Financial Inclusion Happens Where Two Roads Meet

Financial Inclusion can be achieved through the intersection of financial empowerment strategies and community economic development efforts.

By Brian Rakovitis

As economically depressed neighborhoods and cities begin to see outside investment coming in for the first time in decades, many of the low income individuals living in these communities are often excluded from benefiting from this growth. As the Lawyers Alliance acknowledges, “they often lack the collateral or credit history to borrow or otherwise access funds needed to thrive.”

CityLab addresses how unable to build wealth, these neighborhoods become increasingly unaffordable for low-income individuals, leading to displacement. This is of course an example of gentrification in which change of economic status in a neighborhood transforms it from a place of primarily low-income persons usually dominated by racial and ethnic minorities, to a middle- or high-income neighborhood, often composed primarily of whites.

Contained within these disruptive forces is also an avenue to promote economic inclusion of low-income residents. Noted in research published by Stephanie Brown (© 2014), more often than not these redevelopment efforts are spurred from public-private partnership, allowing local authorities some measure of control over the development process. This means municipalities are part of the pre-development process and can advocate for anti-displacement strategies. These strategies tend to focus on affordable housing, zoning and access to transportation, all of which are worthy strategies for mitigating displacement. However, an often overlooked addition is the implementation of financial empowerment strategies.

Prosperity Now recognizes financial empowerment strategies as a “means in which financially vulnerable families gain a foothold on the path to economic security and opportunity.” They assert that through the process of connecting low-income individuals to financial coaching, counseling, access to public benefits, credit repair, free tax preparation and mainstream financial products, we help remove many of the barriers that prevent low-income individuals from benefiting from the wealth generation in their communities, creating greater financial inclusion.

Cities have begun implementing these strategies in the form of one-stop shops known as financial empowerment centers (FECs). Cities for Financial Empowerment notes that FECs have trained counselors “to help consumers with low incomes manage their finances, pay down debt, increase savings, establish and build credit and access safe and affordable mainstream banking products. At the core of the FEC model is the integration of counseling into other social services, including housing and foreclosure prevention, workforce development, prisoner reentry, benefits access, domestic violence services and more.”

FECs are excellent city-wide resources that can provide services to all residents, and as we begin to include these initiatives in the development process we can begin to offer these services at the neighborhood level, either directly by the city or through partnerships with nonprofits. By deploying these strategies. we will see an increase in inclusion, allowing residents to grow with their neighbor.

CEDAM and our partners at CDAD look forward to continuing this financial inclusion discussion at our upcoming conference Developing Vibrant Communities (DVC) on August 21 and 22 in Detroit. We bring together speakers and presenters from across the community economic development and financial empowerment fields to share their experiences about how they have combined community development and financial empowerment to strengthen their communities and empower low-income individuals.