Connecting Multicultural Clients to Asset-Building Financial Services Presented by Ann Baddour September 2006

General Financial Characteristics of Unbanked Immigrant Communities Language barriers impact the services people feel comfortable accessing. Most financial transactions are cash-based. Lack of trust and lack of familiarity with financial institutions; a sense that, “Those services are not for me.” Individuals are often unaware of how financial transactions and contracts work in the United States and thus more vulnerable to fraud.

Many people depend on word of mouth and other community members as the sole source of financial services information. Pay stubs generally do not reflect total family income – the informal economy is also important. Pooled resources and informal credit. Many recent immigrants send money to family members in country of origin. Strong savings ethic. Often no credit history. General Financial Characteristics (cont.)

What is an Asset Building Financial Service?

A low-fee bank account. Immediate access to deposited funds Designed to avoid overdraft fees Incentives to save Access to credit building tools-secured credit. Start with where people are, what they want, and the services they are using Lower check cashing fees Better remittance products Alternatives to predatory practices Community investment based on local needs by the alternative and mainstream financial services sectors

For IDA or other asset building program participants Seek out the best loan products in your community to set people up to succeed in the long-term. Community organizations as financial service providers Community organizations can be a great marketing asset for financial service providers. Income earning opportunities for organizations through serving as agents for remittance companies or stored value card companies.

Which Approach is Right for You? 1.Determine what you want--Know your target community and the financial services environment in your service area. Community focus groups and reaching out through trusted organizations and locations where people already congregate. Survey of local financial institutions and financial services currently used by the community.

2.Determine which community priorities fall within your capacity and which are most easily implemented Are there financial institutions in your community already trying to reach your clientele? Can you leverage competition-or the lack of competition-to serve the needs of your clientele? Are there successful models to address your priorities from other communities? What existing relationships can you leverage?

3.Determine the relationships necessary to achieve your goals. Financial service providers Local law enforcement City officials Local consulate Employers/Unions Other nonprofits Trade Associations Regulators (State and Federal)

Promising Market Trends More financial institutions are interested in reaching out to unbanked immigrant markets—a 2004 to 2006 comparison in Texas showed: – More familiarity with foreign issued identification; –more Spanish language information; and – an increase in bank and credit union- based international remittance products. More competition means nonprofits are in a stronger position to leverage their community relationships.

Things to Watch Out For (an abbreviated list!) Watch out for account/loan features that may lead to client confusion or failure –High overdraft fees without education or a “second chance” –Delayed access to deposited funds –Heavy cross-marketing of products like life insurance or shopping clubs with direct withdrawal from accounts or billing through mortgage –ARMs & Balloon loans should be avoided if possible: unpredictable payments; potential for negative amortization; and heavy refinance marketing

Successful Initiatives and Tools to Connect Immigrants to Asset Building Financial Services Identification to open an account Banking outside the branch Community engagement Earned-Income Tax Credit Financial education Home mortgages with immigrant-friendly credit criteria International remittances