Poster Paper:
Financial Networks in Low-Income Urban Communites
Saturday, November 14, 2015
Riverfront South/Central (Hyatt Regency Miami)
*Names in bold indicate Presenter
Financial resources are a necessity for all to acquire the goods and services we need. However, it is not entirely clear if and how everyone has access to them. This is true even in cases where people are entitled to such resources, like with salary payments or welfare benefits. To open a bank account in the United States, one must make a deposit of at least $100 depending on the bank and keep a regular minimum balance to avoid paying fees. Once the account is open, customers can access the benefits offered by the financial institution.
On the other hand, the latest FDIC Survey of Unbanked and Underbanked Households found that 16.7 million adults do not have dealings with banks or are “unbanked.” An additional 50.9 million adults are “underbanked,” meaning that while they have a bank account, they either do not use it or also use so-called ‘alternative’ financial services. How do they manage their finances without a bank account? How do they cope with emergencies if they do not have savings in a bank? What if they want to make a big purchase and need a large sum of money?
For almost two years, I have conducted ethnographic research, first by interviewing 91 people in the South Bronx, New York, and Oakland, California, and later by identifying, studying, and participating in various financial networks in the South Bronx. These experiences have revealed not only the ways in which low-income families skilfully manage their finances, but also the underpinnings that support them and the complex issues that explain them.
These areas are among the most unbanked in the US. In the South Bronx, for example, 56% of the population in Mott Haven and Melrose are in this situation. Nonetheless, the 37,337 people living in these communities find ways to access their earnings to make purchases. However, they do not do so through traditional means. They often resource to ‘alternative financial institutions,’ with services like check cashers and money orders, as well as through other ‘alternative’ resources of credit like payday loans -storefront and online- and pawnshops.
Other mechanisms include “informal” savings groups, family members, and even loan sharks. A lot, if not all, of these services are available at a very high financial cost given the higher risk of non-payment. However, they represent resources to get by with what they have - and what they do not have. These resources are a key infrastructure for the resilience and safety of these communities. This research aims to comprehend what makes these “informal” schemes work -or fail-, even if they often have no legal support. By shedding light on these cultural practices, my aim is to better understand them so they can be harnessed to contribute to building people’s assets. The qualitative data provides a fine-grained picture of the way and complexity in which so-called unbanked and underbanked communities behave, thus providing solid and deep evidence for asset-building and financial inclusion policy-making.
On the other hand, the latest FDIC Survey of Unbanked and Underbanked Households found that 16.7 million adults do not have dealings with banks or are “unbanked.” An additional 50.9 million adults are “underbanked,” meaning that while they have a bank account, they either do not use it or also use so-called ‘alternative’ financial services. How do they manage their finances without a bank account? How do they cope with emergencies if they do not have savings in a bank? What if they want to make a big purchase and need a large sum of money?
For almost two years, I have conducted ethnographic research, first by interviewing 91 people in the South Bronx, New York, and Oakland, California, and later by identifying, studying, and participating in various financial networks in the South Bronx. These experiences have revealed not only the ways in which low-income families skilfully manage their finances, but also the underpinnings that support them and the complex issues that explain them.
These areas are among the most unbanked in the US. In the South Bronx, for example, 56% of the population in Mott Haven and Melrose are in this situation. Nonetheless, the 37,337 people living in these communities find ways to access their earnings to make purchases. However, they do not do so through traditional means. They often resource to ‘alternative financial institutions,’ with services like check cashers and money orders, as well as through other ‘alternative’ resources of credit like payday loans -storefront and online- and pawnshops.
Other mechanisms include “informal” savings groups, family members, and even loan sharks. A lot, if not all, of these services are available at a very high financial cost given the higher risk of non-payment. However, they represent resources to get by with what they have - and what they do not have. These resources are a key infrastructure for the resilience and safety of these communities. This research aims to comprehend what makes these “informal” schemes work -or fail-, even if they often have no legal support. By shedding light on these cultural practices, my aim is to better understand them so they can be harnessed to contribute to building people’s assets. The qualitative data provides a fine-grained picture of the way and complexity in which so-called unbanked and underbanked communities behave, thus providing solid and deep evidence for asset-building and financial inclusion policy-making.
