Rural Economic Mobility and Wealth Building

Despite the general economic recovery in the United States, income inequality and wealth inequality are expanding.  Perhaps more critically, it is becoming more and more difficult for families with lower wealth or income to achieve upward economic mobility.  These two facts, that the wealth and income gaps are large and growing and that the relative economic position of families is becoming more fixed, chip away at the common notion of the American Dream – our ideal of equal opportunity.  This is especially true in the South, the region with the lowest upward economic mobility.

In part because of this, many of the “hardest places to live” are in the South and almost all of the counties are rural. Low population density and population outmigration can make housing development, business development, and access to fairly priced financial services more challenging to provide even though those homes, jobs, and savings are critically needed.   This occurs in part because of lack of access to capital which is often due to the loss of traditional financial institutions in rural areas.

Southern Bancorp Community Partners  was founded in response to that need.  Southern is a development finance organization that works to improve family and community net worth in order to promote economic opportunity.   Southern and its bank partner, Southern Bancorp, are US Treasury certified Community Development Financial Institutions and, as such, offer lending, banking, and financial development services and promote policies that improve upward economic mobility in the rural Mid-South.  These services make a real difference not only in the daily lives of the people in our communities but also the in the trajectories of their families and neighborhoods.

Abundant research and Southern’s experience shows that many people do not turn to banks when they need to make a financial transaction.  Some use check cashers, pawn shops, payday loans, and other high priced, often predatory alternative financial services, even if they have a checking or savings account.   The FDIC defines “unbanked” households as those that do not having either a checking or savings account at all, while “underbanked” households have a checking and/or a savings account but have used alternative financial services in the past 12 months.   The most recent FDIC survey on unbanked and underbanked households shows the following for the two states in which Southern operates:

The unbanked and underbanked rates for Arkansas and Mississippi are considerably higher that the US as a whole and the same is true for much of the South.   The survey also shows the unbanked and underbanked rates by race and ethnicity, data which are consistent with reports on the racial wealth gap:

Southern’s own data from the Individual Development Account program support these findings.  IDAs are matched savings accounts that help people save for appreciable assets such as a first home, small business development, or higher education.  Since 1999, Southern has served more than 2,000 people through its IDA program in Arkansas and Mississippi. Recent data show that 50 percent of IDA participants had never had a savings account until opening the IDA.   Given the unbanked rates (and the racial demographics of our service area), it is perhaps not surprising the 78% of our IDA participants identify as African American.

Ideally participants in the IDA program use their savings and match to purchase an appreciable asset and build net worth. But even if they do not save enough to complete the program before it ends, participants may accumulate significant savings for the first time in their lives.  In addition, many choose to keep their savings account after leaving the IDA program.   Such programs, especially when combined with financial education, credit counseling, tax preparation and other services, can help families develop savings and financial habits that allow them not only to weather economic shocks but also to build net worth.  And according to Dalton Conley, “while race, income, job status and net worth all tend to vary hand-in-hand, careful statistical parsing shows that it is really net worth that drives opportunity for the next generation.”

It is important to note two features of the IDA account which may make it attractive as a first savings account: 1) The savings are targeted toward a particular purchase of the saver’s choosing, and 2) the saving plan is time limited.   For people who may have never saved before, the targeted purpose makes the savings process relevant and the time limitation makes it more feasible.   This is not unlike the ever popular “Christmas Club” accounts that have the same two features.  These findings can be used to develop starter savings accounts that will be available to people who are unbanked.

By many measures, the South is the fastest growing region of the country.  That is no surprise given the resources, climate, beauty, and often underrealized opportunity in our region.  So it is important for CDFIs and others to work toward increase economic opportunity for all, regardless of where they live. The solutions are critical not only for rural Southerners but for our country as a whole.

Karama Neal, PhD, is Chief Operating Officer of Southern Bancorp Community Partners, a CDFI based in Little Rock, Arkansas.

This post originally appeared on State of the South, and can be viewed by clicking here.


New CFED data showing state of family economic security in Arkansas

This week, the Corporation for Enterprise Development (CFED) released its annual Assets and Opportunity Scorecard. The Scorecard provides a comprehensive look at Americans’ capacity to accumulate wealth by examining how well residents prosper in the 50 states and District of Columbia on both the ability of residents to achieve financial security and the state policies designed to make it possible. The Scorecard assesses state policies focused on helping people develop and protect assets across 67 outcome measures in five different issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care, and Education. The identified asset building policy triumphs, deficiencies, and recommendations for the state are of great interest to us at Southern as we serve as the Lead State Organization for the CFED Assets & Opportunity Network and our mission is to provide opportunities for increasing net worth and economic mobility.

That said, Arkansas fared poorly overall in 2015. In Education, Arkansas ranked among the worst states in the country in regards to residents with high school degrees (45th) and those with two-year and four-year college degrees (ranked 50th and 49th, respectively). The state’s poor performance in education uncovers significant inequalities. For example, Arkansas ranks last (51st) in four-year college degrees by income, with the top 20 percent of earners 6.4 times more likely to hold a degree than the bottom 20 percent. The Scorecard revealed Arkansas’s young adults are also not doing so well – the state ranked 42nd for the number of “disconnected youth,” meaning those aged 16-24 who are not in school and do not have a job. Without job skills or education, most have to work in low-paying jobs with few to no benefits. According to the Scorecard, 36.6 percent of Arkansas jobs are low-wage, ranking the state 49th in this category.

2015 Arkansas Scorecard Snapshot
Issue Area Success Challenge Rank Grade
Financial Assets & Income


Avg. Credit Card Debt Households w/ Savings Accounts 46 D
Businesses & Jobs


Business Creation Rate Low Wage Jobs 44 D
Housing & Homeownership


Affordability of Homes Delinquent Mortgage Loans 28 C
Health Care


Uninsured Rate by Race Employer-Provided Insurance Coverage 17 B


Early Childhood Education Enrollment 4-year Degrees by Income 44 D
Source: CFED Assets & Opportunity Scorecard, 2015.

The state received its worst ranking in Financial Assets & Income, ranking 46th and earning a “D.” This grade reflects persistently high rates of income poverty (18.8 percent) and unbanked households (12.3 percent), ranking the state 48th on both of these measures. Arkansas also received a “D” in Businesses & Jobs, partially due to a stark disparity in business ownership by race, with business ownership 2.4 times as high for white workers as for workers of color. The state’s ranking of 44th in Education is essentially due to residents’ low levels of math and reading proficiencies (ranked 42nd and 40th, respectively) and low rates of postsecondary degree attainment described above.

Interestingly enough, Arkansas has always and continues to fare considerably better on its policy measures than its outcomes, having adopted 29 of CFED’s 68 recommended policies and receiving an overall ranking of 14th among all states. Despite many entrenched problems placing pressure on low- and moderate-income families, the state ranked among the top in Health Care and Education policies, receiving rankings of 6th and 5th in these issue areas, respectively. But the dichotomy between Arkansas’ enacted policies and its policy outcomes is intriguing: although Arkansas ranks 42nd in the nation in terms of outcomes, the state places 14th in its aggregate policies. Hence, there is a weak relationship between Arkansas’s policies and outcomes; the state has strong policies yet still poor outcomes for families.

A reason behind the weak relationship between Arkansas’s policies and outcomes is while a policy may have been effective for a period of time, the policy was never extended or supplemented. For example, Arkansas passed legislation for a Housing Trust Fund but never fully funded it and the state left our matching 529 GIFT plan program (Aspiring Scholars) in pilot mode without a sustainable funding source for match money or marketing. Further, when payday lenders left Arkansas, no financial institution introduced a payday loan alterative product. For state policy to truly have a lasting, major impact on Arkansans, policies must be sustainable and comprehensive.

Over the years, Southern has supported a number of asset building policy changes focused on financial stability and independence of Arkansans, including a state match for Individual Development Accounts (IDAs), an increase in the state’s minimum wage, a statewide housing trust fund, matched savings for the state’s 529 GIFT plan, the termination of payday lending practices, and most recently, the expansion of our Medicaid program. However, the need for sound and effective asset building policy is still highly critical to ensuring a family’s economic security in Arkansas. Furthermore, support for implementation of the policies Arkansas has in place must also be secured.

The findings from the Scorecard highlight the need to better prepare Arkansas’s children for the future workforce through investments in education. Arkansas can make postsecondary education more affordable with a statewide Children’s Savings Account program that would encourage families to start saving early for college and promote a college-going mentality. Additionally, current workers can develop needed skills through expanded job training programs. Policymakers should also help low-income workers keep more of their hard-earned dollars through the adoption of a state Earned Income Tax Credit.

To learn more about what can be done at the state policy level to create economic opportunities for more Arkansans, please contact Nathan Pittman, Director of Communications, at

Banking in Rural America: Insight from a CDFI

As a rural community bank and U.S. Treasury certified Community Development Financial Institution (CDFI),   Southern is fully aware of the importance of CDFIs in rural markets throughout the country. In our recent paper, Banking in Rural America: Insight from a CDFI, we illustrate why CDFIs like Southern are well-equipped to address the problem of community banks leaving rural communities based on Southern’s recent acquisitions of three banks in different Arkansas markets.

Over the last three decades, more than half of all banks in America have closed.[i] In rural areas, these figures are even greater due to: the depopulation of rural counties; technological advances lessening the need for brick and mortar facilities; lack of succession planning; and increased and adverse regulations of the Dodd-Frank Act, which harms small, local lenders by imposing on them one-size-fits-all financial parameters aimed at big Wall Street banks. However, the most sobering statistic is that of all the bank closures, nearly 96 percent of them have been community banks.[ii]

The following examples demonstrate why large numbers of community bank closures, especially in rural areas, are so problematic:

  • According to the U.S. Treasury, community banks and CDFIs made nearly 90 percent of the dollar volume of small-business loans under the State Small Business Credit Initiative (SSBCI). Community banks originated 1,853 loans nationally under the program in 2013, while CDFIs accounted for another 2,008. Large banks, on the other hand, originated only 403 loans.[iii]  Small business loans are critical for supporting the job creation so many rural communities need.
  • Community banks and CDFIs are proven to increase the social capital of a community. According to the World Bank, social capital refers to how a community’s institutions and relationships shape the quality and quantity of a community’s social interactions. Increasing evidence shows social cohesion is crucial for communities to prosper economically.[iv]
  • According to a recent study by Baylor University, local lending to individuals based on relational banking has decreased as rural communities have fewer traditional financial institutions. In addition to reduced relational lending, research shows that loan default rates are higher when borrowers are not in the same geographic market as their lender. That inaccessibility to safe, affordable credit is one of the root causes of why people remain poor.[v] [vi]
  • Over 32 percent of Mississippi households and over 25 percent of Arkansas households are using alternative financial services such as payday loans at least some of the time.[vii] Small and midsize business loan originations from online lenders, merchant cash advance providers and other alternatives have grown a reported 64 percent in the last four years.[viii] The global shadow banking system grew by $5 trillion in 2012, to reach $71 trillion.[ix]  These high-priced industries strip wealth from people and communities that could otherwise use their resources to promote household financial stability.

As the number of community banks declines in rural markets, so will many of the benefits those banks bring to their communities. CDFIs like Southern are vital to making capitalism work in rural America. Southern has a strong track record of sustainably and effectively serving many of these distressed markets, and to create new economic opportunities for rural Americans, Southern seeks to expand its financial and development services to markets with limited access to non-predatory financial products and services that build long-term wealth. To learn more about our efforts, please contact Meredith Covington, Policy & Communications Manager, at

[i] Wheelock, D. (2012). Too big to fail: The pros and cons of breaking up big banks. The Regional Economist. Federal Reserve Bank of St. Louis. Available at

[ii] Federal Deposit Insurance Corporation (FDIC). (2012). FDIC community banking study. Available at

[iii] Center for Regional Economic Competitiveness. (2014). Filling the small business lending gap: Lessons from the U.S. Treasury’s State Small Business Credit Initiative (SSBCI) Loan Programs. Department of the Treasury. Available at

[v] DeYoung, R., Glennon, D., Nigro, P., & Spong, K. (2012). Small business lending and social capital: Are rural relationships different?. Center for Banking Excellence, University of Kansas. Available at

[vi] Barth, J., Hamilton, P., & Markwardt, D. (2013). Where banks are few, payday lenders thrive: What can be done about costly loans. Milken Institute: Santa Monica, CA. Available at

[vii] Federal Deposit Insurance Corporation (FDIC). (2014). 2013 FDIC national survey of unbanked and underbanked households. Washington, DC. Available at

[viii] Testimony of Renaud Laplanche before the Subcommittee on Economic Growth, Tax and Capital Access of the Committee on Small Business, United States House of Representatives. December 5, 2013.

[ix] Financial Stability Board. (2013). Global shadow banking monitoring report 2013. Available at

Strengthening the Case for Removing Asset Limits on SNAP & TANF: Results of DHS Asset Limits Study

In support of Southern’s mission to create economic opportunity and promote financial security, our policy team worked to pass legislation (Act 535 of 2013) during Arkansas’s 89th General Assembly that required the Department of Human Services (DHS) to conduct a study on current asset limits for the SNAP and TANF programs. While ample national research showed the negative effects of asset limits, there was insufficient data specific to Arkansas. In summer 2014, DHS released the study to determine the effectiveness, consistency, and efficiency of program administration and to understand the potential implications of changing the current asset limits.

The study’s results confirmed our 2013 research findings, presented in our paper “Making the Case for Eliminating Asset Limits: Why Asset Limits Undermine Financial Security for Arkansans”: less than 1 percent of Arkansas SNAP and TANF applications are denied because of excessive assets.  The reason for such a low number of denied applicants is because the great majority of Arkansans receiving and needing income supports are in fact poor. The average Arkansas household receiving SNAP has only $57 remaining at the end of the month after paying for necessary expenses.  Hence, SNAP recipients do not have the funds saved, or to save, to reach the asset limit, making the asset limit irrelevant for them. Further, in addition to asset tests, income tests are also in place to ensure a household has an income below 130 percent of the Federal Poverty Level.

While the intention of asset testing is to ensure accurate allocation of benefits to those most in need, the eligibility criteria can have negative impacts on the effectiveness of the program as a conduit to self-sufficiency. Asset limits were enacted to prevent wealthy people with considerable savings from receiving funds from anti-poverty programs, yet this scenario is extremely rare, largely due to income tests. Rather, asset limits often have an adverse effect, deterring people from transitioning from government dependence to self-sufficiency and keeping them on public benefit programs. Asset limits discourage savings, disincentivize maintaining a bank account, and theoretically increase the duration of time a family is financially unstable and stays on public benefits.

In addition to negatively impacting a household’s economic stability, asset limits also create problems within public benefit administration. Due to the great complexity of rules and exceptions attached to asset limits, the application evaluation process of asset confirmation can be extremely taxing and time-consuming for both the caseworker and the applicant. Regarding the convolutions of eligibility requirements, over two-thirds of payment errors in SNAP are made by the caseworker rather than the applicant. A 2012 study found that doing away with asset tests for SNAP in both Illinois and Ohio simplified the work, reduced the amount of verifications for applicants, and allowed workers more time to process other information regarding the assistance program.

The results of the DHS study show asset limits are futile, yet discourage economic independence. If Arkansas wants to reduce the number of people on SNAP and TANF, the state cannot perpetuate a cycle where those services become the norm – families need to be able to save to become financially independent. Further, removing asset limits in Arkansas would result in less government spending, and more administrative efficiency.

To learn more about our efforts to improve household economic stability for people in rural communities, please contact Meredith Covington, Policy & Communications Manager, at



New Poverty Measure Paints Different Picture of Poverty Rates in Arkansas and Mississippi

In October, the Census Bureau released the poverty rate based on the Supplemental Poverty Measure (SPM). This snapshot of poverty in America, which varies somewhat from the standard official measure released in September, accounts for regional differences in the prices of housing and other local living costs by using more updated formulas associated with consumption patterns and family structures to calculate the rate. It also deducts essential costs—food, clothing, housing, and utilities—and accounts for government assistance programs.  This new measure is significant as the official poverty measure (OPM) has been widely assailed because of assumptions such as the income needed to live in San Francisco being the same as what is needed in the Mississippi Delta. Just to clarify and underscore the absurdity of this, the median value of owner-occupied housing units in Clarksdale, Mississippi is $60,000; while in San Francisco, it’s $750,900.[i] Further, the OPM does not incorporate many income supports that effectively lift families out of poverty.  Thus, many conclude that the SPM is a more accurate measure of poverty than the OPM.

The SPM shines a new light on the effectiveness of anti-poverty and government assistance programs in tackling poverty. For example, a single mom in Arkansas with two kids can receive an Earned Income Tax Credit (ETIC) of $5,370 if she makes about $13,500 annually, which increases her household income by nearly 40 percent. Including this kind of information in poverty analysis measures paints a more accurate picture of what poverty looks like in the U.S.

Source: Census Bureau, 2014.

The OPM calculates Arkansas’s poverty rate as 18.7 percent, and Mississippi’s rate as 20.7 percent.  Under the SPM, Arkansas’s poverty rate decreases to 16.1 percent, and Mississippi’s declines to 15.3 percent.  In summary, the poverty rates in both Arkansas and Mississippi are lower when using the more comprehensive SPM. Further, on the national level, the overall poverty rate over the last five decades remains around 15 percent according the OPM. The SPM, on the other hand, declines markedly over the past fifty years (19 to 16 percent).

  OPM (2011-2013) SPM (2011-2013) Difference
Arkansas 18.7% 16.1% -2.65
Mississippi 20.7% 15.3% -5.4%
U.S. 14.9% 15.9% 0.9%

Source: Census Bureau, 2014.

Having an accurate measurement is critical to Southern’s work as we seek to create opportunities for economic stability and mobility in Arkansas and Mississippi. While the SPM does not tell us everything about the communities we serve, it does provide insight into the resources people have access to and the costs they incur by looking at the population in a comprehensive way. To learn more about our efforts to improve economic opportunities for people in rural communities, please contact Meredith Covington, Policy & Communications Manager, at


[i] Census Bureau. (2010).

New Unbanked and Underbanked Rates Underscore Need for Affordable and Accessible Financial Services in Arkansas and Mississippi

As a Community Development Financial Institution (CDFI) seeking to provide affordable and accessible financial services to Arkansans and Mississippians, a recently released FDIC survey on unbanked and underbanked households in America caught our attention. The study breaks down the rates of unbanked and underbanked households by state as well as providing information on rates of savings account ownership and usage of prepaid debit cards and mobile financial services.

For background, the FDIC defines “unbanked” households as not having a checking or savings account, and “underbanked” households as those having a checking and/or a savings account but using alternative financial services, such as non-bank money orders, non-bank check cashing services, payday loans, rent-to-own services, pawn shops or others in the past 12 months.

While still higher than the national average of 7.7 percent, Arkansas’s unbanked rate was stable over the last two years at 12.3 percent. Further, the underbanked rate decreased from 28.1 percent to 25.7 percent, which is exceptionally noteworthy because of its significant increase from 22.3 percent in 2009 to 28.1 percent in 2011. In Mississippi, the unbanked rate decreased 0.6 percent from 15.1 percent in 2011 to 14.5 percent. However, Mississippi’s underbanked rate took a turn for the worse: the percentage of underbanked households jumped from 23.8 percent in 2011 to 32.8 percent.

  Unbanked, 2011 Unbanked, 2013 Underbanked,  2011 Underbanked, 2013
Arkansas 12.3% 12.3% 28.1% 25.7%
Mississippi 15.1% 14.5% 23.6% 32.8%
U.S. 8.2% 7.7% 20.1% 20.0%

Source: FDIC, 2014.

In addition to the unbanked and underbanked rates, the FDIC’s findings on the increased usage of prepaid debit cards and mobile banking are also of interest. In Arkansas, 10.2 percent of households used prepaid debit cards in the last 12 months; in Mississippi, the rate of prepaid debit card usage is 14.9 percent. Unbanked households had the highest rate of usage of prepaid debit cards, whereas underbanked households are more likely to use mobile financial services than fully banked or unbanked households.

So what does this mean for Southern? Arkansas and Mississippi are both relatively poor states, so higher unbanked and underbanked rates are not surprising as the FDIC survey shows there is a strong negative relationship between lower-income households and ownership of a bank account. But as a CDFI, Southern works to extend the availability of credit and capital to everyone, and provide responsible, fair financial services to its customers. As demonstrated at the national level in the FDIC survey, 35.6 percent of unbanked households reported the main reason for not having an account was insufficient money to meet minimum balance requirements, and 34.1 percent of households that recently became unbanked experienced either a significant income or job loss they said contributed to becoming unbanked. To help alleviate financial stress amongst our customers, Southern currently offers several different kinds of accounts with no service fees and no or low minimum balance requirements.

To learn more about Southern’s efforts to reach unbanked and underbanked households and create economic opportunity in Arkansas and Mississippi, please contact Meredith Covington, Policy & Communications Manager, at

Bringing CSAs to the Legislative Forefront in Arkansas

Promoting savings as a way of building assets has long been a focus of Southern Bancorp’s work, which is why we were so excited to read CFED President Andrea Levere’s  op-ed in last month’s New York Times that highlighted the effectiveness of Children’s Savings Account (CSA) programs. CSAs have been a household term and practice throughout the family economic security field for over a decade. They come in all shapes, and sizes, ranging from accounts held by private financial institutions to demonstrations run by research universities to 529 plans administered by a state government entity. Like Individual Development Accounts (IDAs), CSAs are designed to make opportunities possible for economic mobility – in essence, they are savings accounts created to establish a foundation for children to ultimately increase their net worth, whether it be by achieving a post-secondary educational degree, buying a home, and/or starting a business, all key indicators of economic mobility in Southern’s view. While CSA programs are still relatively small in number, they’re starting conversations in families about planning and paying for higher education early.

Throughout the last ten years, Southern has engaged in a variety of CSA programs in Arkansas and Mississippi. In addition to offering IDAs, Southern has participated in the SEED demonstration, Save for America program, Aspiring Scholars Matching Grant Program, and the Mississippi College Savings Account initiative. While all of these programs have had great success in providing savings accounts for Arkansas and Mississippi children, scalability and sustainability for the programs has been challenging.

Throughout the country, several universal CSA programs have emerged at the city, county, and state levels.  As Ms. Levere’s op-ed points out, the Kindergarten to College initiative in San Francisco has sparked national interest by delivering CSAs to all San Francisco public school kindergartners. The city of St. Louis is planning to unveil a similar program in fall 2015. Cuyahoga County (Cleveland), Ohio launched its own CSA program by establishing a savings account for every child entering kindergarten in fall 2013. Further, Colorado, Hawaii, Maine, and Nevada have implemented or have started the process of implementing different models of CSA programs in their states using various government agencies, all providing a CSA to a child at a particular grade or age level.

As mentioned earlier, Southern was behind the Aspiring Scholars Matching Grant (ASMG) program, enacted by Act 597 through the Arkansas Legislature in 2007. The ASMG program provides a savings incentive to low and moderate income families by matching funds saved for their child’s college education in the state’s 529 GIFT College Investment Plan. The ASMG Program provides matching grants of up to $500 per year to eligible students, based on a household’s income level. The ASMG program was only enacted to serve as a two-year pilot. The funds came from a surplus in management fees charged on all GIFT Plan accounts.[i] Despite management fees continuing to fund the matches, the legislative funding source has officially ended.[ii]

Undeniably, the ASMG program successfully served its purpose to financially assist low-to-moderate income families in saving for post-secondary education; however, less than 1 percent of Arkansas children have an ASMG account established for their benefit.[iii] Hence, the program’s reach is limited, and as noted earlier, it does not have a legislatively committed funding source. That said, the management fees are still being collected on the GIFT Plan accounts, which means there is a pot of money there that could be reallocated for other purposes. In the State of Nevada’s Treasurer’s Office, management fees on their 529 college savings account plans serve as seeds to establish a $50 account for all Nevada public school kindergartners.[iv]

Based on U.S. Census data, Arkansas has approximately 41,000 kindergartners. If Arkansas sought to seed every Arkansas public school kindergartner a $50 account through its 529 GIFT Plan using management fees, it would cost around $2 million per year. And here’s why we think this is so important for Arkansas lawmakers to consider:

  • According to the Georgetown University Center on Education and the Workforce analysis on occupation data and workforce trends, 52 percent of Arkansas’s jobs will require some kind of postsecondary education or training by 2018. Right now, only 21 percent of the population holds a four-year college degree, with 27 percent having a two-year degree.[v]
  • Putting every child on the same starting line at a young age and showing them they have options after high school will increase the economic mobility of Arkansas’s children and better enable them to contribute positively to Arkansas’s future.
  • Building a college-bound culture will help prepare the future workforce Arkansas needs to attract well-paying jobs.
  • Further, a recent study finds that children with savings accounts in their name, including 529 plans, could be up to seven times more likely to attend college if those children expressed an expectation to attend college – regardless of family income, ethnicity, or the educational attainment of the child’s parents.

If all Arkansas children were on the same level playing field, their opportunities for educational attainment, career advancement, and asset-building would be significantly improved. As a Community Development Financial Institution (CDFI), our mission is to create economic opportunities for people in rural communities, so supporting post-secondary education through savings is a natural fit.

To learn more about our efforts, please contact Meredith Covington, Policy & Communications Manager, at

[i] DeLong, KR. (2009). Aspiring Scholars matching grant program: A successful first year. Policy Points, Vol. 33. Little Rock, AR: Southern Good Faith Fund Policy Program. Available at

[ii] Covington, M., & Edwards, T. (2014). Evaluating college savings plans: A case study on Arkansas and Mississippi. Policy Points, Vol. 41. Little Rock, AR. Southern Bancorp Community Partners Public Policy Program. Available at

[iii] Ibid.

[iv] Nevada State Treasurer website. Available at

[v] CFED. (2013). Assets & Opportunity Scorecard. Available at

Recognizing National Save for Retirement Week

This is National Save for Retirement Week, a national effort to increase personal financial literacy and raise public awareness about the importance of saving for retirement.[1] This week provides an opportunity for employees to reflect on their personal retirement goals and determine if they are on target to reach those goals. Southern Bancorp believes that building net worth is one of the best ways to ensure a strong financial future, which is why we’re so big on promoting the benefits of getting started saving for retirement now.

Of course, this is easier said than done.

Research shows Arkansans and Mississippians are not saving at high rates, let alone adequately saving for retirement. According to CFED, the asset poverty rate is defined as the percentage of households without sufficient net worth to subsist at the poverty level for three months in the absence of income, whereas liquid asset poverty is not having sufficient liquid assets, such as cash in bank accounts and equity in stocks, mutual funds and retirement accounts, to subsist at the poverty level for three months. Arkansans and Mississippians do not fare well in either category, indicating most households are not appropriately saving for retirement.

A contributing problem for many folks in Arkansas and Mississippi is they simply don’t have the opportunity to save in a tax-sheltered retirement account because they lack access to a 401(k). In fact, according to the Employee Benefit Research Institute, only 39.2 percent of Arkansas workers and 41.4 percent of Mississippi workers ages 21-64 participate in an employer-based retirement plan.[2]

Today, a retiree beneficiary turning 65 can expect Social Security to replace approximately 30 percent to 50 percent of preretirement income, depending upon his or her earnings history. Consequently, if workers hope to maintain their preretirement standard of living, they may need other sources of income in retirement to supplement their Social Security benefits, as Social Security was not designed to match that standard for all workers.[3] Thus, saving for retirement is imperative to the future economic security of one’s family. With longer life expectancies and rising costs, it is critical that Arkansans and Mississippians understand the consequences of the need for and benefits of saving for their future.

So what should one do to save for retirement if he or she doesn’t have the option to save in an employer-based retirement plan? There are several options at different levels:

  • Individual: Even if one does not have access to a 401(k) plan, an individual can use a variety of different savings vehicles to prepare for retirement. The IRS provides a detailed list of all types of retirement plans here.
  • State policy: While states cannot mandate that every employer offer a 401(k) plan, they can support increased savings through other means. Presently, Illinois State Senator Daniel Biss is working on legislation to provide automatic IRAs to workers earning $30,000-$100,000 annually that do not have access to an employer-based retirement plan. Arkansas and Mississippi could each consider introducing similar bills in their upcoming legislative sessions.
  • Federal policy: In late 2014, the U.S. Department of the Treasury will begin offering myRA to help with financial stability during retirement.

Retirement savings is an important part of the larger financial strength picture. At Southern, we’re working to find unique ways to help families create economic opportunity, and ensuring a sound financial retirement is a good place to start for many.

For upcoming webinars and previously recorded webinars on saving for retirement, please visit To learn more about Southern’s efforts to create economic opportunity in rural areas, please contact Meredith Covington, Policy & Communications Manager, at



[1] Senators Gordon Smith (R-OR) and Kent Conrad (D-ND) established National Save for Retirement Week in 2006. It’s held every year during the third week of October.

[2] The participation rate increases for full-time, full-year wage and salary workers – up to 47.6 percent for Arkansas, 50.4 percent for Mississippi.

[3] Copeland, Craig. (2012). Employment-based retirement plan participation: Geographic differences and trends. Employee Benefit Research Institute. Available at

Building a Housing Trust Fund for Mississippi & Sustaining One in Arkansas

As a Community Development Financial Institution (CDFI), Southern seeks to support efforts focused on housing availability and accessibility for low- and moderate-income families in both Arkansas and Mississippi. We do so because of our belief that affordable housing is paramount to financial stability and strongly correlated to an individual’s ability to save money and achieve economic independence.

Hardworking Arkansans and Mississippians should be able to afford decent housing and still be able to pay for basics, like groceries, child care and medicine. Yet, despite numerous legislative efforts, decent affordable housing is still out of reach for too many Arkansas and Mississippi families. There is, however, a possible solution.

Housing trust funds (HTF), state structures that provide funding for the construction, preservation, and acquisition of affordable housing, can help solve the problem.  Presently, Arkansas has a HTF, but does not have a dedicated funding stream; Mississippi does not have a HTF. In the United States, 48 states and the District of Columbia have HTFs, majority of which have revenue commitments.[i]

In 2009, Housing Arkansas, the state’s housing coalition focusing on providing affordable housing for low-income Arkansans, to pass the Housing Trust Fund (HTF) legislation. Southern participated in the effort to establish an HTF, though the HTF did not receive funding until 2013, and then received only in a one-time installment of $500,000. Funding the HTF was an initiative of the Legislative Taskforce on Reducing Poverty and Promoting Economic Opportunity, of which Southern is part. Housing Arkansas currently seeks at least $15-18 million per year for housing that is affordable to families earning a range of incomes at or below 80 percent of the median household income.[ii] Its goals are:

  • To provide a flexible source of funds for communities to address housing needs;
  • To help families build wealth and economic stability;
  • To revitalize distressed neighborhoods and build healthy, vibrant communities by developing high quality affordable housing;
  • To leverage additional private investment in Arkansas communities; and
  • To contribute to economic growth by increased housing, employment, and tax revenues.[iii]

In 2013, Housing Mississippi, of which Southern is part, worked to pass the Mississippi Affordable Housing Trust Fund bill to establish a HTF to expand affordable and safe housing opportunities for children, seniors, persons with disabilities, and veterans.  While the bill died in committee, it had the following objectives:

  • To mend the gap in the state’s ability to build affordable housing through dedication of permanent revenue sources;
  • To promote homeownership, prevent homelessness, and produce and preserve affordable housing for low to moderate-income individuals and families;
  • To promote accessible housing for disabled persons, down-payment assistance for eligible homebuyers, housing and foreclosure counseling, and technical assistance for nonprofit housing organizations this bill.

Both coalitions are currently working with advocates and their state legislators to introduce new bills to achieve their goals in the 2015 legislative sessions. Southern will continue supporting and working with both coalitions to advocate for greater and committed funding in Arkansas for its HTF and the establishment of a HTF in Mississippi. Southern is seeking to create new economic opportunities and improve net worth in its markets.   Homeownership is a proven driver of these goals.  We invite you to learn more about our efforts to improve the economic security of rural communities and the people who live there by contacting Meredith Covington, Policy & Communications Manager, at

Money Well-Spent: Requiring a Personal Finance Course for High School Graduation

In a national survey, only 33 percent of adults over the age of 50 could correctly answer three questions testing basic knowledge of interest rates, inflation and financial markets.[i] And despite the widespread advertisement and usage of credit cards by young adults, only 48 percent of high school seniors know that paying only the minimum balance each month will result in higher finance charges than paying the full account balance.[ii]  This data underscores what Southern has found as it works to create economic opportunities and improve net worth. Households with low levels of financial literacy tend to borrow at high interest rates, acquire few assets, and not plan for retirement.[iii]  Further, lack of financial knowledge is especially acute among young adults. This lack of financial knowledge is often tied to financial insecurity, and often stressful situations in which families do not have enough money to meet daily expenses and/or plan for the future. At Southern, we believe this is a problem, with a very reasonable public policy solution.

A growing body of research has revealed that financial education in schools can have a significant impact on encouraging healthy financial behaviors later in life. For example, college students from states that require a mandatory financial education course as a condition of high school graduation are more likely to create and adhere to a budget and less likely to engage in risky credit behaviors.[iv] Requiring financial education to be taught in high school is important as there is a strong correlation between high levels of educational attainment and increased financial market participation and decreased chances for bankruptcy, foreclosure, or loan default. Further, it is greater general education that drives changes in savings or investment behavior, rather than increased labor earnings.[v]

In Arkansas, the percentage of financially insecure households is higher than the national rate. Arkansans have a very low savings rate – more than half (51.9 percent) of Arkansas households live in liquid asset poverty, meaning they cannot subsist at the poverty level for three months in the absence of income. In addition, over a quarter (28.1 percent) of Arkansas households are classified as underbanked, signifying the use of high-cost credit from service providers outside the financial mainstream.[vi] There is good news for the Natural State, however.  Arkansas currently has content standards for high school personal finance courses, but the bad news is that the state does not require students to take a personal finance course.[vii]

Presently, twenty-eight states in the U.S. have implemented personal finance courses in their high school curricula, including bordering states Missouri and Texas.  In the 2013 Arkansas Legislative Session, Rep. Duncan Baird introduced a bill advocating for economic literacy and personal finance education in Arkansas public schools. The bill died, but it did not contain an implementation plan for high school personal finance education. For the 2015 Arkansas Legislative Session, Arkansas policymakers must look at the benefits of programs that increase financial literacy as a means to improving financial decision-making. The more Arkansans that are self-sufficient and financially stable, the less of a need for public benefit and income support programs.

Providing a basic financial foundation for high school students is imperative for their future financial success and stability. Arkansans need to be well-equipped to make informed financial decisions for themselves and their families to achieve economic security. As a Community Development Financial Institution (CDFI), Southern is committed to continuing financial education and improving financial stability through our personalized credit counseling and group financial education programs. We invite you to learn more about our efforts to create economic opportunities for people in rural communities by contacting Meredith Covington, Policy & Communications Manager, at

[i] Harnisch, T. (2010). Boosting financial literacy in America: A role for state colleges and universities. Perspectives. American Association of State Colleges and Universities. Available at

[ii] Jump$tart Coalition for Personal Finance Literacy. (2008). 2008 Survey for personal finance literacy among students. Available

[iii] Cole, S., & Shastry, G.K. (2010). Is high school the right time to teach savings behavior? The effect of financial education and mathematics courses on savings. Department of Economics, Wellesley College. Available at

[iv] Gutter, M. (2009). Financial capability of college students from states with varying financial education policies. National Endowment for Financial Education. Available at

[v] Cole, S., Paulson, A., & Shastry, G.K. (2013). Smart money? The effect of education on financial outcomes. Harvard Business School. Available at

[vi] CFED. (2013). Assets and Opportunity Scorecard. Available at

[vii] CFED. (2012). Financial education in schools. Available at