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Grassroots and Groundwork: Escaping poverty by blending tech and tradition

When you find yourself attending a poverty conference in a spacious and shiny Indian casino and hotel, it’s clear that there’s a new attitude about the topic of being poor these days.

True, the location did allow the Northwest Area Foundation, sponsor of the Grassroots & Groundwork conference, to tout the fact that they were holding their fifth biannual conference on Indian land. But even a representative of that community, Shakopee Mdewakanton Sioux Tribe vice-chair Charlie Vig, kept his plenary breakfast remarks firmly centered on the topic of success and prosperity. And another speaker outlined his nonprofit's success with an ingenious community wealth-building scheme that updates immigrant self-help for the digital age.

Prosperity at a Poverty Conference

If Charlie Vig wanted to talk about prosperity, so did many other speakers. The conference’s tag line, mirroring the foundation’s mission, was “working together to reduce poverty and build prosperity,” so it’s no surprise that the sessions covered topics such as financial opportunity centers, evergreen cooperatives (employee-owned green businesses in low-income communities), and ways to create “wealth that sticks” in rural communities. More than 250 attendees gathered at a three-day event that attracted service providers, educators, researchers, policymakers, businesspeople, civic officials, faith leaders, and community organizers from more than 20 states.

Recent statistics on poverty are certainly troubling: There have been six million foreclosures since 2008, and the number is expected to increase to 12 million before the crisis abates. Twenty percent of the U.S. population has no assets or negative assets. In 2007, low-income families owed $2.60 for every dollar they earned.

But while reducing poverty was clearly the endgame for those in attendance, there seemed to be a strong awareness that one of the best ways to gain momentum was by building community assets and wealth. In one room, for example, the first lady of Oregon, Cylvia Hayes, was holding forth on how to prevent hunger and poverty in an economic downturn.

Lending Circles: An Old Idea Updated

And right next door was a session titled “Lending Circles: Culturally Relevant and Responsible Credit-Building Loans for Low-Income Individuals.” It was led by José Quiñonez, the founding executive director of the Mission Asset Fund (MAF), located in San Francisco.

He outlined a concept that is deeply rooted in immigrant culture, yet includes enough high-tech fillips to make it especially valuable for the unbanked and underbanked. (Quiñonez estimates that 32 million Americans currently fall into this category). Here’s how it works: participants form a lending circle and agree together on scheduling, amounts and allocation of payouts. Then they each pay an equal amount, at the designated time, into the circle, and receive the total sum in rotation. So if there were ten participants in a lending circle, each could contribute $100 a month, and each would then receive a payout of $1,000 once every ten months.

The concept’s reliance on trust, community and social capital makes it appealing to the participants, but perhaps even more critical is the technology backbone. Created by MAF in partnership with Citibank/Citi, the system processes funds and distributes payments and reports payment activity to credit bureaus. This important step helps low-income participants establish or improve their credit scores.

Global Idea, Local Solution

“This got started because we realized that many people all over the globe live outside the financial mainstream,” Quiñonez said. “We started asking ‘how do they do it?’ We took an activity that was already going on and then formalized it.”

The roots of this concept run deep in many communities. One of the session participants was Fowzia Adde, Executive Director of the Immigrant Development Center in Moorhead, who shared a story about her Somalia-born great-grandmother. “She and her friends did this all the time,” she said. “They called them ayuto, or trusted circles, which literally means ‘help me.’”

Quiñonez reported that MAF currently works with 111 lending circles with 836 participants. A Twin Cities expansion will begin this summer, backed by CLUES, the behavioral health and human services agency, and the Latino Economic Development Center. Since its inception, MAF has managed more than $1.1 million in loans from community participants, which they estimate has saved $350,000 in service fees. Participants have increased their credit score rating, on average, by 20 to 36 points. Perhaps most impressive is that while conventional lenders have a default rate of 10 to 13 percent, MAF currently has a default rate of zero.

“It’s an incredible way for a community to build on its social capital,” Quiñonez said, noting that these loans have allowed people to start small businesses, purchase homes after previous foreclosures, or escape abusive situations in order to live independently.

Work Together

If asset creation was one dominant theme of the conference, the other one was a new buzzword, “collaborative networks.” Working together with partners toward a common purpose is an activity increasingly prized by federal and private grantmakers. One example presented at the conference was the Minnesota FastTRAC (Training, Resources and Credentialing) initiative, designed to close the skills gap for adult workers. The presentation panel was an alphabet soup of private and public partners, from fields that included adult basic education, human services, workforce development and higher education. Participating agencies include Goodwill/Easter Seals Minnesota, the Minnesota Department of Employment and Economic Development and Greater Twin Cities United Way.

Judy Mortrude, FastTRAC program administrator, says that while everyone is hearing a lot these days about “braided funds” and “joint outcomes,” it can be challenging to get different organizations to work together toward a common purpose. “Typically, we get all these agencies together and have these great conversations, but then the conversations end and nothing happens. I think it’s even more challenging here in Minnesota, because many of our nonprofits are doing good work and hitting their performance measures. But they’re often just doing triage, and not fixing overall problems that are more systemic and need a wider view."

Work Together. We Mean It

Mortrude adds: “We’re hearing this more and more from the federal government--departments like Labor, Health and Human Services, and Education. They’re telling us, ‘You’re all doing good work, but you could do better work, so we want to see some collaborative structures.’ Now our challenge is to find those mutually reinforcing activities. Each of us needs to understand what we’re best at and how we can integrate our talents to better serve people.”

While Mortrude acknowledges that some organizations will have a hard time ceding territory in this new collaborative world, she is optimistic. “It’s true that you might uncover some overlap when you start, but if you really work together, you won’t duplicate efforts. You’re connecting all the services to make a pathway for someone, and you’re seeing the whole person when you do that,” she said.

Julie Kendrick's last article for The Line was a look at the Gorilla Yogis, in our June 6, 2012 issue.

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