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SWFA Implementation

This document discusses the implications of the SWFA implementation on Individual Development Accounts (IDAs) within the context of financial institutions and community-based organizations (CBOs). It highlights the changes in funding structures, eligibility requirements, and the central role of financial institutions in the IDA system. The opportunities and challenges presented by new markets and modes of asset building are examined, providing insight into how CBOs can adapt to remain relevant and effective in supporting individuals' financial goals.

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SWFA Implementation

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  1. SWFA Implementation Implications for the IDA Field: Practice & Policy Timothy Flacke D2D Fund, Inc.

  2. A Changed Landscape… • unlimited* supply of (core) match funds * well, not quite, but still… • up to seven years to save • up to 10 years to spend • central role for financial institutions • lower match (1:1, $500/year) • lower funding for administration • simplified eligibility

  3. Spectrum of IDA Programs

  4. Product: What will it Mean? • financial institutions will be central • compliance will be critical • tax credits at risk = financial risk for banks • key issues: participant eligibility, accounting • “at your own pace” IDA part. experience? • No more “poor to asset owner” in < 3 years • fewer support services • cost will be huge concern • possible new IDA “markets”, new “modes”

  5. New Markets, New Modes • New markets: • existing financial institution customer market • “asset-interested” market • already interested in goal, IDA as tool • e.g., part-time students, aspiring home owners • tax refund market • IDAs funded mostly or only via tax / EITC refund • New “modes” • self-service (no link to social services) • employer-based • asset provider-based (e.g., com. college)

  6. What does it Mean for CBOs? Opportunity: reposition to complement bank weaknesses / needs financial institutions... • well positioned well to: • market (a.k.a. recruit) • hold accounts • provide & track match • issue statements, report to Treasury • but won’t want to: • offer financial education • provide client support • compliance (certify eligibility, purchases) • find additional funding sources

  7. Do CBOs Fit in “Product”? Do you want to be in this business? • how do you want to do asset building? • volume vs. depth (where on spectrum)? • what does your community need? • what are you good at? • financial education? • client support? • advocacy / organizing? • what do your services really cost? • ‘ala carte’ vs. entire program • think cost / client

  8. But it Won’t Happen Overnight... • short term: banks “dabble” (AFIA / hybrid) • channel funds to existing, familiar programs • long term: • some banks will pass, exit IDA field • some will keep it small (AFIA / hybrid) • handful will push for volume (product) • product demands volume, lower cost • path to large scale, sustainability • exciting opportunity for some CBOs • if not CBOs, then... • bottom line: • Good: greater volume, less responsibility • Challenge: less control, “thinner” services

  9. D2D’s efforts to help Product Online IDA: • facilitates partnership model • CBOs, banks & participants linked via web • provides infrastructure for compliance • professional grade match accounting • helps banks offer IDAs at break-even • pools participant (& match) funds • builds from “regular” customer relationship • lowers cost • client side: self-service (via ‘net), paperless • admin: integrated (1 MIS), efficient (less data) • refund “bifurcation” as complement

  10. Policy Implications • Opportunities: • “product” IDAs can increase # of families served • higher profile for asset-building • from “insurgency” to “establishment”? • Integrated in tax code • integrated in financial services industry • Challenges: • “breaking the ice” (getting SWFA started) • integrating models & funding streams • evolving roles for CBOs, funders, banks, policy advocates, participants • “establishment” can still be attacked

  11. Contact Information Timothy Flacke D2D Fund, Inc. 1127 Harrison Avenue Roxbury, MA 02119 www.d2dfund.org tflacke@d2dfund.org 617.541.9066

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