Hope Plus Ggum-na-rae Account
The Seoul-based asset-building project, 'Hope - Plus Savings Account' and 'Ggum-Na-Rae Savings Account', aims to end 'hopeless poverty' which is the core of the current poverty problem.
Project Feasibility Study (’05~’07) → Launching of a Pilot Project in November 2007 (100 households)
We conducted a survey on demand from low-income households in Seoul in 2005 and went through various steps of research and consultation before finally launching the project. First, we identified the current conditions of poverty in Korea and analyzed the advantages and disadvantages of the existing welfare policies in terms of fighting poverty, while closely examining overseas cases of asset-building projects. We also conducted preliminary interviews with potential participants in order to find out their intention to possibly participate in the program and save money. We developed a basic model of the project, and the final model was confirmed after rounds of expert advisory meetings and roundtable event among officials from related agencies. In November 2007, the pilot project was finally launched targeting 100 households recommended by 25 districts and local lself-support centers.
Pilot Project Leads To Two Separate Modes, 'Hope - Plus Savings Account' and 'Ggum-Na-Rae Savings Account'
In preparation for launching the project into full swing, Seoul City conducted surveys such as 'Survey on Living Conditions and Welfare Needs of Low-Income Class in Seoul' and 'Survey for Developing a Self-Support Welfare Model' through are search institute, and the real project was finally put into service in October 2008. However, after an analyzing the performance of the pilot project and considering opinions from various sectors, the Seoul decided to carry out the project in two separate programs which were the 'Hope-Plus Savings Account' and the 'Ggum-Na-Rae Savings Account', respectively. At the end of 2008, the Seoul concluded an MOU with the Community Chest of Korea, which is a representative welfare NGO in Korea to secure funds from private donations, thereby establishing a stable sponsorship base. In February 2009, we designated a local lender, Woori Bank, as the primary bank in charge of managing the fund account. The application process for the program began in January 2009, and 2,130 participants were able to begin start to make a deposit in March after being selected for the first round of the project, recording an average competition ratio of three to one.
The Scale of the Project Continues to Grow as the Number of Applicants Increases
After recruiting participants for the first round of the project, Seoul City carried out a survey on how much the project is known to the low-income class and who needs the project with the help of the relevant district, and it decided to increase the scale of the project to cover a total of 20,000 people in May. In addition, we eased the eligibility requirements for the program to encourage more low-income people to participate, diversified the ways of saving and increased objectivity of the selection process by expanding quantitative evaluation. 10,000 participants were selected for the second round of the project and began to save money in September of this year, and another 8000 will be selected by December to join the program.
New Welfare Policy Focusing on Prevention and Investment
– ‘Seoul-based Asset-Building Project’
In order to fundamentally resolve the issue of an 'hopeless poverty', Seoul City has implemented the 'Hope Dream Project' since 2009 as part of integrated welfare policy that supports the poor group to become self-supporting and self-reliant in terms of finance and mentality. The main initiatives from the Hope Dream Project are 'Hope-Plus Savings Account' and the 'Ggum-Na-Rae' Savings Account.
The 'Hope - Plus Savings Account' program was designed to assist working poor families with savings. If a working poor individual deposits 50,000 to 200,000 Korean won per month for three consecutive years, the program provides a matching fund contributed from the city's budget and private sponsorship. This program aims to encourage low-income earners to become future goal-oriented and to create the foundation for ending poverty for themselves. Meanwhile, under the 'Ggum-Na-Rae Savings Account' program, a low-income household with a child aged less than 9 years is required to deposit 30,000 to 100,000 Korean won for the duration of five to seven years and to receive a matching fund from the City's budget and private sponsorship. This program is aimed at breaking the inter-generational poverty cycle and cultivating a future-oriented mindset by helping the working poor accumulate education funds for their children.
Since their initial launch 2 years ago, both the 'Hope - Plus Savings Account' and the 'Ggum-Na-Rae Savings Account' have received huge attention from citizens as seen in the fact that 45,363 people have applied for 20,000 seats in the program , bringing the average competition rate to 2.3:1 as of 2009. In the selection process, a priority was given to the socially vulnerable such as single parent families, households with a disabled member, and multi-children families, and they accounted for 69% of then total selected. In addition, the second-lowest income group, who has long been neglected in the Basic Livelihood Security Program, showed a whopping 81% of participation rate. In the case of the 'Hope-Plus Savings Account', the main purpose of the savings was to prepare housing funds, which indicates that the account greatly contributes to the creation of housing funds for low-income families.
Background & Goal
The Republic of Korea is currently witnessing a trend where the working-class people are at a higher risk of falling below the proverty line category due to the recent global economic downturn as well as the changed social structure resulting from the financial crisis and the corporate restructuring that swept the country in the 1990's. The more fundamental problem lies with the working poor. Some of the poor people in Korea are trapped in the fixed social structure which makes it difficult delete on space to get out of poverty even though they work hard amid increasing job losses and employment security. This, in space turn, has generated an even stronger sentiment of deprivation among the poor, resulting in the creation of a new type of poverty issue, named 'hopeless poverty'.
The existing welfare polices in Korea have proven to fall short of addressing this newly emerging poverty problem. In particular, the National Basic Livelihood Security Program, which is the primary social safety net in Korea, has granted welfare benefits only to those citizens with incomes a certain below acertain level space (minimum subsistence level), thereby resulting in less effective of work incentives. Inaddition, there were not enough considerations and benefits given to the second-lowest in come bracket, who earns slightly above the minimum subsistence level, and it was hard to prevent them from degenerating into the poor class. The existing welfare policies, which are mainly based on cash pay out assistance, have a fundamental limitation in establishing the foundation for fighting poverty because they define the poor as nothing but service recipients and weaken their will to become self-reliant.
Emerging Need for New Welfare Policy to Root out Poverty
The research on the low-income class in Seoul City (Study on living conditions and welfare service needs of low-income class in Seoul City, Seoul Welfare Foundation, 2008) came to the conclusion that, under the current social structure, more than 90% of the low-income people cannot improve their living conditions within the next five years despite their hard-work and it is also impossible to resolve the new poverty issue. In response, there has emerged the need to formulate a new welfare policy that encourages people to work while providing economic incentives.
The 'Hope - Plus Savings Account' and the 'Ggum-Na-Rae Savings Account' employed the strategies of giving the poor an opportunity to build their own assets and spreading hope that they can get out of the poverty trap when they work hard. In the process of establishing the strategies, we referred to various domestic and overseas studies which demonstrated that an asset building opportunity can instill confidence into the poor and make fundamental changes to the poverty condition. In order to address the increasing number of poor people, Seoul City has prepared practical self-support measures for those in need including a niche class such as the second-lowest income group, and it has placed focused efforts in resolving the lack of asset building and education which are the main causes of poverty.
In detail, the first strategy is to distinguish support measures for the targeted group. The ' Hope - Plus Savings Account' aims to lay the groundwork for ending poverty by assisting the working poor with saving lump sum money. The eligibility is restricted to those who have worked for more than 10 months over the recent year. In addition, the participants are only allowed to use their accumulated funds for housing, micro-enterprise start-up, and higher education for themselves and their children. Meanwhile, the 'Ggum-Na-Rae Savings Account' is to prevent inter-generational poverty by helping create education funds for children of low-income families. If parents (or parental rights holders) of a child aged less than 9 years save more than 5 to 7 years, matching funds are provided from the city's budget and private sponsorship, and the accumulated funds can only be used for the child's education.
The second strategy is to minimize the number of drop-outs from the program by providing services to give the participants psychological comfort such as counseling services, based on a business MOU signed with private organizations and the affiliated agencies of Seoul City. The program participants can receive various services from many institutions, ranging from counseling to job placement, which encourages the participants to stay in the program.
The third strategy is to increase the potential for self-reliance by supporting the creation of human and social assets as well as financial asset building. In this context, the program participants were provided with financial education and financial consulting services in terms of life planning in order to nurture a habit of reasonable spending and savings and investment. In addition, the program actively supported the creation of an online community for the participants, which in turn has led to voluntary offline gatherings and collaborative human networks. Such online and offline gatherings have made a positive contribution to information sharing and continuous participation in the program.
Obstacles And Overcome Method
1. Issue of Securing Financial Resources - The Solution was Cooperation with the Private Sector
Since it is an asset-building project, a substantial amount of financial resources was required. In order to cover matching funds alone, 8.7 billion won and 33.2 billion won were needed in 2009 and 2010, respectively. As such, this project has a structural weakness that demands increasing expenses for the growing number of participants. Since it was difficult to implement the project based on the local government's tax revenue alone, Seoul City internally decided to obtain 50% of required funds through private sponsorship. At the beginning, the project was envisioned as small-scale, but it gained as table source of financial support as the Community Chest of Korea space(Korea's representative charity NGO) agreed on the purpose of the project and offered to donate some of its raised funds. In particular, the Seoul branch of the Community Chest of Korea promoted the Seoul City's project in the process of raising funds, leading to enhanced awareness of the project among citizens.
2. Low Participation At the Beginning – Encouraged participation through a personal visit
The second obstacle was that low-income people showed low participation at the initial stage. Since the project was implemented for the first time in Korea, low-income citizens had little understanding of the project. Therefore, despite many benefits, low-income people held an extremely weak commitment and low interest in the project. In order to address this problem, Seoul City's officials went out to meet with welfare officials on the ground and explained the purpose of the project while asking for support and cooperation. In turn, those welfare officials visited each low-income family to convince them to participate in the program. Thanks to their efforts, many candidates applied for the program, posting a high competition rate and those families in utmost need could be selected as participants.
3. Difficulty to Provide Tailored Management for Each Participant – Working Together with Community Welfare Centers
The third obstacle was difficulty to provide tailored management for each participant as the project was carried out on a large scale over a short period. In an attempt to address this issue, Seoul City actively communicated the purpose of the project and the strong commitment of the participants to local community welfare facilities, and it signed an MOU with a total of 90 facilities so that they could serve as an agency responsible for taking care of each case of participants. Of course, Seoul secured an additional budget to be used for the tailored case management.
1. Utilizing City Budget and Private Sponsorship
Half of matching funds come from seoul and the other half is from private sponsorship. In 2009, Seoul City set the budget for matching funds at 4.1 billion won, and it is expected to be 16.6 billion won in 2010. Seoul will secure private sponsorship in proportion to the city budget. The expenses related to selecting and managing participants will be covered by private donations raised by the Seoul Welfare Foundation.
2. Comprehensive Measures through "Hope Dream Task Force"
Amid the global financial crisis at the end of 2007, there were ever-increasing voices calling for fundamental support measures for the poor who live in the metropolitan city of Seoul. In recognition that the problem is 'hopeless poverty', the Welfare Bureau of Seoul City formed the Hope 'Dream' task force (staffed with 10) and began to ponder how to establish comprehensive countermeasures.. The task force team consists of civil servants from Seoul City, officials from the Seoul Welfare Foundation, and private experts, and it decided to improve the 'Hope-Plus Savings Account' program, then in test the operation, and incorporate it into the main welfare policies of the City. As the scope of the project was expanded to cover 20,000 households in May 2009, the City delegated the Seoul Welfare Foundation the responsibility of managing the program participants, and the Foundation hired a total of 15 staffs to take on the responsibility.
RESULT AND EVALUATION
Escaping from Poverty – Support Asset Accumulation
Under the local autonomy system, local governments hold bigger responsibility to improve the life quality of their citizens. The Seoul-based asset-building project, 'Hope - Plus Savings Account' and 'Ggum-Na-Rae Savings Account', aims to end 'hopeless poverty' which is the core of the current poverty problem. The fact that one can save or hold assets has a positive impact on his or her life and gives him or her more opportunities. Even though it does not provide a comfortable life immediately, it gives hope and opportunity to the poor and strengthens the fundamentals of the society by encouraging them to actively participate in the labor market.
Key Sucess Factors - Boosted Confidence through Asset Creation, Collaborative Relations between Community Welfare Facilities, and Strong Commitment of Decision Makers
The first element that made Seoul City's program a success is that it lessened future economic shock, such as job loss and diseases and boosted confidence by supporting low-income families to build assets. Traditionally, Korean people are bound with a strong family tie and committed to saving money. In consideration of these characteristics of the Korean society, Seoul City recruited and managed participants based on a family unit, thereby drawing active participation and making a difference.
The second element lies in the fact that the program could best utilize abundant resources from affiliated organizations of Seoul City. In cooperation with the Seoul Welfare Foundation which first envisioned the program and various affiliated organizations related to welfare, economy, culture, and housing, the program could provide integrated services, thereby minimizing the cancellation of the savings accounts and nurturing the will to be come self-reliant.
Lastly, the decision makers' strong commitment is required because a substantial amount of resources and efforts are needed for the continuous growth and success of the program. In order to break the inter-generational poverty cycle, it is necessary to secure financial resources to support matching funds, while closely managing the cases of participants as well as running a self-support program in the long term. Therefore, without the decision makers' strong commitment, it is difficult to expect the project to begin, not to mention for it to succeed.
It was necessary to secure continued financial resources from the city's budget and private sponsorship, in order to help save matching funds with the amount of savings deposited by participants. The financial issue can become a major obstacle in expanding the project. Therefore, it is necessary to identify a stable source of financial resources by forging an alliance with private fundraisers that have shared the understanding of the purpose of the project. In particular, efforts should be made to establish cooperative relations with social contribution foundations of large companies or religious circles so that financial support can be given to the project in the mid-to-long term.
In terms of social aspects, it is necessary to raise awareness of the poverty issue across society and actively utilize charity resources within the community. Aside from financial assistance, various educational and cultural or welfare services that help develop a sense of economy, vocational skills, and child care capacity should be provided in a comprehensive manner. In addition, it is also necessary to prepare follow-up self-support programs which can be adopted after the completion of savings. When a local government carries out this project with the focus on these issues, the synergistic effects will be maximized.
In terms of regulatory sustainability, it is necessary to enact laws on supporting asset creation for the poor so that the project can be implemented in a stable manner. Under the current regulation, the poor instantly lose the eligibility to receive benefits from the Basic Livelihood Security Program once their assets exceed the minimum subsistence level. Therefore, it is likely that those who are close to the minimum subsistence level will refrain from joining the project. In this sense, it is needed to establish an independent act on supporting asset creation, by which the poor can maintain the beneficiary eligibility for the Basic Livelihood Security Program for a certain period of time and receive long-term assistance with self-reliance.
As Seoul City pushes forward with the 'Hope - Plus Savings Account' and the 'Ggum-Na-Rae Savings Account' program, a government-led IDA pilot project began to recruit participants in four metropolitan cities and provinces (Gyeonggi, Incheon, Busan, and Jeonbuk), starting from October 2009. The IDA project supports low-income households with the family head aged less than 34 years. In addition, the Korean government benchmarked after the 'Hope - Plus Savings Account' of Seoul City, and it now plans to launch the 'Hope Building Savings Account' program targeting 180,000 people nation-wide in 2010, which could accumulate up to 300,000 won every month as work incentives for the basic livelihood support recipients who earn more than 70% of the minimum subsistence costs. half of the expenses will be supported by the central and local governments, and the remaining will be covered by private sponsorship. The accumulated funds are given to the participant only when he or she gets de-listed from the Basic Livelihood Security Program. Currently, many local governments are implementing similar initiatives which were benchmarked after the Hope Dream program (Changwon City, Namyangju City, Pyongtaek City, Dalseo District of Daegu City, etc.).
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