Credit union interest is growing in offering member business loans, or MBLS, even though strict regulatory limitations still exist. The lending rules are clear, but the amount of MBL dollars available differs based on a credit union’s size and the makeup and performance of its overall loan portfolio.
With fewer MBLs available compared to other loans, the ones credit unions do issue should be given to well-performing entrepreneurs with the greatest need, and who can do the greatest good with those funds for their community. In our minds, Hispanic-owned businesses should be top contenders when credit unions make their MBL decisions.
Does that surprise you? It shouldn’t. Hispanics are one of the country’s fastest-growing population segments, and also one of its most entrepreneurial. Moreover, loans to Hispanic-owned businesses are being increasingly targeted by banking industry competitors in a way that is frictionless and culturally relevant.
A 2018 Gfk Social and Strategic Research study surveyed Hispanic and non-Hispanic business owners about their beliefs and practices. These results may surprise you.
* Hispanic business owners are significantly more confident in overall economic growth than their non-Hispanic counterparts. In 2019, 68 percent of Hispanic owners believed their local economy would grow compared to 54 percent of their non-Hispanic counterparts. Although slightly lower, faith in national economic growth measured 59 percent and 55 percent, respectively.
* Concurrent with their optimism, Hispanic business owners raised greater levels of concern over the rising cost of doing business. Those concerns included everything from increasing health care costs (70 percent for Hispanic owners versus 63 percent for non-Hispanics) to continued strength of the U.S. dollar (59 percent versus 42 percent, respectively) to credit availability (45 percent versus 29 percent, respectively). Such cautionary concerns added to their overall optimism place Hispanic business owners in a stronger and more realistic position to effectively compete in an open marketplace.
Hispanic business owners surveyed about their future plans again outpace those of their non-Hispanic counterparts.
* In 2019, 74 percent of Hispanic-owned businesses expected to increase revenues, compared to just 57 percent of their non-Hispanic counterparts.
* For the same year, 51 percent of Hispanic owners plan to hire more staff, compared to 26 percent of non-Hispanic owners.
* Finally, 28 percent of Hispanic owners say they plan to apply for loans, compared to only 14 percent of their non-Hispanic counterparts.
This all adds up to greater optimism and market-readiness by Hispanic-owned business, 87 percent of which planned to expand their enterprise in 2019. It also means a greater need for available capital to help those businesses reach their lofty, but eminently achievable goals.
Credit unions need to play an active role in this process through member relations and MLBs. Your Hispanic members,a highly motivated and growing market segment whose successes will benefit both sides of the lending equation, are relying on you.Leave a comment
Hispanic Heritage Month is right around the corner! This year, the 31 days of celebration begin on Sunday, September 15, and end on Tuesday, October 15. During this special month, we recognize the centuries of contributions made to United States growth and development by Hispanics.
For credit unions that serve large Hispanic communities, public recognition and celebration of the month can both honor the heritage of members and build stronger relations between them and the institution. But even credit unions that don’t serve large numbers of Hispanics should recognize the importance of what has become one of the country’s fastest-growing population groups.
Many businesses find numerous ways to celebrate Hispanic Heritage Month. Here are a few ideas that you can use.
Host employee and member luncheons or receptions featuring food and beverages from Latin American countries. Nothing brings people together faster than food, and a buffet of authentic dishes would create real interest from your community to want to learn more about the Hispanic culture.
Hold a ‘lunch and learn’ event for staff that features a local Hispanic community leader. Find someone who can talk about the financial needs of the community and other topics that foster curiosity understanding and empathy. Too many people are reluctant to reach across the aisle and get to know people outside their social circle. This would be an excellent opportunity to break down a few barriers of cross-cultural communication.
Conduct a credit union-wide charity drive to raise funds for a Hispanic need or educational opportunity. In addition to helping a good cause, employee participation can help raise awareness and empathy among credit union members, board and staff, all of which are key to greater cultural awareness.
Aprende a hablar Español. (Learn to speak Spanish.) Whether it’s a new Spanish word each day for 31 days, impromptu dialogue lessons in the employee break room, or one-on-one tutorials between Spanish-speaking employees and those who want to learn, everyone benefits when everyone gets talking. Communication leads to understanding, and knowing the language is where it starts.
Take cultural field trips. Chances are there is more activity going on among local Hispanic community members than you might think. Seek it out and encourage employees to visit Hispanic cultural centers, art galleries, dances, concerts and even food carts. Task those employees to describe their impressions at weekly staff meetings. That way everyone learns from each other’s experiences.
¡Fiesta! Feeling ambitious? Host an outdoor concert and mini-fiesta one Saturday morning during Hispanic Heritage Month in the credit union’s parking lot, serving food and featuring a live local Latino entertainment. Such an event can attract members and nonmembers alike, perhaps even drawing local TV news coverage because of the music, colorful costumes and festive activities. It’s a very visible way to show support for the Hispanic community and maybe even gain new members in the process.Leave a comment
Credit unions are known by the communities they serve and their outreach efforts to make members, not customers, an active part of the institution. “People over profit” is, after all, the credit union mantra.
More credit unions are actively reaching out to Hispanic communities in attempts to include them as valued members of their financial families. The most successful credit unions embrace the Hispanic community’s unique nature in ways that create a blended community of both the Hispanic and credit union cultures. It’s a better methodology than assuming that one size – specifically that of the credit union – fits all.
There’s a need among Hispanic families for affordable and accessible financial services. More than 16 percent of the Hispanic population is unbanked, according to data released by the Federal Deposit Insurance Corporation. An additional 30 percent of those families are underbanked, meaning they rely on often costly services provided by payday lenders, check cashers and remittance transfer providers instead of financial institutions. But there is a better way.
With their hyper local roots and service focus, credit unions have a natural advantage over banks when serving the Hispanic community. Credit unions that seek to understand and embrace aspects of those cultures into their own institutional DNA will have the best luck providing Hispanic members with critical financial services.
At Coopera, we’ve helped numerous credit unions serve Hispanic members and have seen both the most and least successful of those efforts. A credit union that builds its service profile around one Spanish-speaking staff member – no matter what level of employee they are – may have the hardest time merging cultures. The designated individual may be very effective, but the rest of the institution’s culture likely will not have changed to meet Hispanic member needs. What’s more, if the Spanish-speaker were to leave, chances are those Hispanic members may follow.
We’ve seen other misfires by credit unions that haven’t identified a specific reason to serve the Hispanic community. Clearly identifying a service goal gives the credit union a foundation on which to build its relationship, as well as a distinct identity in the minds of those members. Some credit unions have told us they want to help their Hispanic members build good credit, while others have said they want to assist members in affording their first homes. In either case, the goal builds the foundation.
In the best cases, ongoing communications between Hispanic members and the institution – and within the institution itself – have resulted in effective service programs and welcoming environments that strategically intersect with the Hispanic community and make those members feel valued, understood and taken care of. As in all cases, the more you understand about the people and culture you’re trying to serve, the more successful that service will be.
Hispanic community members often define relationships within the context of family and isn’t that what credit unions do as well? The successful blend of those families will benefit all.Leave a comment
A credit union’s income is largely driven by its loan portfolio, and there is a unique opportunity for even greater loan growth available to institutions willing to go the extra mile in serving immigrant populations.
Not everyone who works in the U.S. is considered a citizen, yet all are required to pay taxes on their earnings. Workers who don’t qualify for Social Security numbers must satisfy their debt to the IRS by registering for Individual Tax Identification Numbers, better known as ITINs.
More credit unions are starting to use ITINs to qualify borrowers for loans and other services, a move beneficial both to members and their institutions.
This is especially true for credit unions serving Hispanic and other underserved markets, but it should be noted that ITINs are not only for Hispanics and recent immigrants. Many workers from Canada, India and other countries pay their U.S. taxes through their ITIN accounts. Done correctly, loans using ITINs as proof of income can open a new world of borrowers for participating institutions.
This past month Coopera, in partnership with our sister company PolicyWorks, the Filene Research Institute and inclusiv (formerly the National Federation of Community Development Credit Unions) released the Implementation Guide: Individual Taxpayer Identification Number (ITIN) Lending. The 67-page publication, free to credit unions, offers a comprehensive, legally compliant approach to ITIN lending.
The guide consolidates best practices, tools and resources for credit unions wanting to reach this largely untapped market of immigrant workers who need the ability to more fully participate in the economic growth and development necessary to make their lives financially secure.
The guide evolved using testing results from the Filene Institute’s Reaching Minority Households Incubator, which measures products and service strategies for reaching financially underserved consumers. Coopera was a major collaborator in both the research study and implementation guide creation.
This guide couldn’t have come at a better time. There is a very strong business case for providing personal and automobile loans to what is an often-overlooked population segment. As with other financial products provided to the Hispanic community, the word is likely to spread among its members, resulting in an increase in member applications along with the resulting loan growth.
There also is an equally strong philosophical platform for ITIN lending. Providing members of this group greater financial stability and more active participation in the U.S. economy serves not only their needs but helps create a level of increased financial security that serves to further strengthen their community and society at large.
Credit unions are committed to serving the underserved, and this may well be the most underserved community of all.
Please feel free to contact any of us at Coopera for more information on ITIN lending and a copy of the guide. We are here to help.Leave a comment
Enhance Your Service to the Hispanic Market by Learning Something New During Hispanic Heritage Month
The theme of this year’s Hispanic Heritage Month, celebrated from September 15 to October 15, is “Hispanics: One Endless Voice to Enhance our Traditions.” Hispanic Heritage Month is an ideal time to check in on your credit union’s plans to enhance its service to the increasingly influential Hispanic market.
During Hispanic Heritage Month, make it a point to learn something new about the Hispanic members in your cooperative, as well as those who have yet to be exposed to the credit union difference.
Below are a few questions you may consider asking consumers on your quest to learn more.
Is the immigration process part of your financial journey?
Although most of the 58 million Hispanics living in the U.S. are native-born Americans — and nearly three in four are U.S. citizens — there are nearly 20 million foreign-born Hispanics living and working in the U.S.
Many foreign-born Hispanic individuals have gone through the immigration process to obtain U.S. citizenship, and many others are working on adjusting their status. Others may not be eligible for U.S. immigration status at this time.
The immigration process is a time-intensive and costly one, as well as a major part of the lives of many Hispanic immigrants. Credit unions are in an ideal position to help members going through this process with both financial tools and education.
In addition, simply understanding how complicated the process is and welcoming individuals of all backgrounds at your credit union can go a long way toward building lasting relationships, establishing trust and making people feel welcome and comfortable becoming part of your cooperative.
Although credit unions exist to serve, they must also be sustainable. And, as many are discovering, the immigrant Hispanic profile exemplifies the ideal credit union member. This is especially evident when you consider how Hispanics in the U.S. are driving economic growth.
Which is your preferred language?
Often, credit union leaders interested in adapting their programs for Hispanic consumers are overwhelmed by the misperception they have to begin by translating into Spanish every piece of communication, including websites and disclosures. Thankfully, this is not the case.
It’s true many Hispanics, both U.S. and foreign born, prefer to speak Spanish. In fact, more than 37 million Hispanics speak Spanish at home. Yet, a strategic Hispanic growth plan begins by identifying the specific needs of the community and the particular target market a credit union is trying to reach. Initial Spanish-language materials (or better yet, bilingual materials) will only be required for those introductory products and services, and of course, member communications deemed essential to the strategic Hispanic member growth plan.
Often, Spanish-speakers tend to be the foreign-born population, which is also the most untapped and unbanked group. There is a reason large financials like Wells Fargo and U.S. Bank offer Spanish-language services across all of their channels and even why the government continues to introduce more Spanish-language services and materials. Everyone is trying to reach the most untapped groups because they present the greatest growth opportunity for the majority of businesses.
How can our products improve your financial life?
Hispanic use of top financial products has grown by double-digits over the past five years and outpaced non-Hispanics. Mortgages have grown 30 percent among Hispanics (compared to 9 percent among non-Hispanics) and auto loans have grown 31 percent among Hispanics (compared to 1 percent among non-Hispanics).
Hispanics are the only demographic in the U.S. to have increased their rate of homeownership for the last three consecutive years. What’s more, 9 percent of Hispanics are planning to buy a house in the next 12 months, compared to 6 percent of non-Hispanics.
The number of cars purchased by Hispanics in the U.S. is projected to double in the period between 2010 and 2020. It’s estimated that new car sales to Hispanics will grow by 8 percent over the next five years, compared to a 2 percent decline among the total market.
In short, there are many present and future needs among Hispanic communities for the types of products and services credit unions are uniquely positioned to provide. Understanding those needs can go a long way toward crafting an effective onboarding program.
Being all things to all people is rarely a good strategy, particularly for credit unions that pride themselves on truly knowing their members and providing custom, personalized experiences. The key is to ensure your products and services are culturally relevant and meet the needs of the community. If products aren’t adapted to the market, they will not resonate. The good news is you only have to repackage what you have instead of starting from scratch
To grow, credit unions must make a strategic effort to learn as much as possible about the youngest, fastest growing and most untapped consumer segment in the U.S. The celebration of Hispanic heritage going on right now presents the perfect opportunity to do precisely that.Leave a comment
National Hispanic Heritage Month (HHM), a celebration of Hispanic and Latino culture, heritage and contributions, begins September 15 and continues through October 15 each year.
The celebration starts on September 15 because on that day in 1821, five Latin American countries declared their independence: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. In addition, Mexico, Chile and Belize celebrate their independence days on September 16, September 18 and September 21, respectively.
HHM presents a great opportunity for credit unions to connect with and support their Hispanic members and staff. Here are a few examples:
• Altura Credit Union in Riverside, Calif., recognizes HHM by promoting a variety of community festivals, contest and events on its website. The credit union also made a $600,000 pledge to the Cheech Marin Center for Chicano Art, Culture & Industry at the Riverside Art Museum earlier this year.
Another way to celebrate HHM is to create a way for your Hispanic staff and members to share stories about their favorite traditions from their countries of origin. Along those lines, we thought it would be fun to share a bit about where the Coopera team came from and our favorite traditions from those countries.
Kenia Calderon, Coopera’s Client Relationship Consultant
What is your country of origin?
What is your favorite tradition?
On September 15, K-12 students participate in the Independence Day marches/parades that take place across the country. People line up along the sidewalks to watch the parade. Each school has its own theme, uniform, music and acts. My siblings and I participated every year. The first time I participated, I was in charge of holding our national flower. The following year, I was a tambourine player. The marches typically take place downtown, and we probably marched more than five miles.
What do you enjoy most about HHM?
Tania Perez, Coopera’s Client Support Specialist
What is your country of origin?
What is your favorite tradition?
My father is from Aguascalientes, Mexico, host of the San Marcos National Fair. It started off as a cattle and harvest fair and is now an international event. There are many exhibitions to enjoy, including bullfighting, which has an important history in the city of Aguascalientes. The fair takes place in April and May. My family who owns a taco business in the city says that many businesses close earlier in the day or close for a couple days to celebrate the fair.
What do you enjoy most about HHM?
Victor Miguel Corro, Coopera’s Client Relations Director
What is your country of origin?
What is your favorite tradition?
During the four days prior to the start of Lent, the Catholic holiday, the whole country comes to a complete stop for Los Carnavales. In many towns, large and small, there is is a full-throttle celebration with parades, floats, queens, music, dancing and costumes.
Festivities include both traditional Spanish and Panamanian customs. The most distinct and fun tradition is “La Mojadera” – a water hose soak. Water tank trucks soak the crowd for hours, along with loud music, entertainment and plenty of Seco, a sugarcane-based spirit and Panama’s national drink. The tradition is undoubtedly inspired by the hot tropical weather. La Mojadera goes on until the early hours of the afternoon, when the crowds go home to take a short nap before preparing to dance the night away and start all over the next day.
Miriam De Dios Woodward, Coopera’s CEO
What is your country of origin?
What is your favorite tradition?
As the religious celebration draws to a close on January 12, a special pilgrimage is held to welcome back “los hijos ausentes” or the “absent children” who live away from town. That night, “la farola,” a cart with a lamp post symbolizing an old way of making public announcements is pushed down the streets of town with a live band and processional of people, announcing the start of the fair. The fair activities that follow include bull riding, concerts, enjoying a variety of food stands, carnival games, parades, traditional dances and the crowning of the fair queen.
Las Fiestas represent a time for family and friends to gather from near and far to share in the tradition that was started many generations ago. To this day, my family continues the pilgrimage to El Grullo during the time of Las Fiestas.
What do you enjoy most about HHM?
As you can see, Latin American countries are rich with culture and traditions. Finding ways to celebrate HHM and giving your members and staff an opportunity to share stories from their countries of origin are great ways to learn from each other to build a more inclusive community.Leave a comment
According to the U.S. Department of Commerce, employment opportunities in science, technology, engineering and math (STEM) are booming, with 24.4 percent growth over the last decade. Yet, not enough students are pursuing degrees and careers in the STEM fields to meet the increasing demand. There are currently two STEM job openings for every qualified job seeker.
The lack of STEM representation is even more prevalent among Hispanics, who although account for approximately 20 percent of the U.S. population, only represent about 7 percent of the STEM workforce.
STEM workers enjoy a pay advantage compared with non-STEM workers with similar levels of education. Therefore, increasing the number of Hispanic students pursuing STEM degrees is one way to promote the continued socioeconomic mobility of Hispanic families in the U.S.
There are likely many factors that play a part in the underrepresentation of Hispanic students pursuing STEM – lack of information or academic resources, unfamiliarity of STEM opportunities among parents, etc.
However, according to a July 2018 study from the Hope Center for College, Community and Justice, a lot also has to do with finances. The study found that university students from low-income families who were offered need-based grant aid were 7.87 percentage points more likely to declare a STEM major than similar peers, representing a 42 percent increase.
What does this mean for credit unions?
The Hope Center study means credit unions have the opportunity to impact the number of Hispanic students who are pursuing STEM careers. This can be accomplished by connecting members with a variety of college savings products and opportunities – supported by culturally relevant financial education for parents and children. Consider the following opportunities:
• 529 college savings plans. These savings plans are tax-advantaged college savings vehicles and one of the most popular ways to save for college today. Much like the way 401(k) plans revolutionized the world of retirement savings a few decades ago, 529 college savings plans have revolutionized the world of college savings.
• Coverdell ESA plans. These savings vehicles are often used as supplements to 529 plans or other savings vehicles because they only allow parents to invest a maximum of $2,000 in them each year.
• UGMA/UTMA accounts. Parents or grandparents can also set up custodial accounts available under the Uniform Transfers to Minors Act (UTMA) or Unified Gift to Minors Act (UGMA). These accounts allow parents or grandparents to invest as much as they would like each year and in total. However, these investments are not tax-free like they are with 529 plans and Coverdell plans.
• College savings reward programs. Consider ways you might be able to help members save for college through purchases they’re already making. Can you offer credit card points or cash back that go toward a 529 plan or college savings account?
• Separate savings accounts. Perhaps the easiest solution for members is to set up a savings account dedicated to college savings and keep it separate from other accounts. Encourage members to set up automatic contributions and bolster the contributions anytime they receive a raise, bonus or other financial influx.
• Scholarships. Providing a scholarship may be just the financial – and confidence – boost a deserving high school student needs to attend college and pursue a STEM career. Just look at Gabriel Hernandez, who received a scholarship from JetStream Federal Credit Union, made possible by the Warren Morrow Hispanic Growth Fund Grant. In his scholarship essay, Hernandez wrote, “I know that I will succeed in college, but this scholarship will show me that others believe in me, too.”
No matter how your members plan to pay for college, it’s important that they save early and often. Consider offering educational classes and information – in both English and Spanish – to communicate the importance of saving for college and share resources to make it easier. The more financially prepared they are, the more likely it is they will go to college and pursue their dream career – STEM or otherwise.Leave a comment
In its 2017 Diversity Report, Financial Solutions Lab (FinLab) provided an update on its efforts to create a more inclusive financial services industry. Managed by the Center for Financial Services Innovation (CFSI) with founding partner JPMorgan Chase & Co., FinLab seeks to identify, test and bring to scale promising innovations to improve financial health in America. The program is dedicated to supporting and encouraging diversity within the early-stage fintech space.
“As an investor and supporter of early-stage startups, we believe that diverse teams simply build better products,” writes CFSI FinLab Senior Manager Maria Lajewski in the report. “By having a more comprehensive understanding of the market, diverse teams are more likely to build products that address the needs of a broad swath of consumers, including those who are historically underserved. And it’s those companies that are much more likely to grow and scale to reach millions of customers.”
Below are a couple interesting findings Lajewski shares in the report:
Of the 57 percent of Americans who struggle with their financial health, some segments of the population – including low-income women and people of color – struggle disproportionately.
Of the 78 FinLab applicants who self-identified as targeting at least one underserved community, 32 had not yet raised any capital and 22 had raised less than $500,000. However, the average amount of capital raised across the total applicant pool was $630,000.
LESSONS FOR CREDIT UNIONS
FinLab’s findings and work to create a more inclusive industry are relevant to credit unions in several ways. Here are a few key takeaways:
Consider extending credit to startups. The FinLab report reveals many early-stage companies, especially those serving underserved communities, struggle securing investment capital. With their community focus and “people helping people” philosophy, credit unions are well-suited to help meet that need. As reported in Inc., Apple may exist today because co-founder Steve Wozniak was able to get a loan from his credit union while the company was still based in a garage. Talk about a feather in that credit union’s cap.
Educate staff and community. Throughout FinLab’s eight-month program, the organization brings in a wide range of people and experiences to help founders deepen their understanding of the financial challenges low-income and underserved consumers face. FinLab also organizes dinners to discuss how to build diverse organizational teams and culturally relevant products for underserved communities. Credit unions could easily adopt similar models to educate their employees and community members.
Host “day-in-the-life” events. During a workshop called FinX, FinLab participants go into a local community to perform a series of real-time financial transactions, such as cashing a check, buying and loading a prepaid card and sending a money order. Here again, credit unions could organize similar activities to help their staff better understand the challenges faced by the underserved in their communities. Coopera coordinates similar activities through its Coopera Immersion Program. Our staff guide credit union team members through a series of exercises designed to give them a better idea of what life is like for the underserved in their communities.
“While we understand these issues are multifaceted and will never be solved in a single conversation over dinner, creating a safe space and the opportunity to have these discussions is one way that we can regularly check our individual and collective blind spots,” writes Lajewski. “Where are the missed partnership opportunities or design decisions that could open up your customer base to those who have the most to gain from your product? It takes a little extra effort to make sure we’re creating a safe space to discuss these kinds of questions, but it’s an investment we’re willing to make.”Leave a comment