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Definition: Individual Development Account (IDA)
Individual Development Account is tool used by lower income groups for asset building. It is a savings account that helps people with modest means to save for specific purposes like education, stating a business or purchasing a home, etc. IDA acts basically as a matched savings account which supplements the savings of low income people with matching funds drawn from various public and private sources.
IDA is used as an anti-poverty vehicle for economic security of lower income group people to help them build assets and thus move out of the vicious cycle of poverty. Most IDAs are offered as a partnership between local non-profit organizations, also called as IDA program sponsors and financial Institutions. These sponsors are also responsible for providing financial literacy classes. They also provide counseling for efficient methods of saving to poor people. These firms recruit participant based on several criteria like Income, net worth, earnings, etc. These participants are required to open up an IDA account with partnering financial institution and thus start saving.
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