For Very Poor, Income Amount Not Only Factor: Onsite Coverage
DETROIT – Credit unions considering how best to serve very low income communities may need to look into the details of those members' incomes and financial lives and not just the amounts of money they make, researchers reported.
Kirsten Moy, director of scale initiatives for the Washington, D.C.-based Aspen Institute presented the research at the National Federation of Community Development Credit Union’s 40th annual conference on May 16 in Detroit.
Moy and Joy Silha, a qualitative researcher and founder of Silha Communications in Santa Fe, N.M., conducted the Ford Foundation-funded research last fall and winter.
Moy stressed the results were qualitative, not quantitative, and that they were not trying to make claims for an entire population of people. Rather, she said the researchers hoped their in-depth interviews with people who have very low incomes might provide some insights into how to most effectively work with them to improve their financial situations.
Researchers, primarily Silha, met with very low income people in four sites around the country, three credit unions and one strip-mall based check casher, for roughly a one-hour interview. Participants were promised confidentiality and researchers defined very low income as half the Housing and Urban Development's poverty level for that area.
Self-Help FCU's Prospera credit union affiliate in East San Jose, Calif., was one site as were the $136 million Guadalupe Credit Union in Santa Fe; Community Check Cashing in Oakland, Calif.; and the $245 million St. Louis Community Credit Union in St. Louis.
Moy reported that one notable finding was that many very low income people not only lacked income but also lacked regular or steady work. She said 25% of the people interviewed were out of work but were looking for work, 40% had full-time, low-paying jobs and 35% had two or more low-paying, part-time jobs, she added.
“One compelling factor was the overwhelmingly insecure feelings many of our interviewees had about their income and work situations,” Moy said. “Many, even those with full-time jobs, did not feel they could count on those jobs and many were used to the phenomenon of having parts of the year with relatively a lot of work and a strong income and parts of the year without either of those things.”
Moy said she and Silha had also discovered that many of the interviewees tied their lack of employment and lack of financial knowledge or acumen to their sense of self-worth and self-respect and that this made them very reluctant to trust or visit financial institutions.
In fact, Moy said they found that the majority of interviewees had only visited the credit union or check casher when they felt they had to do so and only slowly built trust and a relationship with that business after it was able to offer them help to confront the need that had brought them into the institution in the first place.
The researchers also found that the interviewees had conflicted feelings about savings, for example, or about credit. They often recognized the need for savings for when the unexpected happens, but doubted or feared their ability to keep savings without spending them, Moy explained. They also often didn't understand credit or credit scores and generally feared both as dangerous or likely negative, she added.