What buying a house taught me about financial inclusion

For over two years now, I’ve worked for Accion, an organization that gives people the financial tools they need to improve their lives. I started working here when my family and I moved back to New England from New York City — we had just had a kid, and we wanted him closer to family.  As our son started to get bigger and more destructive, it dawned on my wife and I that we needed to buy a house, if only to contain the damage.

When I wasn’t at our apartment trying to teach my boy why we don’t jam our fingers into electrical sockets, I was at work, learning and writing about the 2 billion people that lack access to formal financial services like savings, checking, credit, insurance, and more.

But I didn’t really get it. Financial inclusion as a cause didn’t apply to me outside of work because I was lucky enough to already be financially included: my paycheck automatically goes to my checking account. My insurance protects my car. I can slide a plastic card into a machine in the wall and use it to take out cash. I can talk to a financial planner about how much I should be saving for retirement, and the best ways to do that. It’s not that I took any of this for granted, either: I knew that the financial infrastructure was there, humming in the background, doing what it was supposed to do.

But it was always in the background. Aside from a form or two, it was just something that happened without much thought or effort on my part.

And then I bought a house.

That’s when I was confronted. That’s when our financial infrastructure stopped quietly humming in the background, tore across the foreground, and got right up in my face.

I get it now. Oh man, do I get it.

Buying a house while financially included

Buying a house was like trying to walk across a field with fifty people holding hands. No one can take a step forward unless everyone else is ready to, so there’s a lot of shouting from one end of the line to the other, taking a step, and then repeating. You can do it, but it takes a lot of coordination and most of the time you just want to scream at the lollygaggers.

Who are those fifty people holding hands and shambling across the field? The buyers, the sellers, the buyer’s agents, the sellers’ agents, the bank, the bank’s lawyers, the seller’s lawyers, the mortgage insurer, the home inspector, the notary, the Registry of Deeds, credit bureaus, title insurers, and so on.

The crazy thing, though? It actually works. It’s frustrating and time-consuming, and you have to sign exactly ten bajillion different documents along the way (I have 30 PDFs in a file on my computer, in addition to the billion other forms I had to e-sign. Once, having already e-signed half a billion forms, I had to sign another form re-affirming that my e-signature was an acceptable alternative to my ink signature).

The impact of financial inclusion

But ultimately, and because of it all, my family and I bought a home. And there’s no other way that it could have happened: we asked strangers to loan us far more money than we’ve ever had, to make the biggest purchase we’ve ever made. And those strangers did! Sure, they checked our credit and called our offices to verify that we were employed and asked us to take pictures of every check that we wrote. But that’s appropriate due diligence when a young family comes to an office asking if they can borrow a couple hundred thousand dollars.

I realize now how lucky I was, and that that ‘luck’ is really the inclusive finance that I’ve benefited from my whole life. I had:

  • The credit history for the bank to check – which means that there were credit bureaus that were tracking and scoring my every expense and repayment, and evaluating that behavior to assess whether or not I was a good bet.
  • A bank account to link my credit cards to.
  • The financial capability – the skills, attitudes, and behaviors I needed to manage my personal finances – to look responsible enough under the bank’s microscope.
  • A bank – one of many in the area – that competed for my business.
  • A raft of regulations protecting me, the buyer, and the people I was working with.

And that’s just the start. When we write about promoting financial inclusion at Accion, we often refer to trying to develop an “ecosystem,” but it’s clear that that’s not the right analogy – it’s really an entire universe unto itself.

Buying a house while financially excluded

So financial inclusion matters – it helped me get the house where my family lives. And, short of winning the lottery, financial inclusion was the only way that I’d ever be able to purchase a house.

If I didn’t have any of those things – the credit history, credit bureaus, bank account, financial capability, and regulations – I don’t think I’d ever have the chance to buy a house. It would be the same if I wanted to open my own business, or when I eventually send my kid to college. If you don’t have those supports, services, and products, you’re stuck where you are – you can’t move up the economic ladder because the rungs are missing. Instead, you’re trapped on the ground.

It’s not just important for an individual to have supports, services, and products. It’s critical for the overall economy: in a healthy market, housing makes up around 20 percent of the GDP, including both the construction and purchase of the homes themselves and the “consumption spending” on housing services – the stuff we buy for our homes.

Of course, it’s crazy to use my house-buying experience to contextualize the financial inclusion needs of the 2 billion financially excluded adults who don’t have access to any formal financial products and services or the hundreds of millions of people who live of less than $2 a day. We don’t need to extend financial services to them to help them buy homes, at least not immediately. We need to extend financial services to them because they, like everyone else, deserve a chance at success; because it’s expensive to be poor; and because these services can clearly make a difference.

Instead, I’m using my experiences to show how an inclusive system can help individual families and strengthen economies. My economic opportunity was buying a house – it’s likely something entirely different where Accion works in Asia, Latin America, and Africa. Regardless of what the opportunity might be, billions of people stand no chance of realizing it – they don’t have the support, infrastructure, or advice that I relied on. It’s a similar problem right here in the U.S., too, where 17 million people don’t have any bank accounts, where an additional 51 million people need to rely on, “check cashers and pawn shops to meet some of their banking needs,” and where 45 million Americans have no credit score.

Financial services can — and should — change that with products designed to meet peoples’ many different needs, and provide them with the same access, knowledge, and most importantly of all, opportunity that my family and I are lucky enough to have.

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