In our last blog post, we shared several stats that reveal how Hispanics in the U.S. are driving America’s economic growth. A recent study by Stanford, Harvard and Census Bureau researchers further confirms this point and signals additional opportunities for credit unions.
The study shows Hispanics are escaping poverty and climbing the economic ladder at nearly the same pace as their white peers.
• Among Hispanics in the U.S. who grew up in the lowest income segment, 45 percent made it to the middle class or even higher, compared to 46 percent of whites.
• Of those who grew up in the lower middle class segment, 28 percent made it to the upper middle class or higher, compared to 35 percent of whites.
• Nearly half of Hispanic high school graduates, ages 18 to 24, were in college in 2016, up from just under a third in 1999.
THE CREDIT UNION OPPORTUNITY
Consider how you can help more Hispanic members become homeowners. As Hispanic income grows, so will the ability to buy homes and make other financial investments. In 2017, more than 167,000 Hispanics purchased a first home, taking the total number of Hispanic homeowners to nearly 7.5 million (46.2 percent of Hispanic households). Hispanics are the only demographic to have increased their rate of homeownership for the last three consecutive years. By offering a variety of home loan options supported by culturally relevant education, credit unions can help more Hispanics realize the dream of homeownership.
Offer programs to help Hispanic members save for retirement. A recent survey found 71 percent of middle-income Hispanics feel they are behind on preparing for retirement, compared to 63 percent of the general population. At the same time, many have difficulty securing the financial services that can help them address these issues. The survey found 59 percent are unsure who to go to for financial advice and guidance; 53 percent say it’s difficult to find financial services companies that know how to help households like the ones they belong to; and 42 percent believe they have different financial planning needs than the average household. Fortunately, increasing income mobility will allow Hispanics to start saving for retirement sooner. Consider how your credit union can be the financial services provider many Hispanics are looking for to help with their retirement savings needs.
Partner with high schools and colleges to offer financial education to students. While more Hispanics are attending college, their graduation rates tend to be lower than their white peers. A report by the National Student Clearinghouse Research Center found that 45.8 percent of Hispanic students who entered college in 2010 completed their degree within six years, compared to 62 percent of whites. This disparity could be the result of several different factors, including financial challenges. By offering culturally relevant financial education on topics like budgeting and student loans – as well as encouraging students to establish a relationship with a credit union before or during their college years – you can help more Hispanic students graduate from college and land higher paying jobs.
While the numbers on Hispanic income mobility are encouraging, there is still work to be done. Who better to do it than credit unions?Leave a comment
Anyone curious about the Hispanic community’s contribution to the U.S. economy need not look any further than these stats from the first half of this decade, provided by the Latino Gross Domestic Product (GDP) Report:
• At 2.9 percent, the U.S. Hispanic GDP experienced the third-highest growth rate in the world, behind only China and India. It was nearly 70-percent higher than the non-Hispanic U.S. GDP growth rate of 1.7 percent.
• If it were an independent country, the U.S. Hispanic GDP would be the seventh largest in the world, larger than the GDP of India, Italy, Brazil or Canada.
• While the non-Hispanic U.S. workforce shrank by about 4,000 workers, the Hispanic U.S. workforce grew by nearly 2.5 million, making possible an overall increase of 2.4 million in the U.S. workforce, ages 24 to 64.
• The U.S. Hispanic college graduate population, ages 20 to 24, grew by 40.6 percent, compared to 13.6 percent for the non-Hispanic population in the same category.
• As young Hispanics enter the workforce and older non-Hispanics leave it, the Hispanic GDP will account for an increasing portion of the total U.S. GDP growth, projected to be 24.4 percent of total U.S. GDP growth by 2020.
What do these stats mean for credit unions?
• As the Hispanic community’s impact on the U.S. economy continues to grow, so will its need for financial services. There’s never been a better time for credit unions to start (or grow) a Hispanic membership growth strategy. Those that don’t will find it increasingly difficult to grow their total membership, deposits and loan balances.
• Young Hispanics will be an increasingly important pool of talent as credit unions grow and hire new employees. As college-educated Hispanics continue to enter the workforce at a faster rate than non-Hispanics, it’s important for credit unions to review their recruiting and hiring processes to ensure they are appealing to Hispanics.
• Dispelling myths about Hispanics is a joint effort. Despite the above statistics, some segments of the U.S. population are not aware of the essential role Hispanics play in the success of the domestic economy. Consider ways you might partner with organizations and Hispanic leaders in your community to help tell the story.
In short, the U.S. Hispanic community is growing in number, spending power, education and – for growth-minded credit unions – opportunity.Leave a comment
Through Partnerships (and Great Videos) Ascentra Credit Union Accelerates Financial Education Initiative
To fully understand the reason Ascentra Credit Union is using its grant funds the way it is, it’s helpful to consider two important stats:
• 90 percent of Hispanic consumers stream video on their mobile devices.
• 7 in 10 Hispanics regularly use YouTube.
With the grant funds, the credit union has translated 16 video scripts into Spanish for a series of financial education videos. Not only are these videos available on Ascentra’s YouTube channel, they have also been airing on its local NBC affiliate, KWQC-TV, serving the Quad Cities area of southeastern Iowa and northwestern Illinois. The videos are available on the television station’s website, as well.
In addition, the grant funds enabled Ascentra to add Spanish subtitles to their existing financial education videos.
“The Warren Morrow Hispanic Growth Fund Grant has been instrumental in providing lasting and ongoing content in Spanish for Ascentra’s Financial Wellness program,” said Alvaro Macias, Ascentra AVP of community development. “We are now in the process of working with our local Spanish/English newspaper Hola America News to use their social media channels to share these informative one-minute videos to effectively reach local Spanish-speakers.”
Ascentra is also offering a series of financial education presentations in partnership with Esperanza Legal Assistance Center, a low-cost immigration service provider. The grant provided the funds needed to translate three presentations into Spanish. Spanish-language flyers were distributed throughout the predominantly Hispanic neighborhood in which the center is located, and the content was also used to promote the seminar on Facebook.
“We have plans to further utilize the translation services; we have some brochures that need to be translated and are planning to re-launch our website later this year,” Marcias said. “Our goal is to have the entire website available in Spanish.”Leave a comment
A recent study on the significance of gender for Hispanic savings and retirement found two important things:
1. Hispanic women have a huge appetite for financial education and a strong desire to save
2. Their savings could provide a critical safety net to America’s largest minority group.
“This study demonstrates that if financial information is communicated simply and respectfully, and in culturally and linguistically competent ways, Latinas, especially, will listen,” said Karen Richman, Ph.D., the principal investigator of the study, a collaboration between the National Endowment for Financial Education and the University of Notre Dame.
Reasons for Low Retirement Savings
Despite a desire to save, low earnings mean Hispanic women have much lower retirement account balances than any comparable demographic, the study found. Employment paths have a lot to do with these outcomes. According to the study, Hispanics switch jobs more frequently than other demographics. What’s more, they tend to accept positions that do not provide retirement savings benefits.
The research went on to show that Hispanics with employer-sponsored retirement plans are 50 percent more likely than whites to make hardship withdrawals. Hispanic women are more likely than Hispanic men to liquidate pensions with a lump-sum payment or to spend rather than reinvest their savings when they change jobs. Additionally, Hispanic women tend to see retirement accounts as a source of liquidity. They may take loans and early withdrawals, often to help others, and they end up paying large penalties.
How Credit Unions Can Help
Below are a few key takeaways from the study and what they mean for credit unions.
• Hispanics have the highest labor participation, and yet the lowest retirement security. Hispanic women would benefit from workplace financial education, particularly during job transitions as they are deciding what to do with retirement accounts. Credit unions can provide financial education, as well as investment and savings products in a way that’s relevant to this influential and growing audience.
• Hispanic women tend to be the administrators of family finances. The female head of the family often makes tough decisions without knowing all the options. Credit unions can address Hispanic women’s appetite for financial education and desire to save through direct outreach, relationship building and financial education opportunities. A great way to gain a better perspective on what Hispanic women need is through the creation of a Latina advisory group.
• Hispanic men and women are equally likely to participate in collective financial practices based on “confianza,” or “mutual trust.” Credit unions should work to develop relationships with Hispanics based on trust. They should position themselves as a dependable resource for the community through product accessibility, bilingual staff and community investment.
As this study reveals, a gap exists for Hispanic women in terms of saving for retirement. Credit unions, with their financial expertise and their people helping people philosophy, are well positioned to address this gap.Leave a comment
In an article ranking the best cities for Hispanic entrepreneurs, WalletHub asked a panel of minority-business experts about the biggest challenges faced by Hispanic entrepreneurs. Nearly everyone mentioned access to capital and financial education.
“There is a clear issue with lack of access to capital to start and grow their venture,” said Pedro F. Moura, an MBA candidate at the Haas School of Business at University of California. “This is also influenced by cultural aspects in which Latinos would rather rely on family and friends for funding than outside investors. Plus, limited financial education also plays a crucial role in understanding the funding that could be unlocked by entrepreneurs.”
What does this mean for credit unions?
This means Hispanic communities represent a huge opportunity for credit unions to grow their lending business – and become those communities’ preferred financial provider. If there is a known preference for borrowing from family and friends, the question for credit unions becomes, How can we build and nurture a similar relationship with Hispanic members?
Below are a few strategies to consider.
Offer small business-friendly loans. Small-dollar loans or Small Business Administration (SBA) loans up to $5,000 can be a great way to help entrepreneurs get their ideas off the ground. With an SBA 504 loan, for example, a borrower may only need 10 percent of equity, rather than the 20 percent required with a more traditional loan. Also, the loan is normally divided into two parts. One, which tends to be 50 percent of the loan, is held by a lender. The rest is held by nonprofit groups, such as the Certified Development Corporation, with this portion backed by the SBA.
Provide microloans. Microloans are typically very small (under $500) short-term loans with a low interest rate, extended to self-employed individuals, new startups with very low capital requirements or small businesses with only a few employees. Microloans can be a good source of funding for a business to hire its first employee, cover startup costs or purchase initial inventory.
Offer Individual Taxpayer Identification Number (ITIN) loans. ITIN loans are designed to help people who have a tax ID number but are not eligible for a Social Security number. Credit unions see the possibilities in serving a population that is not being served well by traditional financial institutions and they understand the value of inclusivity.
Provide lines of credit and credit-building loans. During the early stages of developing their companies, entrepreneurs may not have diversified enough to generate a constant positive cash flow. Lines of credit accommodate the seasonal credit demands of businesses along with ups and downs in cash flow. They also enable entrepreneurs to purchase inventory in anticipation of future sales. Credit-building loans, on the other hand, can help entrepreneurs build their credit as they work to grow their business.
Offer small-business financial education. Even the most robust small-business lending program can be ineffective without the right education plan in place to help entrepreneurs understand their options and select the right loans for their businesses. Ensure your marketing and education materials are available in Spanish and are culturally relevant to Hispanic populations.
Build community partnerships. One of the best ways to expand your credit union’s Hispanic entrepreneur outreach efforts is to partner with organizations that offer small business assistance for Spanish-speaking entrepreneurs. Examples include local Hispanic chambers of commerce and small business incubators.
Credit unions desiring to be Hispanic entrepreneur-friendly should work to build the right mix of lending products supported by a strong financial education program. Those that get it right will not only provide a much-needed service to Hispanics in their communities, they will also benefit themselves through lending and membership growth.Leave a comment
Continuing our get-to-know series, we’d like to introduce you to Víctor Miguel Corro, who joined the Coopera team earlier this year as client relations director.
How did you end up working for a company focused on helping credit unions serve the Hispanic market?
I’m no stranger to the credit union world, and in a career-transition moment, things aligned to give me this great opportunity. It is a great fit personally, as I am a first-generation immigrant. I came from Panama and now live in Wisconsin. I remember coming to the U.S. and facing everyday struggles. Everything from trying to get a haircut to adjusting to the climate was difficult. I’d never experienced a day below 75 degrees in my life and now I was living in Wisconsin. Talk about building character!
What gets you out of bed in the morning?
Knowing I support my family though a career in a mission-driven industry that ultimately seeks to improve lives. When I wake up, I see that as one more day, one more chance to help somebody.
What does your typical day look like?
My day consists of helping Coopera’s clients reach more people who do not know the joy of being part of a credit union. I get to interact with clients and work with our wonderful team to help those clients be the financial entity of choice for the Hispanic community.
What’s the best business advice you’ve ever received?
Be the proverbial bridge. That means working to connect people in spite of their background and differences. There is always common ground to be found, and that will push us all forward together.
What excites you the most about the future of financial services in the Hispanic market?
There is a growing understanding among credit unions that reaching an untapped market makes sense philosophically, and it also presents a strong business case. In my recent conversations with industry leaders, I have sensed the enthusiasm and a natural inclination to want to reach out and serve. The integration of technology is also a very exciting prospect for this market.
Where do you go/what do you do to get inspiration?
A hammock in Panama does the trick every time! But when that’s not available, it’s a long bike ride or an old song.
What is something unique about you most people wouldn’t know?
My parents started a credit union back in my hometown in Panama. I was once a fifth-grade homeroom teacher. I have visited 89 countries (and not just the airport!). I have met six sitting heads of state in as many countries.Leave a comment
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Somewhere between 50 and 80 million U.S. consumers have little or no credit history. That’s somewhere in the range of 15 to 25 percent of the U.S. population. What this means is that a massive number of people in America are “unscoreable” by most traditional models.
At the same time, acquiring new members is becoming increasingly difficult for credit unions. Competition and financial consumer expectations have never been more complex and fast-moving.
What if there was a way for credit unions to avoid turning away “unscoreable” consumers for loans and other services? What if there was a way to welcome them without increasing a cooperative’s risk profile?
No Credit Does Not Mean Bad Credit
Just because a consumer is unscoreable by most traditional credit scoring models doesn’t mean he or she won’t be able to pay back a loan. Several alternative models available today can help a lender evaluate a consumer’s ability to repay. Below are some examples, along with the types of data they incorporate into their models:
eCredable – Bills, such as rent, utilities, mobile phone, cable/satellite TV and insurance
Cignifi – Mobile phone behavior data
First Access – Prepaid mobile-phone payment histories
TrustingSocial – Social, web and mobile data
Kabbage – e-commerce histories from sites like Amazon
Experian’s Emerging Credit Score – Internet and direct-marketing purchases, property and asset records and telecommunications and utility data
TransUnion CreditVision Link – Property tax records and checking/debit account records
LexisNexis RiskView – Residential stability, asset ownership, derogatory status, life-stage analysis
One thing all these companies have in common: They’re using big data to create better outcomes for consumers and meaningful value for lenders. And credit unions have the opportunity to do so, as well.
Alternative sources of consumer data, such as utility records, cell phone payments, medical payments, insurance payments, remittance receipts, direct deposit histories and more, can be used to build better risk models. Armed with this information – and with the proper programs in place to ensure compliance with regulatory requirements and privacy laws – credit unions can continue making responsible lending decisions while better serving the underserved.
How One Organization Successfully Uses Alternative Credit Scoring
Kinecta Federal Credit Union uses an alternative data score from LexisNexis known as Riskview to assess creditworthiness for traditionally unscoreable borrowers. The model factors in data from sources like utility bills, public records, address and employment stability, among many others alternative data elements. The result is a Fair Credit Reporting Act (FCRA) regulated score.
By using nontraditional credit verification methods, Kinecta is able to approve more than 60 percent of the applications it receives. Since 2014, Kinecta has made about 20,000 loans for more than $30 million.”
How Alternative Credit Scoring Fits the Credit Union Philosophy
Credit unions exist to help people, not make a profit. Their goal is to serve all members well, including those of modest means – the very people most likely to be unscoreable by traditional credit scoring models. Many of these consumers fall into one or more of the following segments:
Alternative credit scoring provides credit access to consumers who may otherwise be turned down for a loan or forced to turn to a predatory lender. Using payment history and other data sources to evaluate a consumer’s creditworthiness is an excellent example of “people helping people” – one that benefits both consumers and credit unions alike.Leave a comment
In September 2017, we announced seven Juntos Avanzamos designated credit unions had received the 2017 Warren Morrow Hispanic Growth Fund Grant to continue their Hispanic outreach and community impact efforts. Over the next few months, we’ll be checking in with each of the credit unions and sharing updates on their progress.
First up is JetStream Federal Credit Union in Miami Lakes, Florida.
JetStream partnered with a local high school to select a deserving scholarship recipient. To qualify, the student needed to be a member of a Hispanic, low-income family and meet the following criteria: a 3.7 minimum GPA, a college in mind and an area of interest in business or finance.
As a first step, JetStream chose Barbara Goleman Senior High as a partner. “We chose this high school because of its location, as well as its student body makeup,” said Vanessa Miranda, manager of HR and community outreach for JetStream. “The Barbara Goleman student makeup is 84 percent Hispanic.”
JetStream received many qualified applications, which included essay responses. With the help of several teachers and JetStream staff, they were able to select the winner: Gabriel Hernandez, a senior who will begin an accounting program at Florida International University in the fall.
“Gabriel’s essay demonstrated his devotion to his academics,” said Miranda. “His long list of extra-curricular activities, as well as his academic achievements, truly stuck out from the rest. He has been an honors AP student since freshman year and has achieved a 4.9 weighted GPA. In addition, he is the captain of the soccer team and part of The National Honors Society.”
Something else Jetstream says made Hernandez stand out was a strong commitment to his community. He has tutored immigrant students at a local high school, as well as volunteered his time to feed the hungry.
Long-term, Hernandez plans to be an accountant or financial advisor. “I will be working with people and matching them to financial programs that will assist with their future,” Gabriel wrote in his essay. “Like JetStream’s motto, I believe that people matter most. I think that I could be an asset for both the consumer and the financial institution that hires me in the future.”
In his essay, Hernandez also shared that he is concerned about how he will pay for college tuition and does not want to create further financial burdens for his parents.
“We are very thankful that the Warren Morrow Hispanic Growth Fund Grant was awarded to JetStream, which allowed us to give a most valuable gift, the gift of education, to this deserving Hispanic student,” said Miranda. “I know this young man will go on to do amazing things. We feel honored that we were given the chance through this grant to aid him in achieving his goals and helping him see that the American dream is possible for everyone.”
Hernandez closed his essay by writing, “I know that I will succeed in college, but this scholarship will show me that others believe in me, too.”Leave a comment