Partners (Fall 1998)

Asset Building
Healthy Communities:

A concept paper

Woodruff Park in Atlanta - 1978
The Appalachian Center for Economic Networks (ACEnet) is a community-based economic development organization located in rural southeastern Ohio. ACEnet's mission is to revitalize the regional economy by linking new and existing firms with emerging markets and community support. Partners is pleased to publish an excerpt of this organization's paper addressing asset-building concepts. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank or the Federal Reserve System.

In this paper, ACEnet presents a new, comprehensive approach to asset development for low-income communities. In it, we focus primarily on asset building that encourages the development and expansion of enterprises. However, since the goal of asset development is the emergence of a healthy community, we will begin by defining and describing this key term.

A healthy community focuses, not on problems, but on existing resources, positive outcomes, and creative community processes so that all residents have access to the opportunities needed to meet personal and family needs, develop gifts and potential, and contribute to the prosperity and health of the community. In a healthy community:

  • all individuals have many opportunities to secure quality jobs, develop new skills, or start businesses;
  • individuals contribute to their community by buying locally and participating in civic activities;
  • many different types of small enterprises — from the smallest mom-and-pop companies started by low-income people to sophisticated businesses — are working collaboratively to reach high-value markets;
  • these firms collaborate with others: contributing to the community by hiring and training low-income workers, buying from other local firms, and mentoring start-up firms;
  • the economic development community - Community Development Corporations (CDCs), business assistance providers, Community Development Financial Institutions (CDFIs), banks, educational institutions, government agencies, churches, and others - convenes diverse groups from within the community to develop new programs, institutions, or resources that support the activities of the firms and individuals.

Asset-based Strategies

Once we have a vision of a healthy community, the concept of assets is extremely useful in developing the strategies by which we can build such a community. As John P. Kretzmann and John McKnight point out, emphasizing assets enables us to move from seeing a world of poor people with problems who need services to seeing all citizens participating in a community full of underutilized assets. These underutilized assets might include empty lots, people's energy, the wisdom of grandparents, and local employers, all of which can be developed by community activists into community resources.

The consequences, when community organizations or government move to an asset-based strategy, are profound, since the change means a shift from seeing our primary mission as providing services or income to low-income people to investing with people in themselves and their communities to get long-term returns.

The concept of assets as resources that keep on generating new resources is important for several reasons. It pushes us to invest in activities that result in significant and long-term return. An example from Michael Sherraden's work, Assets and the Poor, is illustrative. He points out that people often fall into and then stay in poverty because they have no assets - either savings, a home, or skills - to draw upon in a crisis.

By encouraging asset-building through matched savings programs, such as Individual Development Accounts (IDAs), people gather the funds they need to start a business or obtain new skills - both of which can provide substantial long term sources of income and thus protect people from re-entering poverty. Every dollar invested in an IDA thus has the potential of generating a return equal to many times that amount over a lifetime.

These authors have emphasized that assets are not limited to "money in the bank" kinds of resources. Both describe how the untapped skills and commitment of individuals, when mobilized and/or expanded through training, can make a tremendous difference to the individual as well as to the community.

Although the work of McKnight and Sherraden is an important step forward, we need to see their strategies as part of a much larger picture. Sherraden focuses primarily on individual assets, while Kretzmann and McKnight focus primarily on volunteer-based community initiatives, which are designed to develop assets. We add to the discussion the essential perspective of community enterprises — firms and the CDCs that work with them — and will discuss how all of these groups can maximize their value as community assets.

But, because we are also looking for dramatic scalability — a strategy that can produce significant changes in numerous low-income communities in a relatively short period of time — we embed individual, enterprise, and community assets in the framework of asset-building communities. This helps us think about how assets continue to be developed and expanded over time.

Asset-building Communities

An asset-building community is one where many people in the community are involved in developing and using a wide array of highly targeted assets for themselves, their businesses and organizations, and the community as a whole. Asset-building processes are the creative community processes that will be required to transform opportunities into benefits for all community residents.

For example, a business owner obtains a loan and technical assistance from a local CDC or business development organization. Since this assistance is quite successful in helping the firm expand, the firm owner agrees to help design a mentoring project and then mentor new firms.

In this way, a personal asset — the owner's knowledge of running a business--becomes part of a larger community asset that results in the creation of more individual assets, as s/he and others mentor more entrepreneurs over the years. At the same time, the firm owner benefits, as the newer firms grow and become assets to their former mentors — perhaps serving as subcontractors or partnering on joint ventures.

In another example, a CDC sets up an IDA or matched savings fund for low-income residents. The organization embeds that fund in a business assistance program, so that those building new IDAs have access to support to start a successful business. In particular, the CDC facilitates links between existing firms who have offered to subcontract with the new entrepreneurs, thus ensuring a stable base market for their products. Six months later, the new entrepreneurs are asked to attend a joint design session — also attended by representatives of banks and loan funds — to redesign and improve the IDA and business development programs so they are more effective.

What these examples help us understand is the importance of shaping the processes by which assets are created so they maximize value. Our tendency is to focus our energies on creating a new asset — an IDA pool, or a loan fund--but these examples reveal how the value of these assets is dramatically increased when we see them as part of a much larger community strategy. But what makes that happen? We have identified four qualities that seem to amplify the impact of asset-generating processes.


Connecting each asset to other activities within the community ensures that assets do not stand alone but are embedded in or linked to other programs that increase their impact and effectiveness. In the examples above, both the loan fund and the IDA pool were linked to a technical assistance program and to relationship-building activities with other firms. The IDA pool was also linked to a market assistance effort that connected new entrepreneurs directly to the mainstream economy.

This linking of activities has several benefits. First, linking provides more substantial support for firms and entrepreneurs, increasing the likelihood of their success as well as a more substantial return from use of the asset. But linking activities also tends to thicken the social fabric of a community, by bringing people together who wouldn't ordinarily interact — such as the bankers and low-income entrepreneurs--and enabling them to become resources for each other.


Specific activities designed to equitize assets — both through opening specific asset pools for people with few assets and assisting low-income people to build economic support networks - also result in greater impact. Getting a chance to be in a meeting with bankers and establishing relationships with other firms are invaluable pathways to open business resources.

As Timothy Bates has pointed out in a number of articles, minority businesses hire many more minority workers than non-minority firms — but such firms are limited in their expansion efforts due to the well-documented lack of access to equity and loan capital. When communities identify gaps such as this, they need to convene appropriate stakeholders to set up an asset pool and support activities to meet this specific need.

As the Bates study clearly reveals, equitization is often a relatively low-cost method for producing dramatic and lasting changes in the local economy because it builds on something that is already there. Creating a new equitizing asset — in this case an equity system for minority entrepreneurs — taps a previously underutilized asset — minority owners' willingness and commitment to hire minority employees — that can make a substantial difference in the availability of jobs for low-income residents. In the examples presented earlier, one of the equitizing assets was the connection that the low-income entrepreneurs were able to make to larger firms. For microenterprise practitioner organizations, having links to larger firms and thus being able to assist in the relationship-building process is a key to increased effectiveness.


Embeddedness and equitization are possible because assets are developed through collaboration among diverse groups in the community. When we encourage people to work with others in their creation of new assets, core economic relationships are transformed and more community development is likely to occur in the future.

In the examples above, diverse sets of community residents came together to identify opportunities and cook up joint projects to develop them. In some cases, they designed a new program — the IDA program or the mentoring program. In other cases, two firms worked out mutually beneficial economic arrangements. The diversity of these groups - especially their inclusion of people with few assets - meant that the solutions generated were much more likely to be successful and broadly effective. And, in each case, the programs or relationships were redesigned and improved - or they ended, leaving room to try something else more effective.

Why do organizations and firms participate in these asset-building activities? As is seen in the examples above, economic benefit and community benefit become synergistic - assisting new entrepreneurs becomes a means to identify potential new partners; investing in an IDA fund and assisting in design sessions enables banks to identify and create new borrowers. On another level, we can see that subsets of the community that seldom had any interactions of substance are now energized through the act of working together, and thus they can become resources for each other in a multitude of ways. And finally, the people involved in these collaborations are building a deep sense of community, and their positive role in it, which nourishes the entire system.

In this model, everyone is encouraged to give back to the community through the myriad concrete activities the community establishes. People make the mental shift that enables them to realize that when they benefit from a community asset, such as a loan or IDA fund, they have a responsibility to become an asset to others, by sharing knowledge or opening an opportunity.

Drawing In Innovation

Finally, just as asset building derives its power from collaboration of diverse groups and individuals throughout the community, so communities need to benefit from the diversity of experience of other communities. Flora et al, in a recent study, discovered that communities with the most self-development (creation of new local programs or projects) were those who had significant relationships with communities and organizations outside their region. This way, new ideas can stream into the community, providing a larger pool of creativity than any single community could generate on its own. Thus, part of any asset-building process needs to bring in fresh ideas from the rest of the world.

For copies of this paper in its entireity, please call Christy Bradford at ACEnet, 740/592-3854.

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