This document outlines a framework for using market-based approaches to community economic development. It argues that markets can be leveraged to invest in undervalued assets in low-income communities. The framework involves: 1) Analyzing specific market components and levels like production, exchange, and consumption to identify how to better align market and development goals 2) Identifying "levers" like costs, networks, and information flows that influence market behavior and can be adjusted through activities 3) Choosing activities that target key market levels and levers, like providing alternative credit scoring to reduce risks for lenders. The goal is to refine markets to include low-income communities by addressing market failures and expanding economic opportunities.

1. Market-Based Community
Economic Development
Presented toPresented to
J. McDonald Williams InstituteJ. McDonald Williams Institute
ByBy
Robert Weissbourd and Riccardo BodiniRobert Weissbourd and Riccardo Bodini
RW Ventures, LLCRW Ventures, LLC
October 23October 23rdrd
, 2006, 2006

2. CONTENTS
Applying the Framework: Retail Development
Market-Based Community Economic Development
Applying the Framework: Urban Financial Markets
Discussion

3. Origins: From “Equity” to … “Equity”
Putting thePutting the EconomicsEconomics in Economic Developmentin Economic Development
Civil RightsCivil Rights
EmpowermentEmpowerment
Economic Development:Economic Development: AssetsAssets
Economic Development:Economic Development: MarketsMarkets

4. Why Markets?
• To address poverty, create wealth
• Wealth is created by investing in
assets
• The economic mechanism for
investing in assets is the market
• To create wealth in low income
communities, expand market
activities to the assets of those
communities

5. Market Failure in
Lower Income Communities
PovertyPoverty ProductivityProductivity
ConnectednessConnectedness
IsolationIsolation

6. Market Failure in
Lower Income Communities
• Employment networks
• Entrepreneurial opportunities
• Business, real estate investment
• Expanded products and services
• Competitive, healthy communities
• Distressed neighborhoods have undervalued assets, reflecting lack of specialized marketDistressed neighborhoods have undervalued assets, reflecting lack of specialized market
intelligence and poor economic networksintelligence and poor economic networks
• Investment is function of profitability, risk and transaction costsInvestment is function of profitability, risk and transaction costs
• ““Seeing,” measuring, accessSeeing,” measuring, access  ValuingValuing  Market Activity and OpportunityMarket Activity and Opportunity
• Undervalued,Undervalued,
underutilized assetsunderutilized assets
PovertyPoverty ProductivityProductivity
ConnectednessConnectedness
IsolationIsolation

7. Overall Framework:
Enhancing Markets to Include LICs
Set Success
Metrics; Evaluate
Progress
Set Success
Metrics; Evaluate
Progress
Community
Economic
Development Goals
Community
Economic
Development Goals
Is There A Market
Solution?
Is There A Market
Solution?
Key Levers for
Affecting Market
Behavior
Key Levers for
Affecting Market
Behavior
Choose and
Implement CED
Strategy
Choose and
Implement CED
Strategy

8. Overall Framework:
Enhancing Markets to Include LICs
Goal:Goal:
Align Market and CEDAlign Market and CED
InterestsInterests
Strategy:Strategy:
• Analyze MarketAnalyze Market
• Target Market ComponentTarget Market Component
• Identify Change LeversIdentify Change Levers
Products and Activities:Products and Activities:
Choose operating activitiesChoose operating activities
to move leversto move levers
Set Success
Metrics; Evaluate
Progress
Set Success
Metrics; Evaluate
Progress
Community
Economic
Development Goals
Community
Economic
Development Goals
Is There A Market
Solution?
Is There A Market
Solution?
Key Levers for
Affecting Market
Behavior
Key Levers for
Affecting Market
Behavior
Choose and
Implement CED
Strategy
Choose and
Implement CED
Strategy

9. Goals: Aligning Markets and Development
Low AlignmentLow Alignment
High AlignmentHigh Alignment
MarketMarket
InterventionIntervention
Market solutionMarket solution
possible ifpossible if
marketmarket
operations andoperations and
environmentenvironment
changedchanged
through publicthrough public
policy andpolicy and
advocacyadvocacy
MarketMarket
RedefiningRedefining
Market solutionMarket solution
possible ifpossible if
marketmarket
operations andoperations and
marketmarket
environmentenvironment
changedchanged
through privatethrough private
activitiesactivities
Market RefiningMarket Refining
Market solutionMarket solution
possible withpossible with
new information,new information,
products orproducts or
networksnetworks
Pure MarketPure Market
Market solutionMarket solution
possible; marketpossible; market
alreadyalready
generates CEDgenerates CED
outcomesoutcomes
Non-MarketNon-Market
No marketNo market
solution; marketsolution; market
is not theis not the
appropriateappropriate
channelchannel
Market InterestsMarket Interests
CED GoalsCED Goals
Adapted from Kahane,Adapted from Kahane,
Weissbourd and WeiserWeissbourd and Weiser

10. Goals: Aligning Markets and Development
Low AlignmentLow Alignment
High AlignmentHigh Alignment
MarketMarket
InterventionIntervention
Market solutionMarket solution
possible ifpossible if
marketmarket
operations andoperations and
environmentenvironment
changedchanged
through publicthrough public
policy andpolicy and
advocacyadvocacy
MarketMarket
RedefiningRedefining
Market solutionMarket solution
possible ifpossible if
marketmarket
operations andoperations and
marketmarket
environmentenvironment
changedchanged
through privatethrough private
activitiesactivities
Market RefiningMarket Refining
Market solutionMarket solution
possible withpossible with
new information,new information,
products orproducts or
networksnetworks
Pure MarketPure Market
Market solutionMarket solution
possible; marketpossible; market
alreadyalready
generates CEDgenerates CED
outcomesoutcomes
Non-MarketNon-Market
No marketNo market
solution; marketsolution; market
is not theis not the
appropriateappropriate
channelchannel
Market InterestsMarket Interests
CED GoalsCED Goals
Adapted from Kahane,Adapted from Kahane,
Weissbourd and WeiserWeissbourd and Weiser
This step helps determine whether a market based developmentThis step helps determine whether a market based development
strategy makes sense, and begins analysis of what level of marketstrategy makes sense, and begins analysis of what level of market
activity to focus on…activity to focus on…
Make MarketMake Market
WorkWork
(Addressing(Addressing
InternalInternal
Imperfections)Imperfections)Change MarketChange Market
ParametersParameters
(Using Market(Using Market
Mechanisms)Mechanisms)
Change MarketChange Market
ParametersParameters
(Using Non-(Using Non-
marketmarket
Mechanisms)Mechanisms)
Vital Work –Vital Work –
but not CII!but not CII!
Market Works:Market Works:
CompanyCompany
profits whileprofits while
providing CEDproviding CED
impact.impact.

11. Other ExogenousOther Exogenous
Influences:Influences:
InfrastructureInfrastructure
Factors/ResourcesFactors/Resources
TechnologyTechnology
TastesTastes
Institutional Context:Institutional Context:
Enabling LawsEnabling Laws
Prescriptive RegulationPrescriptive Regulation
Entry BarriersEntry Barriers
Strategies: Identifying Key
Levels and Levers of Market Activity
ExchangeExchange
ProductionProduction ConsumptionConsumption
Level: Market EnvironmentLevel: Market Environment

12. ProductionProduction
FunctionsFunctions
Levers:Levers:
ProductivityProductivity
CostsCosts
ExchangeExchange
Levers:Levers:
Transaction Costs:Transaction Costs:
Finding costsFinding costs
Measurement costsMeasurement costs
ExchangeExchange
FunctionsFunctions
Levers:Levers:
TasteTaste
IncomeIncome
ConsumptionConsumption
FunctionsFunctions
Strategies: Identifying Key
Levels and Levers of Market Activity
Level: Market OperationsLevel: Market Operations

13. Information Resources are the
Modern Currency of Wealth Creation
• Who gets seen and servedWho gets seen and served
--specialized market knowledge &--specialized market knowledge &
customer accesscustomer access
• Who gets employedWho gets employed -- employment-- employment
networksnetworks
• What goods and services areWhat goods and services are
producedproduced – product and process– product and process
knowledge and controls, flexibleknowledge and controls, flexible
customization, financial risk andcustomization, financial risk and
transaction costtransaction cost
• Value CreationValue Creation -- Fed Ex (tracking-- Fed Ex (tracking
system); Sabre (reservationssystem); Sabre (reservations
system)system)
Information Determines:
0%
100%
200%
300%
400%
500%
600%
$s lbs
%Change
Gross Domestic Product
% Growth over last 50 years
Greenspan: Fundamental change
in the economy towards intangible
assets

14. • Finance
• Retail
• Employment
SpecializedSpecialized
products,products,
policypolicy
SpecializedSpecialized
products,products,
policypolicy
More Efficient,More Efficient,
Productive,Productive,
InclusiveInclusive
SystemsSystems
More Efficient,More Efficient,
Productive,Productive,
InclusiveInclusive
SystemsSystems
Target specificTarget specific
market levelsmarket levels
and leversand levers
Target specificTarget specific
market levelsmarket levels
and leversand levers
Identify CEDIdentify CED
goals andgoals and
relevantrelevant
marketsmarkets
Identify CEDIdentify CED
goals andgoals and
relevantrelevant
marketsmarkets
MainstreamMainstream
MarketsMarkets
MainstreamMainstream
MarketsMarkets
• Prod./Exchange Costs
• Market Intelligence
• Training, Transaction
Costs
• Payroll Cards
• Specialized IC Models
• Skills Certification,
Coordinated Networks
A Framework for Enhancing Markets
NeighborhoodNeighborhood
AssetsAssets
NeighborhoodNeighborhood
AssetsAssets
GoalsGoals StrategiesStrategies ActivitiesActivities
Adapted from Living Cities/BrookingsAdapted from Living Cities/Brookings

15. Example: Retail
• Goal: Commercial Development
• Market Operation: Exchange function
• Strategy: Reduce retailers’ finding costs
• Activity: Develop better data and models
to reveal demand and improve market
access in IC neighborhoods
• Example: MetroEdge

16. Bexar County, Median Income
Darker blue shades represent
areas with higher median
income.

17. Bexar County,
Concentrated Buying Power
Darker blue shades represent areas with higher
concentrated spending power ($ per sq. mile).

18. Spending as a Percent of Income
1995 Consumer Expenditure Survey
252%
140%
109%
87% 83%
66%
0%
100%
200%
300%
<$10K $10-20K $20-30K $40-50K $50-70K $70K+
Income Bracket
Income is NOT a Good
Indicator of Spending Power
Source: MetroEdgeSource: MetroEdge

19. 1990 census data
0.00%
4.00%
8.00%
12.00%
16.00%
20.00%
<
$5000
$10,000
to
$12,499
$15,000
to
$17,499
$20,000
to
$22,499
$25,000
to
$27,499
$30,000
to
$32,499
$35,000
to
$37,499
$40,000
to
$42,499
$45,000
to
$47,499
$50,000
to
$54,999
$60,000
to
$74,999
$100,000
to
$124,999
>
$150,000
Household Income Category
%HouseholdsinCategory
CHICAGO
SOUTH SHORE
South Shore median
income = $25,100
South Shore has a lower proportion of the very wealthy and
a higher proportion of the very poor, but its solid middle
class looks much like anywhere else in the city.
Central Cities are
Diverse as well as Dense
Source: MetroEdgeSource: MetroEdge

20. Retail Float for Bexar County

21. New indicators were more significant than traditional ones in this
location model created to predict sales for a grocery chain.
Validating a New Approach
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
Percent African American
Percent Home Ownership
Median household Income
Private Co Data
Per Capita Exp on Dry Cleaning
Population Density
Concentrated Buying Power
Percent Using Credit Products
Median Housing Value
Avg Credit Balance
NOT STATISTICALLY SIGNIFICANT
NOT STATISTICALLY SIGNIFICANT
NOT STATISTICALLY SIGNIFICANT
Standardized Coefficients
(Beta from LTS Multiple Regression on Sales Per Sq. Ft.)
New Data Predicts Sales Performance For Grocery Store Model
Source: MetroEdgeSource: MetroEdge

22. Example: Financial Services
• Goals
– Enable IC residents to build ownership assets (by expanding
financial and insurance services)
• Market Operation
– Production and Exchange functions
• Strategy
– Reduce producer’s underwriting costs; improve risk assesment
• Activity
– Reduce incompleteness and bias (esp. of credit scores) by
including additional information & improving models
• Example
– UIPI, CFSI

23. Market Snapshot
• As many as 39 million people, including 11 million
unregistered immigrants, are unbanked.
• Approximately 44.7 million people are underbanked
-19.4% of all households.
• The combined un- and underbanked populations may be
40 million households and $1.1 trillion in income.
• The average underserved household receives $27,500 in
income.
• Assuming the average household spends 1% of income on
basic financial services, the overall market is $11 billion.
Source: BearingPoint and Visa study (not including last bullet)

24. • 35-50 million Americans have thin or no credit files.
• Many of these consumers are demonstrating responsible
financial behavior but aren’t getting credit for it.
– Rent
– Utility bills
• Credit bureaus and lenders are beginning to experiment
with alternative data and scoring methods.
– Experian
– PRBC
– CircleLending
Process Improvements:
Alternative Credit Reporting/Scoring
– Remittances
– Payday loans

25. When viewed with a “lifetime value” lens, the needs of financial institutions and
underbanked customers can be aligned
The Credit Path
Alternatives Federal Credit Union
Financial institution viewCustomer view
•Investment products
•High margin lending
•Fee income
•Cheap deposits
•Consumer credit
•Savings
Closing the Gap: Creating Alignment

26. Market-Based Community
Economic Development
Presented toPresented to
J. McDonald Williams InstituteJ. McDonald Williams Institute
ByBy
Robert Weissbourd and Riccardo BodiniRobert Weissbourd and Riccardo Bodini
RW Ventures, LLCRW Ventures, LLC
October 23October 23rdrd
, 2006, 2006