At the brink of a new era for education
It’s no secret that the current financial system in the United States is flawed. Structured in a way that creates obstacles for those who are already struggling to make ends meet. This is particularly true for the majority of Black communities, who have been disproportionately affected by poverty and lack of access to resources. According to recent data, low-income Black Americans are nearly twice as likely to live in poverty as White Americans, and this gap is only widening through our current system of earning, saving what you can, and borrowing.
One of the little-discussed consequences of our financial system is that it creates a virtual “black market” of lending, with catastrophic costs of money being lost through fees, penalties, and exorbitant interest rates. The result is that those who are already struggling to make ends meet are forced to resort to high-cost alternatives when they encounter unexpected expenses or financial emergencies. This can create a vicious cycle of debt that can be difficult to escape.
Moreover, the lack of access to affordable credit can prevent individuals from being able to take advantage of opportunities to improve their financial situation. For example, it can make it difficult to start or expand a small business if you’re a low-income person with no credit or not-so-good credit. Ultimately, this can have a ripple effect on the economy as a whole because a society is only as strong as its economy. When residents have stable jobs and access to quality goods and services, the entire community thrives, ultimately promoting economic growth and stability for everyone.
We can create an alternative to our current two-tier society — in which those with more financial resources are better off while everyone else is left behind — via community-focused financial initiatives that center community.
Community financial programs are designed to help people in a particular area or group. Whether a loan, savings program, or access to financial literacy education, they can offer advice on how to manage money, provide loans and interest-free credit, and give guidance on budgeting and saving for the future. What makes community financial programs so special is that they are tailored to meet the needs of the people they serve, making a big difference to people’s lives. In addition, community financial programs are usually run by volunteers or people that have experienced poverty themselves. This means that they are often more approachable and understanding than banks or other financial institutions.
Black Americans are nearly twice as likely to live in poverty as White Americans, and this gap is only widening through our current system.
A variety of new lending models have grown in recent years, with a focus on communal approaches to money access and the concept of leveraging community to create self-sustaining monetary access models. These models have been designed to build cooperation, achievement, and a sense of shared responsibility. For example, Community Development Financial Institutions (CDFIs) are designed to help low- and moderate-income people and businesses access the capital they need to improve their economic condition. CDFIs provide financing for a wide range of activities, including small business lending, home mortgages, community infrastructure projects, and microenterprise development. In addition, CDFIs often provide technical assistance and training to help their borrowers be successful. Because they are specialized in serving low- and moderate-income communities, CDFIs are an important source of capital for investments that might otherwise not get made. As a result, they play a key role in promoting community-based economic development.
There has also been a growing movement away from traditional philanthropy, which focuses on highly scrutinized institutional giving, to direct assistance and equitable partnerships. One example of this shift is the rise of community-based crowdfunding platforms, which allow individuals and organizations to directly donate to causes they care about. These platforms often have lower fees than traditional fundraising sites, making them more accessible to a wider range of donors. In addition, they typically provide more transparency about where the money is going, allowing donors to see the impact of their contributions. As more people become aware of the limitations of traditional philanthropy, it is likely that these new community giving models will continue to gain popularity.
There has also been a growing movement away from traditional philanthropy, which focuses on highly scrutinized institutional giving, to direct assistance and equitable partnerships.
Aside from institutions and software, individuals can help cultivate more equitable financial communities by making sure everyone has access to the tools they need to achieve their goals.
Here are a few examples of how you can get involved:
- Advocate for policies that support financial inclusion
- Connect people who need financial services with providers who can meet their needs
- Promote education and awareness about the importance of financial literacy
- Help businesses grow by strengthening their access to capital
- Support organizations that work towards developing strong communities
By doing any, or all, of these things, you’ll be helping to make your community a better place for everyone! Financial community is an important part of creating equity and social justice, so make sure to include it in your activism arsenal. When it comes to building a strong economy, community-centered financial programs are an essential piece of the puzzle.
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