nef (the new economics foundation)

The impact of the economic crisis on asset building in Europe: Using opportunities and creating resilience

new economics foundation

EMN Conference, Milan 5 June 2009

nef (the new economics foundation)

Asset Building – a definition

Asset building as a strategy to help people out of poverty differs in its approach to more traditional thinking which seeks to iron out lows in incomes. The emphasis of asset building is on long-term savings, either through savings accounts, wealth creation (e.g. house purchases), but also through investment in education and training.

Long-term focus – not to equalise current income

•Savings

•Wealth Creation

•Human capital growth

Resilience and ability to overcome crisis

nef (the new economics foundation)

Asset Building during economic crisis

Is Asset Building in Europe more relevant than ever or under threat?

nef and LSF examined the impact of the crisis on Asset Building’s potential across Europe

nef (the new economics foundation)

Asset Building Foundations - US

US asset inequality

• Inter-generational and racially-based impact

• Interventions, e.g. tax incentives, often aided better-off

• Legislation to address discrimination and exclusion including the Community Reinvestment Act; for 40m underserved households

Individual Development Accounts

Auto-enrolment of employees into retirement savings plans

Tax incentives designed to target excluded, low-asset groups

Laws protecting assets & reducing vulnerability

nef (the new economics foundation)

Key differences

nef (the new economics foundation)

Asset Building in the EU, during crisis

Asset Building originally developed despite widespread economic growth, amidst its failure to deliver comprehensive benefits

Conditions now reversed, and Asset Building’s task will inevitably alter

nef (the new economics foundation)

Asset Building in the EU, during crisis

Asset Building needed despite widespread economic growth

• Persistent inequality in backdrop of rising incomes

Crisis likely to exacerbate exclusion that pre-dated it

• Credit relations strangled, despite Governments’ stimuli

• Individuals and communities in Credit Crunch, inhibiting necessary borrowing and destroying savings

• Over-concentration at top meant greater distance from borrowers and savers

nef (the new economics foundation)

Macro Causes, Micro impact

The shape of the challenge:

Increased demand for and need of Asset Building

• Debt Advice

• Microfinance, especially for self-employment and business support

• Funding pressure, especially from partnerships with private sector

• Social lenders facing growing bad debt burden

The test for Asset Building:

Can AB help to do more with less?

nef (the new economics foundation)

Funding is major concern, but opportunities do exist

Demand and need for Asset Building increasing

Realising Asset Building goals is expected to become harder to achieve and more at risk

• 6 organisations reported immediate decrease in funding

• 3 organisations also saw decreased non-funding support

Recognition of enhanced importance of financial literacy

• Evers & Jung anticipate greater demand for their role as research organisation

• KIZ optimistic of increased take-up of their practice-oriented approach to supporting self-employment and skills training

nef (the new economics foundation)

Findings: key role of policy

1. Recognition

2. Public Partnership

3. More localised, more responsive

UK, Toynbee Hall, working with non-financial assets

“ There are no plans to re-conceive the broken system… people who used to stand at the precipice are now falling, and [Government] is not doing anything… to stop people getting to that precipice in the first place. “

Hungary’s Autonómia; Asset Building project threatened

nef (the new economics foundation)

Findings: Policy recognition of importance of assets approach

Germany, KIZ and Evers & Jung

• Increased support

• Visibility and recognition of asset builders’ role

Spain, Asociación Comunidades CAF

• Partner to Catalan regional government, regional roll-out

Visibility and recognition of asset building tied to supportive policy

• Enhanced in contexts with more local and federal structures

nef (the new economics foundation)

LessonsFunding Adaptation including networks, and easier collaboration and cooperation

•Co-funding, partnership strategies•Redesign of elements of Assets Building programs•Increased operational capacity•Networking

Accelerated development•Support required to develop enhanced need for Asset Building into opportunity to enhance AB programs and their impact

Risk of displacement or dilution of AB impact•Increased demand and vulnerability; asset erosion•Responses & capacity correspond with circumstances

nef (the new economics foundation)

Recommendations

Organisations’ network presence needs to be bolstered

Funding strategies need to adapt

Support required to develop enhanced need for Asset Building into opportunity to enhance AB programs and their impact

Diversify sector and ensure cross-section of products designed to meet broader range of needs