Friday, December 4, 2009

Reaching Unbanked Latinos

In celebration of Plaza Bank President & CEO Carlos Guangorena's birthday today, I'd like to write a little about banking and Latinos. In general, immigrants to the U.S. are much less likely to be banked than American-born. In addition, certain minorities are especially unlikely to have a relationship with a banking institition.

The problem with not having that banking relationship is that then it's difficult to establish credit. And we know that, without credit, many things--like home ownership--are simply unattainable. Now sometimes we hear that employers even check credit reports of their candidates to ensure that they're "responsible." Well, not having any credit at all doesn't make a person "irresponsible," it just means they're living outside the societal norm in the United States. And if they come from a place where banks closed and they lost all their savings, you can understand their hesitation. But now, you see, they have limited opportunities.

According to a first-ever federal survey on the topic, minority groups showed to be much less likely than the overall population to have standard banking relationships. In fact, an article in yesterday's L.A. Times reports on the survey: "Nearly 22% of black households were unbanked, as well as 19.3% of Latino households and 15.6% of Native American households. Just 3.5% of Asians and 3.3% of whites did not use banking services." That's an astounding gap.

Excerpt from the article:

"Many Latinos are most comfortable operating in cash," said James Gutierrez,
chief executive of Progreso Financiero in Mountain View, Calif., which focuses
on giving small, short-term loans to Latinos. Instead of having a paycheck put
on hold for several days at a bank, many turn to expensive payday loans for
immediate liquidity. "There's a lot of distrust of banks," Gutierrez said. "But
even though it's convenient for them to operate outside the financial
mainstream, they can't build a credit history, get a small-business loan, build
wealth. You need to give people a staircase upwards."

Here in the Puget Sound region, Plaza Bank was formed, about four years ago, on this very principle. The founders and directors wanted to create an institution that would be accessible, and since many of them were Latino, they created the Pacific Northwest's first Latino bank--with bilingual/bicultural staff, services and materials. They of course welcome everyone to bank there, with business lending and administrative office is right here in downtown Seattle, and a gorgeous retail branch at the Kent Station Shopping Center in Kent. The Bank has been offering not only your typical bank products for consumers and businesses, but also opportunities for financial literacy. This is what sets Plaza Bank apart from the bigger banks. It's a community bank that is truly reaching out.

For the same reason, the organization Bank On Seattle was created a couple of years back. The mission of Bank on Seattle was to make banking accessible to the unbanked--and keep this population from losing all its money through payday loan services. They formed a cooperative of many credit unions and banks, including Plaza Bank. If anyone can provide information describing the organization's current efforts or achievements, that would be great to learn.

As a side note, in our own survey of Puget Sound Latinos two years ago, we learned that 56% of local Latinos are banked (meaning they have a savings account, checking account or both), which makes the Seattle area market very different from the national average.

Sources: Hispanic Consumers in the Puget Sound Region study available FREE at; ;

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