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Financial Inclusion for Immigrants: Challenges, Opportunities, and Strategies

Discusses financial service trends, challenges, and opportunities for immigrant communities in the U.S., focusing on diversifying pathways to financial mainstream. Provides insights on utilizing community organizations, new banking products, and documentation changes to enhance financial inclusion. Examines market potential, sustainability studies, and offers recommendations for foundations to support immigrant financial empowerment.

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Financial Inclusion for Immigrants: Challenges, Opportunities, and Strategies

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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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