Banks Target Latino Customers

DURHAM -- The founders of the Latino Community Credit Union launched the first branch of the financial institution in Durham, North Carolina, 11 years ago amid concerns about growing crime against Latinos.

Erika Bell, the credit union's vice president of strategy and services, said the population was targeted as result of a perception of Latinos as "walking banks" who carried large amounts of cash or stashed money at home.

Bell said Latinos lacked general access to mainstream financial services because of factors including language barriers and a lack of experience with financial institutions.

"Really, the credit union was created initially to save people's lives and provide them with a place to save their money and access affordable loans," she said.

And now, Bell said a University of Virginia study provides evidence that the credit union is doing what it set out to do.

The study, "Perdido En La Traducción: The Opportunity in Financial Services for Latinos," set out to investigate opportunities for banks that work with growing, underserved populations. Researchers found that robberies in Durham fell by about 14 percent between 1999, before the credit union opened, and 2002, two years after it launched.

The study, which was sponsored by the Tayloe Murphy Center, a research center at the university's Darden School of Business, showed that in that same period, average robberies per county increased in the state. It also reported that other counties where branches opened through 2003 saw declines in robbery numbers, except in one county.

"Our statistical analysis provides an answer to an intuitive question: If more Latinos deposited their funds, rather than taking them home, would they be less attractive as targets?" said Gregory Fairchild, the study's co-author, the Tayloe Murphy Center executive director and an associate professor of business administration, said in an email. "Our analysis suggests the answer is yes."

Fairchild also said that a study finding was that there are benefits to the whole community when banking services are provided to a targeted low-income population. Crime was one of two impacts that the researchers looked at, and impact on property values was another.

The researchers estimated that between 2000 and 2008 in the state, the opening of credit union branches with strategies to serve Latinos contributed $9.8 billion to property appreciation, representing an almost 3.8 percent increase, according to the study.

"You can begin to think that these things really end up helping the population that we're focusing on," Fairchild said. "But the reality is that it has lots of what we call in academia spill-over effects to other populations that you might not have immediately assumed would benefit."

The study also looked at the credit union's financial performance compared with a group of peer credit unions. Fairchild said the credit union performed well financially compared to the group, even while experiencing rapid growth.

The credit union has grown from one branch and five employees in 2000 to 62 employees and 10 branches last year, according to its 2010 annual report. It served more than 55,000 members as of 2010, according to the report, of which 75 percent were previously not served by a bank, and 95 percent were low-income.

The study reported that the credit union's deposits grew from around $3 million in 2000 to $74 million in 2009, above the average deposits of its peer group in that year. It also states that the credit union is the second-highest among the seven peers in generating operating income.

Fairchild said that around the country there are a growing number of credit unions and financial institutions recognizing the potential market in immigrant populations, most prominently the Latino population.

He said the Latino Community Credit Union works to serve its population by offering services in Spanish, through its branch locations and face-to-face education and interaction at a time when it's becoming more expensive for banks branches to provide average consumers with a teller.

"The (question of) how to bring those unbanked populations into banking relationships is a really complicated thing," Fairchild said. "It just so happens that there in Durham you happen to have one of the organization's that's been working out and demonstrating how it's done."