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Presenter: Marva Williams Woodstock Institute September 2005

NEIGHBORHOOD FUNDERS GROUP CONFERENCE Diverse Voices, Values, and Traditions: Philanthropy in the 21st Century Building Diverse Pathways to the American Dream. Presenter: Marva Williams Woodstock Institute September 2005. Financial Service Trends of Recent Immigrant. The Banked in the U.S.

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Presenter: Marva Williams Woodstock Institute September 2005

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  1. 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

  2. Financial Service Trends of Recent Immigrant

  3. 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.

  4. Use of High Cost Services • Operate with cash • Check cashers • Rent-to-Own stores • Payday lenders • Pawn shops • Mortgage brokers

  5. Remittances Source: Inter-American Development Bank and Central Banks of Latin American Countries

  6. 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

  7. Challenges to Financial Mainstream • Language • Lack of documentation • Unreliable banking system in country of origin • Lack of knowledge • Finding a trustworthy advisor

  8. Opportunities to Enable Immigrants to Engage in Financial Mainstream

  9. Non-Profit and Community Organizations • Financial literacy training • Advocate for new bank products and services • CDFI products and services • Banking regulations

  10. Changes in Documentation • ITIN: IRS Individual Tax Identification Numbers • Mexican Consular Matricula Card

  11. 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

  12. 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.

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

  14. 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.

  15. 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.

  16. 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

  17. 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

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