Market-Based Community Economic Development

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Market-Based Community Economic Development
Presented to J. McDonald Williams Institute
By Robert Weissbourd and Riccardo Bodini RW
Ventures, LLC
October 23rd, 2006
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CONTENTS
Market-Based Community Economic Development
Applying the Framework Retail Development
Applying the Framework Urban Financial Markets
Discussion
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Origins From Equity to Equity
Civil Rights
Empowerment
Economic Development Assets
Economic Development Markets
Putting the Economics in Economic Development
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Why Markets?

• To address poverty, create wealth
• Wealth is created by investing in assets
• The economic mechanism for investing in assets is
  the market
• To create wealth in low income communities,
  expand market activities to the assets of those
  communities

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Market Failure inLower Income Communities

• Employment networks
• Entrepreneurial opportunities
• Business, real estate investment
• Expanded products and services
• Competitive, healthy communities

• Undervalued, underutilized assets

• Distressed neighborhoods have undervalued assets,
  reflecting lack of specialized market
  intelligence and poor economic networks
• Investment is function of profitability, risk and
  transaction costs
• Seeing, measuring, access ? Valuing ? Market
  Activity and Opportunity

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Overall FrameworkEnhancing Markets to Include
LICs
GoalAlign Market and CED Interests

• Strategy
• Analyze Market
• Target Market Component
• Identify Change Levers

Products and Activities Choose operating
activities to move levers
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Goals Aligning Markets and Development
High Alignment
Low Alignment
Pure Market Market solution possible market
already generates CED outcomes
Market Refining Market solution possible with new
information, products or networks
Market Redefining Market solution possible if
market operations and market environment changed
through private activities
Market Intervention Market solution possible if
market operations and environment changed through
public policy and advocacy
Non-Market No market solution market is not the
appropriate channel
Market Interests
CED Goals
Adapted from Kahane, Weissbourd and Weiser
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Goals Aligning Markets and Development
This step helps determine whether a market based
development strategy makes sense, and begins
analysis of what level of market activity to
focus on
High Alignment
Low Alignment
Pure Market Market solution possible market
already generates CED outcomes
Market Refining Market solution possible with new
information, products or networks
Market Redefining Market solution possible if
market operations and market environment changed
through private activities
Market Intervention Market solution possible if
market operations and environment changed through
public policy and advocacy
Non-Market No market solution market is not the
appropriate channel
Market Works Company profits while providing CED
impact.
Make Market Work (Addressing Internal
Imperfections)
Change Market Parameters (Using Market Mechanisms)
Vital Work but not CII!
Market Interests
Change Market Parameters (Using Non-market
Mechanisms)
CED Goals
Adapted from Kahane, Weissbourd and Weiser
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Strategies Identifying Key Levels and Levers of
Market Activity
Level Market Environment
Other ExogenousInfluences Infrastructure Factor
s/Resources Technology Tastes
Institutional Context Enabling
Laws Prescriptive Regulation Entry Barriers
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Strategies Identifying Key Levels and Levers of
Market Activity
Level Market Operations
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Information Resources are the Modern Currency of
Wealth Creation
Gross Domestic Product Growth over last 50 years
Change
Greenspan Fundamental change in the economy
towards intangible assets
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A Framework for Enhancing Markets
Goals
Strategies
Activities
Specialized products, policy
More Efficient, Productive, InclusiveSystems
Target specific market levels and levers
Identify CED goals and relevant markets
Mainstream Markets
NeighborhoodAssets

• Finance
• Retail
• Employment

• Payroll Cards
• Specialized IC Models
• Skills Certification, Coordinated Networks

• Prod./Exchange Costs
• Market Intelligence
• Training, Transaction Costs

Adapted from Living Cities/Brookings
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Example Retail

• Goal Commercial Development
• Market Operation Exchange function
• Strategy Reduce retailers finding costs
• Activity Develop better data and models to
  reveal demand and improve market access in IC
  neighborhoods
• Example MetroEdge

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Bexar County, Median Income
Darker blue shades represent areas with higher
median income.
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Bexar County, Concentrated Buying Power
Darker blue shades represent areas with higher
concentrated spending power ( per sq. mile).
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Income is NOT a GoodIndicator of Spending Power
Spending as a Percent of Income
Income Bracket
1995 Consumer Expenditure Survey
Source MetroEdge
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Central Cities are Diverse as well as Dense
South Shore median income 25,100
CHICAGO
SOUTH SHORE
Households in Category
Household Income Category
1990 census data
South Shore has a lower proportion of the very
wealthy and a higher proportion of the very poor,
but its solid middle class looks much like
anywhere else in the city.
Source MetroEdge
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Retail Float for Bexar County
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Validating a New Approach
New Data Predicts Sales Performance For Grocery
Store Model
NOT STATISTICALLY SIGNIFICANT
NOT STATISTICALLY SIGNIFICANT
NOT STATISTICALLY SIGNIFICANT
Standardized Coefficients (Beta from LTS Multiple
Regression on Sales Per Sq. Ft.)
New indicators were more significant than
traditional ones in this location model created
to predict sales for a grocery chain.
Source MetroEdge
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Example Financial Services

• Goals
• Enable IC residents to build ownership assets (by
  expanding financial and insurance services)
• Market Operation
• Production and Exchange functions
• Strategy
• Reduce producers underwriting costs improve
  risk assesment
• Activity
• Reduce incompleteness and bias (esp. of credit
  scores) by including additional information
  improving models
• Example
• UIPI, CFSI

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Market Snapshot

• As many as 39 million people, including 11
  million unregistered immigrants, are unbanked.
• Approximately 44.7 million people are underbanked
  -19.4 of all households.
• The combined un- and underbanked populations may
  be 40 million households and 1.1 trillion in
  income.
• The average underserved household receives
  27,500 in income.
• Assuming the average household spends 1 of
  income on basic financial services, the overall
  market is 11 billion.

Source BearingPoint and Visa study (not
including last bullet)
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Process Improvements Alternative Credit
Reporting/Scoring

• 35-50 million Americans have thin or no credit
  files.
• Many of these consumers are demonstrating
  responsible financial behavior but arent getting
  credit for it.
• Rent
• Utility bills
• Credit bureaus and lenders are beginning to
  experiment with alternative data and scoring
  methods.
• Experian
• PRBC
• CircleLending

Remittances Payday loans
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Closing the Gap Creating Alignment
The Credit Path Alternatives Federal Credit Union
When viewed with a lifetime value lens, the
needs of financial institutions and underbanked
customers can be aligned
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Market-Based Community Economic Development
Presented to J. McDonald Williams Institute
By Robert Weissbourd and Riccardo Bodini RW
Ventures, LLC
October 23rd, 2006