Nobel Prize “drives” home idea to help Oregon’s low-income population
Lack of reliable transportation is a crucial barrier for low-income and welfare dependent people in escaping intergenerational cycles of poverty. For these individuals and families, car ownership plays a positive role in acquiring employment, raising income and participating more fully in family and community life.
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While policy makers and non-profit organizations stand at loggerheads regarding the definition of effective anti-poverty strategies here in Oregon, a for-profit enterprise in Bangladesh—the Grameen Bank—is spearheading an egalitarian and market-friendly social revolution.
The concept of “microcredit” is winning accolades around the world for fundamentally changing the way everyone perceives the potential of the poor. This growing recognition culminated in October 2006 with the award of the Nobel Peace Prize to Grameen Bank and its founder Mohammad Yunus. Yunus and his bank popularized a unique mechanism through which financial services can be marketed to the poor and unbanked. Their ability to develop a solution to overcome a major barrier faced by the poor—credit—is the harbinger of good news. It indicates that other barriers can be brought down as well.
In the United States, lack of reliable transportation is a crucial barrier for low-income and welfare dependent people in their attempt to break intergenerational cycles of poverty. Car ownership plays a positive role for the low-income in acquiring employment and raising income, but purchasing and maintaining a car can be a challenge for lowincome families.
More than 160 local car ownership programs for lower-income consumers operating throughout the country have developed new business models to meet the rising demand for cars in that market. These programs have carefully created a market niche to appeal to low-income drivers looking for responsible car dealers. For example, the Vehicles for Change, a Baltimore-based program, sells 40 to 50 cars per month to lowerincome households. This company also sells auto loan products to qualified, lowerincome car buyers, along with a six-month warranty.
Another non-profit organization, Bonnie CLAC, helps low-income people buy new, base-model cars at prices and on loan terms equal to those obtained by people with more negotiating savvy and solid credit. It acts as the loan guarantor. Robert Chambers, one of its founders, has arranged price and extended-warranty deals with several auto dealers and interest rates with some banks. The average purchase involves a total of less than $15,000, with no money down, a warranty, a 6% interest rate and an $800 fee to Bonnie CLAC. This comes to an average monthly payment of $270. They give their clients basic training in managing their finances. The auto dealers and banks make a fair profit from this as well.
An increasing number of states are turning to cars as a means of helping low-income working families reach their places of work. For example, Michigan provides up to $1,200 for a down payment on a car and Pennsylvania up to $750. Some states provide a set amount of money to families to pay for car repairs. Tennessee provides $500 per year for minor car repairs. In Michigan, Temporary Assistance for Needy Families (TANF) recipients also can receive up to $900 per year to pay for car repairs.
In the long term, advocacy efforts can be employed to persuade government and the insurance industry to make car insurance more affordable to low-income drivers. California is experimenting with the Lifeline low-cost auto insurance program. Texas passed legislation in 2001 that allows insurance companies to offer mile rates as a way for consumers to exert direct control over insurance costs by purchasing coverage at cents-per-mile rates.
The car ownership concept is an innovative policy tool with the capacity to empower the low-income population by expanding their menu of transportation options. The transportation needs of this population are complex because of the multiple stops and off-peak hour requirements of their daily lives. Car ownership plugs in the gaps that public transportation cannot fill.
Auto ownership facilitates better employment and higher wages. Having access to a car increases housing choices and the flexibility to balance family and work. These allow individuals to participate fully in social and community activities. In other words, car ownership has the potential to incorporate the low-income population into the mainstream, freeing them from economic and social isolation.
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