New Programs: Safe Savings and Micro-Development Accounts

The CEF loan program launched in May of 2009 with a small-scale pilot application. Given the initial successes of the pilot launch, we have since begun building the foundations for program expansion, including outreach with youth and the Latino community, the addition of a small business-focused training module, and the opportunity to begin work in Durham, NC.

During the pilot launch, CEF staff and borrowers found that in the domestic context, and specifically within CEF’s target populations, opportunities for participation in safe, convenient savings programs that incorporate strict budget oversight and financial literacy training may actually overshadow the financial value of the loan itself. Borrowers involved in our savings program benefitted from limited access to cash and the opportunity to get banked, make personal investments, build a trusting relationship with their loan officers in order to co-manage a savings plan, and the personal accountability structures inherent to this relationship. This model of personal and intentional saving allowed borrowers to save towards larger career and business goals, prepare for emergencies or changes in living situations, and smooth income in spite of volatility. Furthermore, savings built through this program both facilitated transitions out of and prevented re-entry into homelessness.

Recognizing the value of savings to the ultimate development of the domestic microfinance industry, one analyst has noted that “while only some people want to borrow some of the time, most people want to save most of the time.” Within the context of homeless shelters, substance abuse rehabilitation facilities, transitional housing units, and low-income neighborhoods, residents experience a lack of access to the financial services that can truly motivate positive personal advancement. Residents with employment opportunities face difficulties in harnessing volatile income streams in a way that can proactively facilitate sustainable transitions out of homelessness—sometimes due to a subsisting addiction triggered by access to cash, limited financial education around issues of money management, or the lack of a bank account in which to save. The dominance of alternative financial services such as check-cashing outlets and payday lenders further disadvantages individuals within these communities who remain unbanked.

However, those who become banked are often unnecessarily burdened by overdraft fees and miscellaneous charges. The financial services sector is not built to meet the needs of low-income individuals and the costs of providing conventional banking services to these households have been identified as too high and not worth the risk.

CEF seeks to combat inequalities in financial service provision by providing assertive account management support and savings oversight to individuals who are either experiencing or at-risk of experiencing homelessness. We propose to build a partnership with clients through which we work together to budget efficiently, save for immediate and long-term investments, gain assets, create a personal accountability structure, and thereby motivate transitions out of homelessness and poverty. We propose that, through this partnership, savings program participants will build the capacity—using their own resources—to sustain significant transitions.

CEF is thus proud to announce the launch of two new programs: Safe Savings and Micro-Development Accounts. These two programs will focus on the value of safe, convenient savings coupled with the relational support at which CEF Loan Officers excel.

A unique account structure, these programs will pair Loan Officers with individuals in our community who are committed to saving a greater part of their monthly income or in restructuring the way in which they interact with their money. This new service is open to any individual or household interested in building a partnership in this process, but is especially targeted towards individuals in recovery who may benefit from restricted access to cash and added programmatic accountability.

We look forward to working with our pilot program participants to structure these services to best meet the goals of our communities, and furthermore, to reporting on the ability of this relationship–based in accountability, budgeting, and saving–to change the way we view financial services.