National Immigrant Integration Conference 2010 – Strategy Sessions

Financial Access: Investments of New Americans in mainstream financial institutions
September 30, 2010

Access to fair, affordable financial products and services is closely linked to economic prosperity, especially
among low- and moderate- income communities. The success of today’s immigrants depends on their
access to mainstream financial institutions that can help them save money, buy homes, access credit, start
businesses and build wealth. Strategies that help immigrants participate fully in the financial mainstream, as
well as harness the global business and investment activities many immigrants already engage in, improve
their prospects for full social and economic integration. This benefits not just immigrants, but all residents
of communities where they live. This session will address market opportunities to equitably serve
immigrant communities, making services immigrants demand available, preventing predatory practices,
reaching out in new immigrant neighborhoods and to the second generation, and leveraging high rates of
employment and financial activity among immigrant populations.

Moderator:
Deyanira Del Río, Neighborhood Economic Development Advocacy Project
Panelists:
Jessica Anders, Program Manager, Success Measures, NeighborWorks America
Gwendy Brown, Saving for Citizenship Program Director, Opportunity Fund
John Herrera, Board Chair, Latino Community Credit Union
Tony Tapia, Senior Program Director, Western Union Foundation

Presenters representing community development organizations, credit unions, and remittance services giant Western
Union addressed ways to limit barriers for Immigrants’ financial inclusion and different strategies to higher access to
financial services that are fair affordable and equitable.

There is currently very little information about what is available for immigrants in this aspect of finance investment.
Rather, there are many myths, lies, and misinformation that leads to the disenfranchisement of a population from
mainstream financial institutions, more immigrants fallen victim to predatory practices.

The session began with these three facts:

• A social security number is not required to open a bank account. ITINs, voter registration cards, foreign
consulates documents are all acceptable forms of identification.
• Under the US Patriot act, banks’ confidentiality regarding immigration status was protected; banks are not
required to know the immigration statuses of customers.
• Worldwide remittances in 2009 was 316 billion, via money transmitters such as Western Union, but also
“underground” via currier.

Credit Unions
                  
                    
 
 
 
Immigrants come here mainly for two reasons – political freedom and/or economic opportunity. The case for
economic integration is strong, and usually not-politicized. The Latino Community Credit Union, one the largest
institutions serving immigrants of its kind, started as a response to the high rates of crime against migrant workers in
North Carolina. Unbanked migrant workers became walking ATMs, and were targets of robbery. The credit union
has now grown to 10 banks, with $100 million in assets among 53,000 members which represent 10,000 families.
The majority of members are recent arriving low-skilled workers. Financial education programs have also successfully
trained hundreds of immigrants.

The development of the Individual Tax Identification Number (ITIN) by the IRS in 1996 has opened doors for many
immigrants. The ITIN allows immigrants to pay taxes with the guarantee of confidentiality and restricting sharing of
information with other government agencies, namely the Department of Homeland Security. This then allows
immigrants access to financial tools (and banks can market to this unbanked population), enabling them to develop
credit history, financial education, money management, economic development, wealth creation.

The alternative, unfortunately, are many predatory loans. These unscrupulous businesses require exorbitant down
payments, and are often operated by immigrants to exploit fellow immigrants.

With access to mainstream financial institutions, immigrants with ITINs can now apply for IRAs, mortgages, deposit
services, and a wider range of options for services such as remittances, online/phone banking, financial education,
and low-cost money orders. The Latino Community Credit Union now boasts less than 1% delinquency rate for loan
repayments.

Outside of the credit union movement, the banking industry has recognized the immigrant purchasing power and
high savings rate, and need for safe and convenient remittance services. One of the most successful businesses is
Western Union, which has now dominated the billlon-dollar remittance transfer market.

Micro-lending and Savings

Opportunity Fund of San Jose, California, offers Individual Development Accounts (IDAs), which includes a match-
savings program and development of financial skills to focus on asset building. It teaches the customer to engage in
long-term planning around life changes such as marriage, children, home-buying, higher education, and retirement.
Opportunity Fund IDAs offer match-savings through grants, and has a unique Savings for Citizenship program –
which merges financial access with immigrant rights and naturalization, recognizing US citizenship is an asset for the
individual, the cost for applying for citizenship can be prohibitive (over $600 per application), and encouraging
naturalization furthers immigrants’ contribution as full citizens.

Started 18 months ago, the Saving for Citizenship program now has reached 500 immigrants, with over a hundred
active accounts saving and going through the naturalization process from applying, to civics education, to
interviewing. These initiatives expose the disconnect that often exists between the community and legal and financial
institutions. It also proves that a small amount of grant funding can make real strides in urging qualified LPRs
towards gaining citizenship.

NGOs
                  
                    
 
 
 
The Neighborhood Economic Development Advocacy Project (NEDAP), based in New York City, promotes financial
justice in low-income communities and communities of color. It provides education programs for community-based
organizations on how the financial services system is structured and its implications for individuals and communities,
emphasizing on people's rights and ways to avoid fringe and predatory banking services that predominate in lower
income communities and immigrant communities.

NEDAP leads the Immigrant Financial Justice network, which provides education, organizing support and legal
assistance resources. It works to eliminate barriers in the banking system, promote equitable financial services access,
and press for corporate accountability and community reinvestment by banks, money transmitters and other financial
institutions. NEDAP also advocates for community development financial institutions (CDFIs), including loan funds
and credit unions, serving immigrant communities.

Success Measures, an initiative of NeighborWorks America, which receives part of its funding via a line item in the
congressional budget, provides financial education and evaluation. As a response to donor fatigue around the popular
financial education movement, evaluation on the impact and results becomes critical. This also dovetails on the
increasing awareness around affordable housing and environmental justice issues in urban neighborhoods, to foster
connections between housing, community and people.

Early evaluations suggest that more intentional and meaningful partnerships between banks and community-based
organizations are beneficial to increasing financial literacy. So far, there is a working group of 90 people who were
practitioners in financial counseling and program evaluation. Some of the important research that needs to be heard is
the reasons for bad financial decisions, and the barriers that need to be overcome. One-hour surveys were conducted
to delve into the exploration of family history and attitudes about financial habits, sharing, what is “enough,”
community and the role of faith.

Some of the findings include the importance of having choices in the tools that match with outcomes clients desire,
and not just implementing cookie-cutter programs.

Private Sector & Philanthropy

The leader in the financial services for immigrants, Western Union, now has over 4000 locations worldwide in 20
countries. Western Union Foundation has recently launched a diaspora development project that supports NGOs,
immigrant entrepreneurs, with a matching program to support economic development projects in countries like
Mexico.

With partnership with USAID, this program has created jobs in rural communities – a unique partnership between
the traditional foreign aid apparatus with the marketplace. For example, it also supports African diaspora community
in America to support Sub-Saharan African communities through a competitive RFP process. It received over 500
proposals for capital to start businesses. Currently, 14 businesses have received over $100,000.
(www.diasporamarketplace.org)

Challenges Ahead

How can you replicate the success of immigrant credit unions in other parts of the country?
                  
                    
 
 
 
• National federation of community credit unions, Latino Community Credit Union as model and source of
information
• The bedrock for every credit union: trust.
• It doesn’t take a large amount of capital. LCCU started with bake-sale of $77
• Start with outreach with labor unions and families

What’s the role for philanthropy? What are some of the cultural attitudes about money which you need to address in
Savings for Citizenship?

• Opportunity Fund organizes annual citizenship day to raise awareness

• Via word-of –mouth
• Cultural competency – savers already have answers - the service is just a opportunity to share what you
know, learn about the rules, continue improving English for citizenship and financial terms.
• Requests from other parts of the country to replicate model

What’s the impact of the global economic crisis on economic integration and microfinance?

• Diminishing remittances: US-around the world, particularly in the Philippines

• People still send money home – even during the worst part of the recession
• Despite issues – US is still far ahead for integrating immigrants, at times we might feel defeated, so
much still to be shared with best practices
• Micro-finance movement in US quite established, but we just haven’t called it as such.
• Stamping out predatory lending still a challenge
o Some undocumented families were swept up by predatory lenders, encouraged to borrow
family SS#, 2-fixed/28-flex interest mortgages as high as 18%.
o Since they use inaccurate SS#s, they are considered fraudulent, which makes recourse next to
impossible.
• We need to learn and leverage existing social networks among immigrants
• Immigrants are overall recession-proof from the hardships which they have endured in their native
country and new country. Immigrants know how to deal with crises, and how to survive.