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2004, ISSUE 1 Meeting in the M a i n s t re a m Meeting in the Mainstream One of the first projects I’ve Financial Services and the Mexican Immigrant Q&A with Ann Baddour and Rebecca Lightsey had the pleasure of working on as the Dallas Fed’s new Community banks, 15 Texas banks and 10 credit in Texas has grown significantly in the ference, “The Business of Immigrant past decade — 107 percent, according to report, Meeting the Financial Service Markets: Providing Access to Finan- the 2000 census. Mexican immigrants Needs of Mexican Immigrants: A Sur- cial Services.” The conference will come to the United States seeking vey of Texas Financial Institutions, highlight the latest research on decent wages for hard work and a better was released earlier this year. immigrants’ role in the economy, life. These workers send much of what explore innovative ways to provide they make back to Mexico, fulfilling a survey with Ann Baddour, program man- them with banking and community commitment to financially support fami- ager of Texas Appleseed, and Rebecca development services, and identify lies at home. In 2003, the U.S. population Lightsey, colonia program director of business opportunities presented of Mexican immigrants sent back more Community Resource Group. by this growing market. than $13 billion — a 35 percent increase This issue of Perspectives examines how and why it is impor- over 2002. It is estimated that less than 50 per- unions were surveyed. The resulting Perspectives recently discussed the Tell us how you went about conducting the survey. tant to invite the largely unbanked cent of Mexican immigrants have rela- Baddour: We selected financial institu- Mexican-immigrant population into tionships with traditional financial insti- tions from East Texas to El Paso that the financial mainstream. The 2000 tutions. This is partly attributable to marketed their acceptance of the census estimated that nearly 2 mil- their experience with an unstable peso, matrícula con- lion Mexican immigrants live in a cultural preference for cash and a sular card, Texas, almost double the number belief that banks are for the wealthy. with the idea in 1990. What do these potential Texas financial institutions have a that if they new customers need most from a tremendous opportunity to move the accepted the financial institution? How can Mexi- unbanked Mexican-immigrant commu- card, they can immigrants overcome the bar- nity into the financial mainstream. would be more riers to accessing financial serv- than likely to Two nonprofit organizations, Texas ices? How do we meet in the Appleseed and Community Resource offer services that would meet the spe- middle of the road— in the main- Group, are working on the issue of finan- cific needs of the Mexican-immigrant stream? Finding the answers to cial access for Mexican immigrants. community. these questions provides leadership Both organizations are concerned that opportunities for us all. most of these immigrants do not use the was to compile the information from a basic services banks and credit unions customer’s perspective. We called finan- offer, choosing instead alternative finan- cial institutions’ customer service lines cial service providers and cash-based so that we could have a sense of the transactions. “front line” and what kind of information I hope you find this issue of Perspectives intriguing and informative. Alfreda B. Norman Community Affairs Officer Federal Reserve Bank of Dallas 2 The Mexican-immigrant population Affairs officer is our upcoming con- perspectives In conducting the survey, our goal To see how well the products and people would get. We asked for key services of Texas financial institutions information that we knew would be meet the needs of Mexican immigrants, important for a person who was just Texas Appleseed and Community entering the banking system. We Resource Group surveyed 33 institu- inquired about free checking accounts tions in the state between October 2003 and products and services that the Mexi- and January 2004. Eight multistate can-immigrant customer commonly uses, Federal Reserve Bank of Dallas such as money orders and international Lightsey: In summary, we found there is remittance services— products that are a great deal of interest among financial of special interest to this community. institutions in serving this population, There are many models that have suc- and there is a lot of innovation taking cessfully moved people into the formal place. However, initially we thought that financial service sector by offering prod- if we identified financial institutions that ucts (at a comparable price) they are offered low-balance or zero-balance accustomed to using, so that they have checking accounts, the Mexican-immi- a comfort zone while making the transi- grant customer would go in and sign up tion. and everything would work smoothly. But that’s not the case. What did you learn from the survey? Please share some anecdotes. financial education. Baddour: There really is a need for Lightsey: What we recognize now is Lightsey: The survey opened up very that it’s a two-way street. Financial insti- interesting issues in terms of some finan- tutions need to be welcoming to this new cial institutions’ policies versus their customer, and the new customer needs practices. We to value the importance of establishing a met with the relationship with a financial institution. staffs of sev- sessions, sev- What can financial institutions do to attract the business of Mexican immigrants and other unbanked populations? eral of the Baddour: Here is a sample of best prac- eral financial institutions. During those institutions told us they accepted the tices that have helped financial institu- matrícula card as identification for open- tions in Texas and elsewhere in the ing an account. However, when we later country earn the business of these called these institutions’ customer serv- groups: ice lines, the people we spoke to didn’t • Accessible hours and branch know what the card was and had no idea locations in nonintimidating what we were talking about when we environments asked about acceptable forms of identification other than Social Security numbers and passports. In another case, one representative • Low-cost accounts, money orders and check cashing • Savings accounts that offer incentives for monthly deposits of a financial institution told us that it • Simple account fee structure did not accept the matrícula card. But • Bilingual staff, web site and litera- when we later called the institution’s ture customer service line, we found out that • Financial education initiatives it did, indeed, accept the card. • Community relationships that Baddour: We also discovered there create trust were some institutions that accepted the • Clear policy on identification matrícula card but also required a Social • Intervention on overdraft Security number or passport. More than anything, we observed that when you stray from the typical mainstream customer profile, there is confusion on the front line. accounts to reduce fees • Savings accounts that serve as Using the Matrícula Card to Open Accounts The long-standing requirement that an individual have a Social Security number to open an account had been a barrier for financial institutions in serving recent immigrant populations. On Sept. 18, 2003, the Treasury Department affirmed earlier rules for implementing the USA PATRIOT Act. The final rules provide discretion to financial institutions to accept foreign-issued identification to open accounts. Under the new regulations, a financial institution must have an individual’s name, date of birth, street address and an identification number to open an account. For a non-U.S. person, the identification number can be a taxpayer identification number, passport number with country of issuance, alien identification card, or other governmentissued identification with number and country of issuance. One of the most common identification cards used by Mexican immigrants to open financial institution accounts is the matrícula consular card, which is issued by Mexican consulates in the United States. Mexican consulates require that the applicant appear in person and present proof of nationality, identity and address. Currently, at least 70 financial institutions and 800 governmental entities nationwide accept the matrícula as official identification. One bank that has been at the forefront of outreach efforts to Mexican immigrants in Texas opened 30,000 accounts, with a total of $50 million in deposits, using the matrícula consular card nationwide in a six-month period. In the Midwest alone, approximately 50,000 accounts were opened using the matrícula consular card over 18 months, collecting over $100 million in deposits. This article was adapted from Meeting the Financial Service Needs of Mexican Immigrants: A Survey of Texas Financial Institutions, May 2004. free overdraft protection • Higher monthly account fees to avoid unexpected charges Federal Reserve Bank of Dallas perspectives 3 Lightsey: The goal should be to main- scoring criteria. We hope these new pro- market with tremendous future poten- tain a long-term relationship with these grams, products and services will even- tial. Mexican immigrants make up nearly individuals, not just get them in the door. tually be part of the mainstream business 10 percent of the total population of the Financial education is key to changing of financial institutions. state of Texas. You can’t ignore the the perceptions of unbanked individuals. Baddour: Why are the results impor- numbers. tant? When people walk around with a Now that the report is complete, what will you do with it? And why are the conclusions important? lot of cash in their pockets, they are vulnerable to crime. At the other end of the spectrum, the conclusions are important because the Mexican-immigrant popula- Lightsey: We want to disseminate the tion in Texas is a huge component of our report in various forums and continue economy, and right now they are outside working with individual financial institu- the mainstream. Bringing them into the tions on initiatives to serve immigrant financial mainstream benefits this com- communities. We hope this report will munity by giving them a safe place to spark dialogue and coalitions that will keep their money and build credit. It also create new underwriting and credit- brings financial institutions a very large Texas Appleseed Texas Appleseed is one of 18 centers operating under the umbrella of the Appleseed Foundation, a Washington, D.C.based nonprofit that traces its roots to a 1993 Harvard Law School reunion. Classmates decided to establish a network of centers around the country that would harness the pro bono efforts of lawyers and prominent law firms in a systemic approach to social reform. Each of the centers functions independently and decides which issues are most important to its community. In the case of Austin-based Texas Appleseed, started in 1996, those issues have been diversity in the legal field, indigent defense reform and fair immigration policy. It was examining immigration issues that led the Texas center to look at the financial products and services offered to 4 perspectives the Latino community. Texas Appleseed’s goal is to improve immigrants’ access to low-cost services that will help them build credit. To achieve this, the organization is working with banks to develop policies that are welcoming to the Latino community, creating financial education materials, and expanding consumer protection and providing information in the area of remittances. Community Resource Group Community Resource Group (CRG) has been helping low-wealth, low-income communities develop long-term solutions to their problems since 1975. The nonprofit organization, based in Fayetteville, Ark., has operations in that state and in Tennessee, Alabama, Mississippi, Oklahoma, Louisiana and Texas. CRG’s main expertise is in the areas of water and wastewater systems, low-income housing Federal Reserve Bank of Dallas The report by Texas Appleseed and Community Resource Group includes tables with account and service information for the financial institutions surveyed. Meeting the Financial Service Needs of Mexican Immigrants is available online at www.texasappleseed.net. For additional information, contact Ann Baddour at abaddour@texasappleseed.net. and community transportation. CRG has been active in Texas since the mid-1990s, working in colonias—unincorporated, impoverished subdivisions along the Mexican border that often lack basic infrastructure. After a 1995 lawsuit revealed that the developers of one Starr County colonia had sold lots to multiple buyers, the state appointed CRG receiver to sort out the resulting maze of title problems for over 1,000 acres of property. CRG’s chief goal in the colonias is asset building, and housing assistance was the logical next step. The organization has used state and federal money to rehabilitate more than 100 homes. Another project, Nuestra Casa, is a privately funded microloan program that’s giving colonias residents access to credit so they can pay to improve their most important asset— their home. Finding a Place in the Mainstream: One Immigrant’s Story Unfortunately, in fall 2003 business dropped off when road construction obstructed the entrance to the bakery. In addition, Becerra was making large payMadge Vasquez, loan officer for ments on three investment properties Austin Community Development Corp., across the street. Using loans totaling believes Jesus Becerra epitomizes the $275,000 from the Austin CDC and the immigrant who’s realized the American Texas Mezzanine Fund in Dallas, he refi- Dream. She describes her client as a nanced the investment property and visionary—an energetic, hardworking obtained $25,000 in working capital. This man, committed to both family and com- past summer, Becerra sold those proper- munity. “He has an indefatigable spirit, a ties. He’ll use the profits to pay off the good sense of humor and a humility that loan and plow another $190,000 back into is refreshing,” says Vasquez. his business. Today, the 6,282-square-foot La Mexi- Becerra surely needed all those quali- cana has four large industrial ovens and ties to achieve what he has. The Mexican boy who arrived in Austin 30 years ago the remainder. A year later, he incorpo- produces more than 100 types of pastries, with 500 pesos now owns a thriving busi- rated his sole proprietorship and began cakes and cookies, as well as breakfast ness that he hopes to someday pass on to looking for his own space. Every day, he tacos, tamales and a variety of lunch and his children. passed an abandoned building one block dinner entrees. Three vans make deliver- south of the restaurant and dreamed of ies for the business, which operates 24 from Guanajuato to Austin with the equiv- owning it for his bakery. For over two hours a day, seven days a week. alent of $40 in his pocket and little educa- years, he and his CPA monitored the tion. Having worked in his family’s bakery price of the property. Becerra was 14 when he immigrated in Mexico, he found a job at La Reyna In 1992, Becerra’s dream became Previously an abandoned building, La Mexicana Bakery brightens the South Austin landscape with its neon red, white Restaurant, a South Austin restaurant and reality. With the help of an SBA loan and green signage—a feature Becerra bakery owned by Vicente Hernandez. For secured through NationsBank, he pur- feels is welcoming to Austin’s growing the next nine years, Becerra also held a chased the building, moved and bought Hispanic community. His ultimate goal is second job as a baker at an H-E-B store. equipment for expansion. He used per- to be the best bakery in Austin and pass sonal savings to pay for subsequent build- the business on to his daughters and sons. After 15 years at La Reyna under Hernandez’s mentorship, Becerra had considerable expertise managing the operation. ing improvements. Vasquez once reminded Becerra of La Reyna Bakery got off to a strong the common Mexican saying, “No te He had also gained the respect of its start in its new location. In 1993, it apures, para que dures.” Translated: owner, who upon deciding to sell the bak- racked up sales of $385,000, and in 1994, “Don’t rush around so much, so that you ery portion of the business, offered it first revenues reached nearly $500,000. In can live a long life.” Becerra’s response to Becerra. “He was the only person able 2002, now operating under the name was, “Pero no mas tengo una vida para to do it,” says Hernandez. La Mexicana Bakery, the business ex- vivir. Tengo que aprovechar.” Trans- panded to include a restaurant, and by lated: “But I only have one life to live. 1989, using $6,700 of his own savings for June 30, 2003, revenues were at $1.2 I must take advantage and live it to the a down payment and owner financing for million. fullest!” Becerra purchased the bakery in Federal Reserve Bank of Dallas perspectives 5 The Texas Challenge in the 21st Century by Steve H. Murdock Steve Murdock is director of the Institute for Demographic and Socioeconomic Research, University of Texas at San Antonio. He is also the official demographer for the state of Texas. Murdock has authored 11 books and more than 150 articles and technical reports on the implications of demographic and socioeconomic change. In May, he received the 2004 Hobby Visionary Award from the Center for Public Policy Priorities, a nonpartisan, nonprofit research organization that works on issues that affect low-income Texans. In the latter part of the 20th century, greater than 40 of the 50 states, and have a smaller immediate impact than many policymakers, analysts and academ- Laredo, McAllen–Edinburg–Mission, growth through migration because the lat- ics began to recognize that the population Austin–San Marcos, and Brownsville– ter involves a new household moving into of Texas was changing rapidly, with dra- Harlingen–San Benito were among the an area—a household that will need matic implications for the state. By 1950, nation’s 10 fastest growing metropolitan somewhere to live and a variety of public Texas was no longer primarily rural. By the areas in percentage terms. and private services. As a result, in periods end of the century, it had become the sec- Since 2000, Texas’ population growth like the 1970s and 1990s—when the econ- ond-largest state in the country and home has slowed somewhat, although not as omy expanded substantially—migration to its second-largest Hispanic population. markedly as other parts of the country. was the largest source of growth. Gener- Demography may not be destiny, but The Census Bureau estimates that from ally, however, natural increase tends to be demographic factors are key determi- April 2000 to July 2003, Texas added the major source of growth. nants of other socioeconomic changes in roughly 1.3 million people. This numerical our society. Three of the most important rate of growth was second only to Califor- impacts the economy significantly. Interna- factors shaping Texas are the rate and nia’s, and the percentage rate of growth— tional immigration tends to involve a small sources of population growth, the aging 6.1 percent—was the fourth fastest proportion of highly educated and high- of the population and the growth in non- among the states. income people and a relatively large pro- Anglo populations. Obviously, the magnitude of growth Population Growth Texas entered the 21st century with a population of almost 21 million, up dra- What kind of migration occurs also portion of relatively poor and poorly edu- impacts many facets of life in both the cated people. This has been true from the private and public sectors. But the source very beginning of the nation. Domestic of such growth is also important. migrants to a state tend to be what demog- Population growth is a product of raphers call “positively selected”—mean- matically from 7.7 million in 1950 and 16.9 three processes—births, deaths and ing that they tend to have higher levels of million in 1990. In the 1990s, Texas added migration. The difference between births education and be employed in higher nearly 3.9 million people—the equivalent and deaths for a given period is called the income jobs than the area’s indigenous of another city of Houston, plus another “natural increase.” Migration can be either residents. As a result, domestic migration Dallas, San Antonio and Corpus Christi. immigration from other nations or migra- generally has a more positive impact on an Texas had the second-largest numerical tion from other states. economy than immigration. increase and the eighth-largest percentage The two sources of change have very In Texas during the 1990s, migration increase of any state. The Dallas and different impacts on the economy. Growth accounted for 50.3 percent of the state’s Houston regions experienced increases as a result of natural increase tends to population growth, 30.2 percent of it 6 perspectives Federal Reserve Bank of Dallas domestic. From April 2000 to July 2003, In 2000, 53 percent of the Texas pop- factors, sociodemographic characteristics however, migration accounted for 43.5 ulation was Anglo and 47 percent was are tied to these demographic character- percent of the growth and domestic migra- non-Anglo. By 2003, the Texas population istics. tion for only 8.8 percent. So although was less than half Anglo. Assuming the For example, incomes tend to be growth has been only slightly slower in growth rates of the 1990s continue, it’s higher for middle-age people. Median the 2000s than in the 1990s, the economic projected that by 2040 the state will be income levels of African-American and implications have been quite different. Aging The Texas population, like that in the rest of the country, is aging. The baby boomers—those born between 1946 and about 24 percent Anglo, 59 percent His- Hispanic households are between 55 and panic and 8 percent African-American, 70 percent of those for Anglos, and with another 9 percent of the population poverty rates for those households are falling into the “other” category, but pri- three times those of Anglos. Roughly marily Asian. (See the chart below.) 25 percent of Texas Hispanics and 23 per- Roughly 96 percent of the net addi- cent of African-Americans lived in 1964—constitute approximately 30 per- tions to the Texas population from 2000 poverty in 2000, compared with roughly cent of the Texas and U.S. populations. to 2040 will be non-Anglos. Projections 8 percent of Anglos. As a result of their aging, the state’s show that by 2040, under the trends noted If the projected demographic changes median age has been steadily rising and above, eight of every 10 children in public take place, and the relationships between by 2000 had reached 32.3 years. By 2040, elementary and secondary school, seven factors such as non-Anglo status and one in five Texans—or about 20 per- of every 10 college students and three of income do not change, Texas will be a cent—will be 65 years of age or older. every four people in the labor force will be poorer and less competitive state in the non-Anglos, and 68 percent of consumer future. If the socioeconomic differentials expenditures will involve non-Anglos. that now exist are not changed, the Insti- Equally important, the age structure of Texas shows an interrelationship with race/ethnicity. In 2000, whereas 72 percent of the population 65-plus was Anglo, 57 percent of those under 18 were non- tute for Demographic and Socioeconomic Implications Research projects that in 2040 the labor These trends would be of little inter- force will be less well educated, the num- Anglo. In 2040, 26 percent of Anglos but est to anyone other than demographers ber of households living in poverty will only 10 to 15 percent of Hispanics will were it not for the fact that due to a vari- increase by 4 percent and the income of fall into the 65-plus category. Young His- ety of historical, discriminatory and other Continued on page 8 panics will dominate the Texas population by 2040. For example, almost 70 percent of those under the age of 5 will be Hispanic, as will more than 60 percent of all groups through age 49. These patterns suggest that at a time Projected Proportion of Texas Population by Race/Ethnicity Percent 60 Anglo African-American Hispanic Other when Anglos will be increasingly concerned with issues involving aging, His- 50 panics will be focused on issues affecting younger people. The difference in age 40 structure also means that growing numbers of older Anglos will be looking to an 30 increasingly larger proportion of young non-Anglos for public and private services. Racial/Ethnic Change 20 10 No factor is more important to Texas than the growth of its non-Anglo populations. If you wonder what the future of this country will look like and you live in Texas, all you need to do is look around you. The state is a precursor of what we 0 2000 2010 2020 2030 2040 Note: 2000 data are from the 2000 census. Projections for 2000 – 40 assume that net migration continues at the 1990–2000 level. Source: Department of Management Science and Statistics, College of Business, University of Texas at San Antonio. can expect nationwide. Federal Reserve Bank of Dallas perspectives 7 Tu Banco Opens the Mainstream to New Customers David Gottlieb, vice president of savings accounts have been opened at vides forms and any needed assistance to strategic relationships at Woodforest Tu Banco since its start in November 2003. apply for one. Once an account is opened, National Bank, was scouting for a new The branch is working to meet the com- a customer receives a picture ID that’s branch location in the heart of a Conroe munity’s needs with check-cashing fees accepted at any Woodforest branch. Hispanic neighborhood when he came that are currently 1 percent of the check across Frutilandia Grocery. After meeting amount, low compared with check-cash- customers with long hours. It’s open the store’s owners, Gottlieb knew he’d ing services; Western Union transfers for seven days a week, 9 a.m. to 8 p.m. Mon- found the right place. The store was small remittances; postal services; and bilingual day through Saturday and 9 a.m. to 3 p.m. and locally owned; it felt like part of the staff, literature, web site and ATMs. on Sunday. Another component of the community. Tu Banco also accepts various com- He then asked a group of Hispanic Tu Banco further accommodates its bank’s strategy is financial education. binations of identification for opening Bank staff is actively involved in initia- bank employees how to embrace and accounts and cashing checks. The bank tives with Montgomery County Commu- accommodate the branch’s potential accepts the matrícula card, and when a nity College District and the Conroe Inde- customers. While brainstorming on how minimum of 15 people need to apply for pendent School District. to do so, the employees envisioned one, takes them by chartered bus to the Tu Banco, “Your Bank.” They also Mexican consulate’s office in Houston, 40 tomers and, says Gottlieb, the second- planned an outreach strategy to a com- miles south of Conroe. The bank accepts and third-generation children of customers munity that was primarily unbanked. utility bills in an applicant’s name as iden- are proud and appreciative of efforts to The strategy they devised is clearly The model works. Employees, cus- tification. It also accepts an individual welcome this community to their bank— working. More than 900 checking and taxpayer identification number and pro- Tu Banco! Texas Challenge and how well these populations do will to ensure that all segments of Texas Continued from page 7 determine how well Texas does. The society are competitive in an increasingly the average Texas household will be demographic changes will have an impact global economy. We must draw together $6,500 lower than in 2000 (in constant on the demand for housing, education, to meet this challenge, because how well dollars). welfare and employment services, as well Texas does will determine its economic as income and wealth and the state’s and social future. costs and revenues. Steps must be taken For more information, go to http://txsdc.utsa.edu. The future of Texas will be increasingly tied to its non-Anglo populations, perspectives www.dallasfed.org 2004, Issue 1 Federal Reserve Bank of Dallas Alfreda Norman Editor: Monica Reeves Designer: Gene Autry Community Affairs Office Community Affairs Officer P.O. Box 655906 alfreda.norman@dal.frb.org Dallas, TX 75265-5906 Jackie Hoyer Gloria Vasquez Brown Houston Branch, Vice President, Public Affairs Sr. Community Affairs Advisor jackie.hoyer@dal.frb.org gloria.v.brown@dal.frb.org September 2004 The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted if the source is credited and a copy is provided to the Community Affairs Office. Federal Reserve Bank of Dallas perspectives 8
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