Office of Small Credit Union Initiatives Report
BUILDING WEALTH AND DEPOSITS:
AN OPPORTUNITY FOR CREDIT UNIONS – PART II
In the January 2012 edition of the NCUA Report, we provided
an overview of Individual Development Accounts (IDAs). We
suggested IDAs as a strategy for credit unions seeking to
increase wealth-building among their low-income members. In
this report, the Office of Small Credit Union Initiatives answers
questions that may arise as your credit union considers this
asset-based approach to help families build wealth, while
creating opportunities for a way out of poverty.
What are the benefits of participating
in an IDA program?
IDAs are a way to encourage low-income individuals to save.
The goal is for the account holder to use the funds to achieve
any of three objectives: acquiring a first home, capitalizing a
small business, or enrolling in postsecondary education or
training. Each dollar the account holder deposits into an IDA
is matched with public and/or private funds. This dynamic
allows the individuals to achieve their desired economic goal
sooner than they otherwise expected, while instilling the
discipline of savings.
As noted in our January article, offering IDAs provides a
credit union with several benefits. The first is simply adding
to the membership ranks as member loyalty is often soon
established. Over time, the member is likely to use a variety of
credit union products and services that may include tapping
their IDA accounts for the purposes mentioned above.
How difficult is it to implement an IDA program?
Operating an IDA program involves recruiting eligible
participants, providing them financial education, and
supporting them from establishing and maintaining a savings
plan through to the asset purchase. There are also fiscal
responsibilities, such as monitoring participant deposits and
tracking matching funds as they are allocated, earned, and
spent. Credit unions are well situated to manage IDA
programs because many of these activities correlate with work
they already do. For example, recruiting participants can be
part of membership development or member services, and
tracking IDA deposits is similar to tracking loan payments.
A way to ease the transition or share the work involved is to
identify and work with a community partner. A community
partner is a local organization that has experience providing
social services to individuals who are potential IDA program
participants. Examples of such organizations include the
United Way, community action agencies, and homeownership
organizations. A partner may facilitate program operation by
providing financial education, credit counseling, asset-specific
training such as entrepreneur training, follow-up for goal
monitoring, or other similar services. 1
There is no single approach to partnering to deliver IDA
program services. Under one model, the partner may
administer the IDA program and only need a credit union to
serve as the depository of the accounts. Under another model,
the credit union may administer the program and rely upon
the partner to provide other program services.
What are the most common sources of
matching funds for IDA accounts?
Matching funds for IDAs may come from various sources,
depending upon the program requirements. Sources for these
matching funds may include government agencies, churches,
charities, and foundations.
What is required of IDA participants?
Eligibility and other program requirements vary depending
upon the particular IDA program. Financial education is a
key element in any IDA program. Typically, an account
holder is required to participate in financial education
training in addition to making regular deposits into the IDA.
Programs generally have provisions to ensure that funds are
used for eligible purposes. For example, at the time an
account holder is ready to purchase an eligible asset, funds
would only be distributed to the title company, into a business
account, or to an accredited school. 2
Where can I obtain additional information
on IDA programs?
Websites for learning more about IDA programs include:
; Federal government: Assets for Independence Program,
; State agencies: Search individual state government websites
using “Individual Development Account” as keywords.
;General information: the Corporation for Enterprise
Development (CFED), http://cfed.org/programs/idas/
To learn about the other resources available through
NCUA’s Office of Small Credit Union Initiatives, watch our
informational video at http://bit.ly/vsHHfE.
1 See Individual Development Account Initiatives, Connecticut Department of Labor, Project Management Office at
2 For more information, see the Frequently Asked Questions section of the link above.