Investing in Ex-Cons: Small Loans May Yield Big Opportunities for Social Reintegration

Article excerpt

Reentering society is a challenge for ex-inmates, whose criminal records impair their ability to find employment and to receive many social services. Access to housing and food assistance, educational loans, and other public assistance is vital to breaking the cycle of criminal behavior that floods prisons and costs governments and taxpayers billions of dollars each year, according to advocates for reform.

Taxpayers contribute an estimated $39 billion each year for running corrections facilities in the 40 states participating in a survey by the Vera Institute of Justice. Decreasing state justice budgets create an increasing fiscal challenge to dealing with a criminal population that keeps returning to jail.

To give ex-inmates productive opportunities and to shift the cost of reintegrating them into society from the taxpayers at large, financial engineering graduate students at the University of California, Berkeley, have designed a way to "fill the funding gap for positive--and hopefully profitable--projects for ex-inmates," says Angelo Caraballo, a member of the Valjean Financing project.

The project named after Les Miser-ablest Jean Valjean, an ex-con with a new lease on life--would allow investors to finance the proposals of recently released inmates (so-called Valjeans) for business opportunities, education, or any other project. This investment approach would cut down the cost to taxpayers and governments, primarily through reduced recidivism--a return to criminal behavior and reconviction. A Valjean loan for vocational training, for example, could also help reduce expenses that governments incur for such training.

The Valjean Financing program helps provide stability during the tumultuous re-entry period. When an inmate is released from prison, finding employment with a living wage is a key factor in preventing recidivism. Employment training, community integration, and public assistance would ultimately cost less than paying for repeat criminals' jail times: About half of released prisoners wind up back in jail within three years. Local support programs that help ex-inmates reintegrate into society show a 20% to 60% decrease in recidivism--but reintegration programs are few and far between.

Through the Valjean Financing program, public and private investors--which could include family members and friends of the Valjean who want to support their loved one while having the security in knowing their investment is being put to good use--would bid down the interest rate of a Valjean's loan proposal for a business, educational, or other project. …