Financial Inclusion and Access within the Latino Immigrant Community

The National Council of La Raza (NCLR) hosted an event today to release “Latino Financial Access and Inclusion," a new report that examines the relationship between comprehensive immigration reform and household financial stability for U.S. Latinos. At the event, experts from NCLR, Citi, the American Bankers Association, and a Chicago-based organization, The Resurrection Project, explored the report's findings on financial inclusion within the Latino immigrant community. The report analyzes data from a survey of roughly 1,000 low-income Latino-identified individuals across California during 2012.

Janet Murguía, President of NCLR, began the event by discussing the historical exclusion Latino immigrants have faced in the mainstream financial services marketplace. Despite myriad barriers to accessing financial services and some significant economic challenges, this report found that Latino consumers were actively prioritizing saving, utilizing a range of financial products to meet their needs, and displaying savvy engagement with financial service providers.

The report also builds the case for comprehensive immigration reform and ensuring a path to citizenship by demonstrating the variance in financial stability and engagement by citizenship status. For example, among immigrants who had been in the U.S. the same amount of time, naturalized citizens were more likely to be engaged in the mainstream financial services sector than their non-citizen counterparts. As Murguía put it, U.S. citizenship opens the doors to not only better job opportunities and education, but also greater financial inclusion. When combined, these resources create a path to upward economic and social mobility. Thus, the report explicitly frames citizenship status as an asset and calls for the current immigration reform conversation to better reflect the economic needs and opportunities of the Latino immigrant community.

Elizabeth Garza, Managing Director for Citi's Global Consumer Banking, Governance, Regulatory and External Affairs division framed her remarks against her background in customer service, branch management, and first-time homebuyer seminars. Garza emphasized the need for financial education to accompany appropriate financial products to ensure a successful banking relationship for both the customer and financial institution. She highlighted the promotion of saving and other positive financial behavior and developing the potential for technology to improve financial access as ways for banks to be involved in promoting the economic integration of immigrants. Garza also pointed to several pilot programs that Citi and other partners have worked on to provide micro-loans to people who need funds to apply for naturalization. These programs, she explained, also reinforce a mutually-beneficial relationship between bank and customer by building an individual's national identity alongside their financial identity.

The next speaker, Janis Bowdler, the Economic Policy Director for NCLR, positioned this report in its broader economic context of the recent Great Recession, during which members of the Latino community lost roughly two-thirds of all wealth. With high unemploymnet and ongoing foreclosure-related struggles, the immigration reform conversation has the potential to create new economic opportunities for Latino immigrants. This report sought to address key questions about citizenship, access to financial services, and the role financial institutions can play in supporting Latino communities in building financial assets. The study found that convenience, price, and welcoming environments weighed heavily in the banking decisions made by Latino consumers. She summarized several key findings:

• Large portions of surveyed low-income Latino participants are saving in spite of economic difficulties. Those with bank accounts are considerably more likely to do so.
• Alternative financial services (AFS), such as payday loans, are used widely and not just for emergencies. Consistent with findings from Pew, the routine use of AFS helped Latino consumers cover routine, rather than emergent, expenses. Over 60 percent of survey respondents reported borrowing money from family and friends.
• Survey participants desire quality financial advice but are not necessarily getting it from their financial institution. With more traditional financial planning seemingly out of reach, many participants said they had turned to their personal networks for advice.
• Technology is not a sure-fire way to reach unbanked consumers. Many survey participants were wary of banking technology, citing security concerns about their personal information. Furthermore, spotty internet and smartphone access may limit the potential for mobile technology to address the financial needs of many unbanked Latinos.
• There are roughly 8.5 million people in the U.S. eligible for citizenship who "have not taken all the steps necessary to naturalize." In NCLR's survey, "half of those who said they were eligible for citizenship cited cost as the reason they had not yet naturalized." The report suggests using the immigration reform conversation to examine cost as a barrier to citizenship.

Corey Carlisle, Senior Vice President of Bank Community Engagement for the American Bankers Association, spoke next about the banking industry's efforts to support financial inclusion for immigrants. He cited many banks' provision of financial education and increasingly bilingual or Spanish-specific language services as examples of this commitment. Carlisle says that while some banks have demonstrated innovation in this respect, many need to do better at serving Latino immigrant communities in ways that are both profitable and practical.

Finally, Raul Raymundo, the CEO of Chicago-based The Resurrection Project spoke about the work community organizations have done to support the financial needs of Latino immigrant communities. The NCLR findings, he explained, confirmed what his and other organizations have known for a long time: that offering high-quality financial services for affordable fees in a convenient, linguistically and culturally-accessible way is the path to sustainable financial engagement. Raymundo pointed to the high cost burden present in applying for citizenship: low-income workers may spend months' worth of earnings on lawyer fees, application fees, and missed work. He also expressed concern that immigration reform may have an unintended side effect of opening people up to predatory lending by "unscrupulous" financial providers. Raymundo advocated for framing the immigration reform conversation within a broader economic development framework.

Bringing members of both the banking industry and community-based organizations to the table together to discuss this new report illustrated several of the tensions implicit in the "financial inclusion" conversation. As profit-driven institutions, banks have a vested interest in developing attractive products and solidifying positive relationships with members of the Latino immigrant community. The extent to which this dynamic will drive product and service innovation in a direction that meaningfully supports the economic development needs of this community are not fully apparent. While access to mainstream financial products is an important barometer for social and financial integration into U.S. society, this increased engagement may also expose immigrant communities to new financial risks. As Bowdler explained, the goal of financial institutions should not be opening an account just for the account’s sake. Instead, banks should work to support customers' self-identified goals and further their economic mobility through product access. NCLR's report and continued research on the needs, desires, and preferences of Latino immigrant consumers can help achieve a vision of financial inclusion predicated on access to meaningful economic opportunity.