New Report: Toward a New Credit Path: Lessons from Alternatives Credit Union
Posted by on July 28, 2008
New Report Examines “Credit Path®” to Asset-building and Financial Security
A report recently completed by Alternatives Federal Credit Union and the Aspen Institute sheds new light on how people move toward greater financial security. The report is based on a conceptual framework, known as the “Credit Path®,” that identifies four stages people may pass through on their way to asset accumulation and greater financial security: transactor (where individuals rely primarily on a cash economy), saver, borrower and owner.
Although it was presumed that people move in a sequential fashion through the four stages, the new research found that people often hopscotch among stages – and sometimes can be in two stages or more simultaneously.
The research also revealed that shifts in the financial services industry over the last decade have fundamentally impacted the ordering of steps people take along the pathway. Previously, people needed to establish reliable savings patterns and build sufficient savings in order to become borrowers. But loosening credit terms now make it possible for some people to borrow before they save – often at great peril to their household’s financial stability.
The study surveyed more than 900 Alternatives credit union members about their financial lives, behaviors and attitudes toward finances.
William Myers, CEO of Alternatives, a full-service community development credit union located in Ithaca, N.Y., conceived of the Credit Path® in 1996 as a tool for designing new products and services that would help people move along a pathway to greater self-sufficiency.
“These research findings have helped refine our thinking about the Credit Path® and should prove a valuable too for financial institutions around the country as they formulate new asset-building strategies for low-income people,” said Myers.
Added Kirsten Moy, director of the Economic Opportunities Program at the Aspen Institute: “Increasingly, nonprofit and community organizations are developing comprehensive programs to link people with financial services and help them build savings and increase their ownership potential. Yet, these programs may not factor in how it is that individuals and families actually grow assets. This research should provide them with important insights in that regard.”
Funded by the Annie E. Casey Foundation, other major contributors to the study, “Toward a New Credit Path®: Lessons from a survey of 904 Alternatives Federal Credit Union Members” were Jack Northrup of New England Market Research, Inc. and independent consultant Cathie Mahon. The full report is available for download at: http://www.alternatives.org/CPResearchOverView.pdf.
The research is part of a larger body of groundbreaking work on asset building underway at Aspen Institute’s Economic Opportunities Program, which also is supported by Casey and includes a research series on the Earned Income Tax Credit (EITC) and Individual Development Accounts (IDA). That work is available at: http://www.aspeninstitute.org/accesstocapital.
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