Fourth Annual Case Competition: Financial Inclusion
April 28, 2017
Underbanked and unbanked households tend to skew towards low income families, and rely on money orders, payday loans, pawnshops and other means of alternative financial services. While there are many valid reasons why individuals may choose to rely on these services, they can come with costs that create a cycle of dependence, hindering the ability of the consumer to get out of debt, develop a credit history, or build equity. Financial inclusion is an aspect of the larger problem of economic inequality that has been gaining more attention recently, in part through the research efforts of Penn faculty, such as Lisa Servon, Professor of Regional Planning at Penn Design, whose new book, The Unbanking of America, has called for a reconsideration of the assumptions policymakers hold with regard to who in this country is “unbanked” or “underbanked,” and why.
The case competition challenged students to grapple with the fact that while the United States economy has rebounded significantly, in aggregate terms, since the onset of the 2008 financial crisis, for many American individuals and families, the US recovery never came and remains elusive. Working in teams of 3-4, the students’ goal was to develop a specific government policy or program (at the local, state, or federal level) that would address economic inequality by expanding access to “mainstream” forms of credit/capital or by affording opportunities to build equity (for instance, through home ownership). The panel of judges for the competition included Benjamin Keys, Assistant Professor of Real Estate at Wharton; Eric Munson, Chief of Staff within the Philadelphia Mayor’s Office of Community Empowerment and Opportunity; and Marty Smith, a senior community development economic adviser at the Federal Reserve Bank of Philadelphia.
A team of four JD-MBA students–Jennifer Mao-Jones, Alex McCammon, Jenny Reich, and Nick Tabor—took home top honors and the grand prize of $5,000. Their proposal offered a long-range solution to the financial inclusion problem, amending existing regulations and building on current institutional frameworks to launch school-based credit unions for high school students. One of the primary reasons cited by households that close bank accounts and turn to alternative financial services is the excessive and unpredictable fees that banks charge. A program around school-based credit unions, the team concluded, “would increase overall student participation and comfort with the formal banking system” at an earlier age. “Adults who participate in these programs as students would enter the formal banking system already aware of how to structure direct deposits and withdrawals to avoid penalties, use online banking tools to manage accounts, and take advantage of more secure saving.”
In addition to the monetary award and bragging rights, Mao-Jones, McCammon, Reich, and Tabor will have the opportunity to take their pitch on the road to Capitol Hill, and present and discuss their ideas with staffers on the US Senate Committee on Banking, Housing and Urban Affairs.