NEIGHBORHOOD FUNDERS GROUP CONFERENCE Diverse Voices, Values, and Traditions: Philanthropy in the 21

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NEIGHBORHOOD FUNDERS GROUP CONFERENCEDiverse
Voices, Values, and Traditions Philanthropy in
the 21st CenturyBuilding Diverse Pathways to
the American Dream
Presenter Marva WilliamsWoodstock
Institute September 2005
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Financial Service Trends of Recent Immigrant
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The Banked in the U.S.

• Percentage who have bank accounts
• Non-Hispanic Whites 93 percent
• African-Americans 63 percent
• Latinos 43 percent
• Mexican Immigrants 25 percent

Source Alternative IDs, ITIN Mortgages, and
Emerging Latino Markets Profitwise News and
Views Federal Reserve Bank of Chicago, Consumer
and Community Affairs Division, March 2005.
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Use of High Cost Services

• Operate with cash
• Check cashers
• Rent-to-Own stores
• Payday lenders
• Pawn shops
• Mortgage brokers

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Remittances
Source Inter-American Development Bank and
Central Banks of Latin American Countries
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Built on Trust

• Use Informal Savings and Credit Networks
• Tandas Mexican-American form of rotating credit
• Essos Haitian-Americans contribute the same
  amount every week-- the full sum is given to one
  member until everyone has received a payment

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Challenges to Financial Mainstream

• Language
• Lack of documentation
• Unreliable banking system in country of origin
• Lack of knowledge
• Finding a trustworthy advisor

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Opportunities to Enable Immigrants to Engage in
Financial Mainstream
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Non-Profit and Community Organizations

• Financial literacy training
• Advocate for new bank products and services
• CDFI products and services
• Banking regulations

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Changes in Documentation

• ITIN IRS Individual Tax Identification Numbers
• Mexican Consular Matricula Card

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New Alliance Task Force

• Launched in Chicago in May 2003 by the Chicago
  regional FDIC Community Affairs Program and the
  Consulate General of Mexico
• Participants Federal Regulators, Mexican
  Consulate, Banks, Community-based Organizations,
  Secondary Market, and Private Mortgage Insurance
  (PMI) Companies
• Impact Financial Education, Bank Products
  Services, and Mortgage Products

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New Products and Services

• Dual ATM cards or stored value cards offered by
  banks offer the lowest costs encouraged the use
  of mainstream financial products among Latino
  immigrants and family members in home countries
• Alternative banking products
• Alternative credit scoring

Source Alternative IDs, ITIN Mortgages, and
Emerging Latino Markets Profitwise News and
Views, Federal Reserve Bank of Chicago, Consumer
and Community Affairs Division, March 2005.
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Increased Competition

• Free checking and other incentives respond to
  the competitive marketplace
• More bank branches in many markets, including
  low- and moderate-income communities

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Market Potential

• Hispanic purchasing power 653 million in 2003
• Asian purchasing power 344 billion in 2003
• Hispanic buying power in the U.S. will jump 89
  percent between 2000 and 2007, from 491 billion
  to 926 billion

Sources Brookings Institution, October 2004 and
Michael Frias, FDIC 2004.
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Evidence of Financial Sustainability

• Study of CRA Products
• A majority of surveyed institutions engaged in
  some lending that they would not have done in the
  absence of CRA
• A vast majority of institutions responding to the
  CRA reported that they were able to do so
  profitably
• Marginal CRA-related lending tended to be small

Source Avery, R, R. Bostic, G. Canner.
Assessing the Necessity and Efficiency of the
Community Reinvestment Act, Housing Policy
Debate, Fannie Mae Foundation, 2005.
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Recommendations

• Financial literacy training
• Consumer protections
• Savings incentives
• Marketing outreach multi-lingual advertising,
  materials and staff
• Trust partner with immigrant and community-based
  organizations
• Products need to be place and immigrant group
  specific
• Remember basics social security policy

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Role of Foundations

• Support education, counseling, advocacy, and
  policy development
• Evaluation of programs
• Development of best practices
• Deposits in CDCUs Community Development Banks
• Support efforts in new gateway communities