by Joseph Cordes and C.Eugene Steuerle. I have only read the first chapter, but I am confident the rest of the book is equally interesting. The most interesting questions posed by the first chapter are:

How can nonprofits use business strategies without causing mission drift?
How do we define social enterprise? The US definition appears more narrow than the European one.
Is a hybrid structure a good idea? It has certain advantages in revenue capabilities and disadvantages in terms of complexity, staff time, and potential mission drift.
Is it a good thing that many foundations are pursuing social investing, combining their charitable activities and their endowment building?

The chapter is also good at demonstrating how nonprofits, like private businesses, evolve over time. It highlights both structural change and internal change in staff thinking.

My opinion has been that nonprofits should generally make an effort to generate revenue independent of donors. This is based on my view of donors as rather short-term in their thinking and fickle in their support as they tend to exit after a few years, moving to the next sexy nonprofit topic.

However, the Stanford Social Innovation Review (podcasts available on this blog) has published some good articles highlighting the drawbacks (and the benefits) of business approaches to charitable activities. Especially relevant to this class was last summers article "The Hidden Costs of Cause Marketing" by Angela Eikenberry. This article argues that when people pay extra for a product due to its charitable intentions, sometimes they do not feel obligated to make donations. Cordes and Steuerle do not address this issue, but they do bring up the case of the American Diabetes Association's endorsement of low-sugar, high-calorie foods. This is cited as an example of potential mission drift and donor alienation.

This brings the discussion back to the differences between various types of nonprofits and a continuum of organizations serving a social purpose. On one side is traditional philanthrophic and charitable activity, no fees for service, all money from grants. On the other side of the continuum is private business that has a social or perhaps environmental mission: for-profit wind companies, for example. In between are nonprofits with earned income or hybrid structures (Pacific Community Ventures and Enterprise Community Partners would be examples of hybrid structures).

Commercialization and market principles certainly have benefits, but these issues are tough ones to tackle. Cordes and Steuerle conclude with this advice:

"The task is for policymakers and nonprofit practitioners alike is to learn when there are real rather than simply apparent benefits to integrating more businesslike features into their charitable activity's operation and to identify best practices for doing so." (P.19)

2010 Microfinance USA Conference in SF!

2010-01-12T15:11:00.000-08:00

Students get in for a low price. Last year's event was amazing and I would expect the same this year! http://www.microfinanceusa2010.org/home/

CFED's new website

2010-01-12T14:12:00.000-08:00

Last semester I worked with CFED as an intern/consultant on their website and on their Innovators-in-Residence program.

Today CFED has officially launched the new site design http://www.cfed.org/ (Old design was this)Check out their site and all the great work they do to help American's build their financial assets.

International Residency Nostalgia

2010-01-10T17:09:00.000-08:00

January marks the beginning of my final semester here at GW and brings to mind many questions, mainly "What kind of job am I going to have?" and "Where will it be?" It also reminds me that around this time last year I was mentally gearing up for our international residency project. I was in the Mexico-microfinance group on the Risk and Portfolio Management team. It was quite the experience since I had fairly minimal financial training before that. However, it was an immensely positive experience. I appreciated Prof. Bhatia's detailed training in how to analyze the numbers for a microfinance organization as well as the readings he chose and the visits we made to practicing microfinance organizations.

I was disappointed that swine flu prevented us from going to Monterrey and conducting on-site surveys of staff, but I was glad we had the opportunity to go to New York City and meet with Grameen America and Project Enterprise. The latter was one of the best experiences I've had through GW: a live group lending session. The reason it was so special? We finally put the method into practice.

Despite having studied group lending all semester, we were surprised by the process in terms of its organization and procedure. It was invaluable to have real people presenting real ideas sitting before us. I felt that everything we had discussed up to that point suddenly made more sense. It was also more meaningful, because the group was essentially debating the future of a business idea for one of the members. I would love for every student of microfinance to have a similar experience, even if only through a YouTube posting.

Our consulting project/residency ended with a final presentation to the team at a Mexican microfinance organization. I was impressed by the ideas of my classmates and by the serious way that the top management listened to our ideas. I am glad that another group of students will be able to have a similar experience this semester-and maybe they will even go to Mexico! The microfinance industry is not homogeneous, but it allows people like me to live by their values, i.e. live with a sense of purpose, and to put methods into practice. I feel the class gave me the framework to better understand poverty and poverty alleviation strategies. It also gave me specific skills that have improved my capabilities as a future community economic development professional.

Payday loan alternative in SF

2009-12-22T13:38:00.000-08:00

As usual, San Francisco is leading the way in innovative ways to address access to capital for our nation's poorest. Ok, I am biased. However, the team that brought us Bank on San Francisco now brings us payday loan alternatives that can help low-income Americans borrow money without paying interest rates in the triple digits.

Anne Stuhldreher of the New America Foundation, headquartered in Sacramento so I should give them credit, published an article yesterday in the Los Angeles Times describing the new product: Pay Day Plus SF.

Through partnerships with credit unions (San Francisco FCU, Patelco CU, Spectrum FCU, Mission Area FCU, Redwood CU and Northeast Community FCU) there is now a new product that allows for longer repayment periods at rates that, yes, are high (around the rate of credit cards), but not the ridiculous three-digit sums outlined here that can drive some people deeper into debt.

The program is risky, yes, because it is new. But if Mohammed Yunus can make it work, then maybe we can find a way too. There is no excuse for not trying. Certainly, the new product will help borrowers build their credit scores and protect them from the industry's worst abuses.

Shaun Donovan and Enterprise Green Communities

2009-10-21T20:07:00.000-07:00

Today Alexandra had the great fortune to attend the launch of the Enterprise Community Partners Green Initiative, which included a fabulous lunch, a gorgeous room the Newzeum, and a star-studded cast of presenters including CEO Doris Koo and HUD Secretary Shaun Donovan.

It was quite the event. Enterprise has pledged to build only new green housing going forward. There was a good deal of agreement among all parties that health, housing, transport and other social pieces need to be more integrated. Sec. Donovan gave a really wonderful speech, which was quite complimentary of Enterprise's work. He spoke specifically about some of his efforts to break down barriers between government agencies. The hot topic was Weatherization funds and how to bring those into multifamily affordable housing developments in addition to the traditional single family units.

Check out recent news for more info on the initiative:

Certificate in Responsible Management

2009-09-28T20:50:00.000-07:00

I have started the official process of applying for the Certificate in Responsible Management at George Washington University. The purpose is to give some academic rigor to the activities that are part of my life and to demonstrate to others that I have a serious commitment to continuing these types of activities in the future. As part of the requirements, this blog will describe some of her civic activities. Today's topic: Tonic Restaurant.

Fellow CRM applicant Andrew Dawson was part of this team as was Andy Ludwig (co-president, Net Impact 2008-9), David Kocher, Simoon Shiferaw, Devika Modak, and Giuliana Canessa (Net Impact President 2007-8). I was the team leader and appointed task master.

David Kocher was the initial impetus for this project. He had experienced doing environmental work and had connected with Tonic management about possibly doing a free consulting project for them to help them reach sustainability goals. Initial objectives included reduction of carbon footprint and improved recycling practices. The team divided these tasks into the areas of energy reduction and employee training. Our consulting process included:

Multiple observations of staff activity at different days and times of the week starting October 2008. We identified obstacles to recycling.
A group walk-through to observe power usage.
A meeting with the management.
Research into DC resources, recycling law, food donation options, certifications available and costs associated with them.
A detailed energy usage analysis combined with alternative energy cost savings analysis. Andy and David were instrumental in this.
The group discussed research findings and prepare a final report with recommendations. This was delivered in January of 2009.

It was impressive that all of us found time to get together and work on the project despite so many other academic concerns (five classes each quarter for the first year students, job hunting and internships plus school for the second year students). We were able to leverage not only our knowledge, but also work done by other companies and even other GW students, like one of our alums who works in alternative energy. Everyone in the sustainability community was really very giving with their time and information, and the group was great at dividing and conquering tasks.

In the end we learned a great deal about sustainability and how to implement our values. We presented a convincing enough report that the restaurant actually implemented the majority of our recommendations. We are proud that we could leave this legacy, especially because Tonic is such a great place to go after a long day of club activities and classwork!

New book on Housing

2009-09-27T10:09:00.000-07:00

Last Friday I had the privilege of attending a talk by David Erickson of the San Francisco Federal Reserve Bank as he presented his new book, "The Housing Policy Revolution" published by the Urban Institute. Mr. Erickson is an economic historian as well as a great source of information about community development policy in the United States. This was a great opportunity to hear about how housing policy professionals view the current economic climate. There was a good deal of attention on the Low Income Housing Tax Credit (LIHTC) and the drop in investment recently. there is also concern that all of the attention has been focused on single-family homes that went into foreclosure, and homeownership in general, rather than rental housing, which is an important alternative, and in some ways more environmentally efficient because apartment buildings house more people and can be located in places with good access to jobs and public transportation.

Since I am now interning for the Enterprise Community Partners policy team, this was a very relevant discussion. The key questions in the debate are 1) Is LIHTC ( affectionately pronounced "lie-tech") the best solution going forward? and 2) if it is the best solution, how do we encourage investment and broaden the investor base to include entities outside of commercial banking?

I am too new to this industry to even start to address the first question, but I do know that Enterprise is a very thoughtful organization and I support the proposals is making to amend LIHTC. In fact, I am managing a website for the Rental Housing A.C.T.I.O.N. coalition. I encourage people to read over our proposals and also give feedback on the website in general.

Kiva starts domestic lending program

2009-06-11T07:25:00.000-07:00

I am very pleased that Kiva has started a domestic version of its international micro-lending program. One of its partners is the San Jose-based Opportunity Fund, which is a great nonprofit that has been doing this work for a long time. Accion USA is also a partner in this work. They operate in Southern California, including San Diego. News coverage on this range from Good Morning America to the San Francisco Chronicle, and even BBC radio. Let's hope this opens eyes to the needs and the dreams right here in the States!

Enterprise Community Partners

2009-03-12T20:39:00.000-07:00

I have a meeting tomorrow morning with their policy director. I plan to talk about the great work Enterprise Community Partners has been doing in terms of collaborating with other nonprofits (ULI), offering comments to government (Housing and Urban Development), and procuring "green" housing tax credits.

I first found out about this group last fall when they won the "Fast Company" social capitalist awards. Check out the more recent article on their CEO: http://www.multifamilyexecutive.com/industry-news.asp?sectionID=528&articleID=871488&artnum=1

For a sampling of other news articles see their website: http://www.enterprisecommunity.org/about/media/enterprise_news.asp

Alex's new blog!

2009-03-11T19:24:00.000-07:00

Today I am officially becoming a blogger

mainly because I don't know where else to put all of the information that keeps coming to me. Right now I am focused on domestic community development so that is going to be the principal focus of this blog. This is my exciting article of the day:

When Banks Say No, Microlenders Say Yes

http://www.nytimes.com/2009/03/12/business/smallbusiness/12micro.ready.html?scp=1&sq=Micro&st=nyt#

Ben Managan of SF EARN also wrote an interesting piece about cell phone use. His blog is a great way to learn more about this field:

http://www.assetpolicy.org/blog/