OECD Forum on Mexico: Policies to Promote Growth and Economic Development Mexico City 3 November 200

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OECD Forum on MexicoPolicies to Promote Growth
andEconomic DevelopmentMexico City 3
November 2004

• Ray Boshara
• New America Foundation
• Washington, DC
• 202-986-2700 boshara_at_newamerica.net

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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

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Why Assets?

• Assets change family balance sheets financial
  security, opportunity
• Lack of income means you dont get by lack of
  assets means you dont get ahead
• Assets change heads attitudes, expectations.
  Asset effects posited and tested
• See Michael Sherraden, Assets and the Poor (1991)

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Social Policy Evolution

• Income -gt Work -gt Assets
• Passive -gt Active
• Programs -gt Accounts
• Placed-based -gt 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.

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Assets and Market Failure

• Financial market failure
• Huge gap between the poor and mainstream
  financial institutions
• 10-50 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.

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Assets Building in OECD Countries
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Asset Building Outside the OECD
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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)

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Research on Asset Effects(Research led and
summarized by Sherraden, 2004)

• 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

• Assets
• 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 childrens educational attainment

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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

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Questions

• Would assets be the best use of public funds?
  Does the evidence thus far justify multi-billion
  policies?
• Whats 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?

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Asset Building Resources

• LEED Programme, OECD, Paris
• Antonella Noya Antonella.NOYA_at_oecd.org
• 33(0) 1 45 24 78 95
• Center for Social Development, Washington
  University in St. Louis, USA
• 314-935-7433
• http//gwbweb.wustl.edu/csd/
• Asset Building Program, New America Foundation,
  USA
• 202-986-2700
• www.NewAmerica.net
• Asset Building Clearinghouse www.AssetBuilding.or
  g