MATCH MAKER

How NMCAA’s IDA funds are empowering local businesses

By Kierstin Gunsberg

Northwest Michigan Community Action Agency (NMCAA) is on a mission to uplift local communities.

The organization serves 10 counties across northern Michigan by connecting them with valuable services, resources, and programs that foster financial growth and stability. One of these programs is the Individual Development Account (IDA).

For nearly 20 years, this matched savings program has assisted local lowto moderate-income households and business owners in building their assets. It was initiated in 2000 by Karen Emerson, the organization’s financial management services department manager, after she first learned about these types of savings accounts at a conference called “Untangling The Funding Jungle.”

The conference, hosted by Michigan Community Action, another nonprofit focused on economic stability and poverty reduction, was Emerson’s first in her new role.

She says she was immediately interested in how matched savings accounts could propel families and business owners forward in their goals. After the conference, she spoke with her executive director and took steps to attend statewide meetings and apply for funding.

In a couple short years, NMCAA became the Michigan IDA Partnership regional co- ordinating organization, helping more than 12 other IDA program sites from Claire to Houghton-Hancock, she says.

The program enables participants to save money while receiving guidance from budget coaches. NMCAA matches each dollar saved by the participants, providing a boost to their savings and momentum toward their goals, which might be the purchase of a home, paying for higher education, or funding a small business start-up or expansion.

Once the program requirements are completed per the participant agreement, the participant will receive a 3-1 match for homeownership at the closing after all appropriate paperwork is received.

“That means after saving $1,000, the match will be $3,000, she said, adding that it gives the participant $4,000 to use for down payment, closing costs or principal reduction.”

For those seeking education or business support, their savings of $1,000 will be matched with $2,000.

To qualify for the program, which is financed through private donations and grants secured by NMCAA through fundraising efforts, participants must have earned income from wages and fall below 200% of the federal poverty guidelines.

The application process is done via a simple online form through the organization’s website. They also provide in-person application support.

Once participants are selected, they are then required to save consistently for a minimum of six months after enrollment and are given flexibility on which financial institution they choose for their savings deposits. They’ll also attend asset-specific education sessions like homeownership workshops, money management workshops, and monthly meetings with a budget coach to meet their program requirements.

The IDA program hopes to act as a catalyst for economic growth and development by integrating low- to moderate-income individuals into the mainstream financial system. Emerson says that the program creates a snowball effect by cultivating educated home and business owners who make informed financial decisions which can lead to more stable and prosperous communities.

In an economic environment of increased inflation and rising home interest rates, the factors that contribute to financial instability may run deeper than financial literacy alone, but Emerson believes that there’s a positive impact brought on by pointed education and support.

“People learn new skills, become more self-confident in being able to manage their finances, and (become) better stewards of their resources.”

She continues to explain that during NMCAA’s history of hosting the program, over 500 qualifying households have achieved homeownership, funded their education, or started or expanded their business, while leveraging over $37 million in total assets purchased. These are numbers that Emerson says are a “huge indicator” of how, when given the opportunity, “people can overcome barriers in generational or situational poverty by saving money, receiving financial education, and coaching.”

The organization has also recently submitted a grant proposal that, if awarded, will allow for the expansion of IDAs to include transportation accounts.

For those focused on their business startups or expansions, NMCAA provides money management education and resources, along with a match of $2,000 for the participant’s savings of $1,000. It’s a financial boost that’s meant to simultaneously help entrepreneurs establish a solid foundation for their ventures while supporting a stronger local economy as the potential for more employment and spending grows.

Since its launch in 2001, the IDA program has facilitated the growth of 46 small businesses across the region. Through their dedication and savings, program participants have accumulated a total of $47,529, leading to an impressive asset price of $154,935. Emerson says some of the program’s success stories include a dog walking service, a print shop, and a logo wear company.

She also notes the particularly successful expansion of the chocolate croissant hub 9 Bean Rows in Suttons Bay, who say that the program was “instrumental” in starting their business. The matched funds from the IDA allowed the bakery to participate in the Natural Resources Conservation Service’s conservation program, EQIP, so that they could add a large hoophouse to protect their crops and expand their farm production into what it is today.

NMCAA has also forged partnerships with key stakeholders in the community to enhance their IDA program including Huntington Bank, which has been a major supporter, working closely with the organization’s Homeownership and

Financial Empowerment Center. The agency is also actively seeking additional partnerships to expand the reach and impact of IDAs across their 10-county region.

Looking ahead, Emerson says they’re aiming to establish a “pool of funds” contributed by local employers, which would enable area workers to apply for IDAs. Emerson explains that this collaborative approach would help foster a symbiotic relationship between businesses and their employees by providing workers.

The collaboration would provide these employees with the opportunity to purchase homes and create financial stability in the same communities they work within, instead of living and working in two separate places – an idea that wraps back around to NMCAA’s mission of building better communities by supporting economic security.

“It’s so important for employees to have the ability to live near where they work and become a stakeholder in their community,” she said.

Meanwhile, the organization, which also provides programming like Meals on Wheels and Early Head Start, continues to expand their education opportunities as an investment in northern Michigan’s future economy.

“Money management education, individual coaching, plus monetary incentives will help create a roadmap of success for the households (that qualify),” Emerson said, adding that this learned ability to navigate fiscal nuances is a trait that trickles down to local children whose parents qualify for an IDA.

“Giving households a foundation of education and a jump start into wealth-building,” she says, “has a significant impact on the parents and second generation of savers, their children.”

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