From Fringe Banking to the Financial Mainstream

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The Center for
Community Capitalism
What Will it Take to Get More Financial
Institutions to Sponsor IDAs? by Dr. Michael A.
Stegman Phillip H. Kim Center for Community
Capitalism University of North Carolina at Chapel
Hill Presented at IDA Learning Conference New
Orleans, LA September 22, 2004
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Estimated Number of IDA-Sponsoring Financial
Institutions

• Number of Institutions
• Banks 274
• Credit Unions 65
• Total 339

• Number of Programs
• 405
• 66
• 471

3
Geographic Distribution of Financial Institutions
and IDA Programs
Note First number denotes number of financial
institutions (counted at state level). Second
number denotes number of IDA matched savings
programs.
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Why Do Some Financial Institutions Sponsor IDAs
and Not Others?

• We use organization theory to help us understand
• Literature suggests there are three reasons why
  large organizations tend to mimic each other
• Mimetic -- highly regarded organizations are role
  models for others copy-cat syndrome
• Normative Trade organizations show the way
  outreach, conferences, codes of ethics, best
  practices
• Coercive government mandates and regulatory
  requirements influence desired behaviors.

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Distribution of IDA Program Size by Bank Assets
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IDA Account Featuresthere are no unique account
constraints to expansion
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Non-Profits Play Critical Rolemature
relationships ease financial institutions into
new program areas
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Program Responsibilities Performed by Nonprofits
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Whats Needed to Grow IDAs to Scale?

• Major trade organizations like the American
  Bankers Association must make IDAs a priority
  (Normative)
• CRA continues to be most influential force in
  shaping community development/asset building
  products and services
• strengthen CRA service test strenghten
  service test
• greater clarity to how IDAs are factored into
  banks CRA scores
• Non-profit management capabilities limit
  expansion possibilities
• While program legitimacy is affirmed by
  government funding, too little funding
  discourages incorporation of IDAs into core
  business
• As highly bureaucratic, labor intensive
  competitive grant program, AFIA cannot be
  template for national IDA program
• Need other funding strategies Savings for
  Working Families Act (SWFA) tax credit has more
  efficient, less bureaucratic delivery of matching
  funds.

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No CRA-Driven CD CommitmentsInclude IDAs
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Example of ABA Leveraging Potential(in your
mind, substitute IDA for Mortgage)
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For more information

• Center for Community Capitalism web site
  www.ccc.unc.edu.
• Call at 919-962-6849