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OECD Forum on Mexico: Policies to Promote Growth and Economic Development Mexico City 3 November 2004. Ray Boshara New America Foundation Washington, DC 202-986-2700 What is Asset Building?.

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OECD Forum on Mexico:Policies to Promote Growth andEconomic DevelopmentMexico City 3 November 2004

Ray Boshara

New America Foundation

Washington, DC


what is asset building
What is Asset Building?
  • Public and private strategies to enable low-income persons to save and accumulate long-term assets – a home, post-secondary education, investments, a small business, and a nest-egg for retirement
  • Includes both specific “tools” and a new “framework”
  • Informed by Amartya Sen (“capabilities”) and compatible with Hernando De Soto
  • Asset Building can mean:
    • Social Investment
    • New Welfare Policy
    • Combating Financial Exclusion
    • Creating an Ownership or Stakeholder Society
why assets
Why Assets?
  • Assets change family balance sheets – financial security, opportunity

“Lack of income means you don’t get by; lack of assets means you don’t get ahead”

  • Assets change heads – attitudes, expectations. “Asset effects” posited and tested

See Michael Sherraden, Assets and the Poor (1991)

social policy evolution
Social Policy Evolution

Income -> Work -> Assets

Passive -> Active

Programs -> Accounts

Placed-based -> Citizen-based (portable)

- Assets are well-suited to 21st Century economy and new social contract that combines “choice and responsibility”

- Challenge remains to preserve some traditional social insurance programs, where certain risks may need to be pooled.

assets and market failure
Assets and Market Failure
  • Financial market failure
    • Huge gap between the poor and mainstream financial institutions
    • 3%-78% “unbanked” households throughout OECD countries
  • Institutional failure
    • Asset “development” policies
    • Asset “denial” policies
    • Contributes to wealth inequality and social exclusion
  • Policy goal:
    • Inclusion – expand institutional mechanisms/policies to everyone
    • Must have (1) public subsidies, (2) regulatory framework, and (3) targeted financial products.
research on savings
Research on Savings

Developed Countries

1. Can the poor save in IDAs?

“Savings by the poor are modest, ranging from $18 to $38 per month in net savings…” (USA, UK, Canada, Taiwan)

2. What effect do IDAs have on savings and asset accumulation?

“Access to the IDA program had a significant influence on the savings and asset accumulation of those served by the Tulsa IDA program…” (USA, experimental research)

Developing Countries

  • Stuart Rutherford, The Poor and Their Money
  • Microfinance institutions, credit unions, other kinds of savings/assets (land, livestock, etc)
  • Poor save for safety, liquidity, and return
research on asset effects research organized and summarized by sherraden 2004

Better labor market experience, marriages, health, health behaviors, political interest

Better cognitive development, physical health, and socio-emotional behavior, even among very income-poor families

Single mothers’ assets are positively associated with children’s educational attainment

IDAs (more likely to):

Work or stay employed, and work more hours

Make educational plans for self and children

Feel more economically secure

Feel confident about the future

Feel in control of their life

Create greater future orientation

See more clearly and better visualize a future

More likely to save for their future

Research on “Asset Effects”(Research organized and summarized by Sherraden, 2004)
assets as social investment
Assets as Social Investment

Asset policies hold the potential to:

* Transform passive welfare and states to active social investment states

* Result in better economies and better citizens, thus providing a greater return on scarce public dollars

* Reduce inequality and social exclusion, thus resulting in greater social cohesion

  • Would assets be the best use of public funds? Does the evidence thus far justify multi-billion policies?
  • What’s the appropriate balance between income support and asset building programs for the poor? Between social insurance and individual accounts?
  • How can asset programs be effective and affordable at scale, given the important role played thus far by community-based organizations?
  • How can asset policies reduce relative wealth disparities between whites and non-whites?
asset building in mexico
Asset Building in Mexico
  • Accounts for all, at birth (“Citizen Accounts” proposed by Prof. Clemente Ruiz Duran)
  • North American Development Accounts (NADA?)
  • MFIs:
    • Expand BANSEFI, Credit Unions, RoSCAs
    • Matching deposits saved through BANSEFI
    • Partnerships between “Caja Solidarias” and postal service offices AND trusted institutions (commercial banks, Caja Popular Mexicana, BANSEFI)
  • Expand homeownership:
    • Leverage assets into capital (De Soto)
    • Develop mortgage finance market (Fannie Mae)
  • Define poverty problem in terms of assets, not just income
asset building resources
Asset Building Resources

LEED Programme, OECD, Paris

  • Antonella Noya
  • +33(0) 1 45 24 78 95

Center for Social Development, Washington University in St. Louis, USA

  • 314-935-7433

Asset Building Program, New America Foundation, USA

  • 202-986-2700

Asset Building Clearinghouse: