[3] Assets play a vital role in poverty alleviation by providing not only economic security but also a psychological orientation that encourages low income families to save and plan for the future.
In his book, Assets and the Poor: A New American Welfare Policy (1991),[3] Michael Sherraden proposed establishing individual savings accounts for the poor calling for the government and the private sector to match individual contributions to IDAs as a means of encouraging savings and breaking the cycle of poverty.
[4] Evidence of IDA programs also exists outside of the continental United States especially in Hawaii,[6] Sub-Saharan Africa.,[7] the UK, and also all around Europe[citation needed].
Once recruited, participants open IDA accounts with the partnering financial institution and begin making deposits.
Match dollars for IDAs come from many different places, such as government agencies, private companies, churches, or local charities.
[2] Home ownership is generally representative of stability and financial advancement since it is an important means of saving and asset accumulation.
[9] IDAs can help participants achieve their goal of homeownership by encouraging savings and providing matched funds to overcome the lack of income and liquid wealth needed to make a down payment or pay housing closing costs.
[11] Access to post secondary education can positively impact one's economic status as well as critical thinking abilities.
This is specially significant for low-income single mothers for whom earning a post secondary education can break the cycle of inter generational poverty and whose opportunities in gaining such an education might be marginalized by federal legislation like The Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
[13] Small business start up and expansion also have a demonstrated record of success in assisting individuals such as welfare recipients, people with disabilities, immigrants and refugees as well as ex-offenders returning to their families and communities.
[14] Matched savings from IDAs can provide the seed capital and/or funding for further expansion for such established businesses and aid in poverty alleviation.
[15] OCS awards grants to nonprofit entities and state, local and Tribal governments that administer AFI projects.
Grantees are required to raise an equal contribution of nonfederal funds to match the federal AFI grant.
ORR invites qualified entities to submit competing grant applications for five-year projects that will establish, support, and manage IDAs for eligible low-income refugee individuals and families.
The Beginning Farmer and Rancher Individual Development Account (BFRIDA) program, authorized in the 2008 Farm Bill, matches the savings of and provides financial education to agricultural entrepreneurs.
The objectives of BFRIDA are to promote local economic development in rural communities; increase farming opportunities among individuals who may be new to this country or otherwise lack collateral; and strengthen food security and independence.
[17] There is a four-step process when acquiring an IDA; this includes; Introduction and Orientation, Opening Accounts, Economic Literacy and Training, and finally Withdrawal, Purchasing Assets and beyond.
Public banks make such programs accessible in Thailand and Sri Lanka and microfinance institutions perform a similar job in Papua New Guinea.
[22] Data and evaluation from these reports show positive significant impact on participants' economic, social and psychological well-being.
Researchers at the Center for Social Development argue that considering that approximate average annual cash income of a village household in rural Uganda is $340 per year, this intervention effect on net worth over a 13-month period would represent the equivalent of over 5 years of cash income.
In the past few decades, there has been growing concern about the level of marginalization currently experienced by vulnerable groups and about unequal distribution of wealth.
The economic stability that assets purchased through IDAs provide enables the creation and maximization of opportunities for meaningful participation of socially vulnerable people like racial minorities and women in economic, social, and political institutions under conditions that enhance their well-being and capabilities.