Street Outreach, August 2007.

Facts
In the United States, more than 50% of Latinos do not have access to formal financial institutions. Unfortunately, there’s no specific data related to Washington, D.C. however, we believe that it follows the same national trends. To remedy this issue, immigrants utilize non-formal channels to satisfy their need for financial services. Examples of these channels are: the proliferation of money transfer agencies, cash checking places and, “sharks” or individuals that lend them monies to purchasing a home or, to pay for debts acquired in their countries of origin in preparation for their journey to the US.; thus, stripping immigrants from opportunities to building access to wealth.

Some of the barriers Latino immigrants face for not participating in the formal financial system are: (1) lack of trust in formal financial institutions since they were ignored by these same institutions in their countries of origin; (2) language and cultural barriers; (3) uncertain immigration status; (4) not proper US valid issued ID and; (5) little interest of formal financial institutions to offer affordable services and products that are appropriate for this segment of the population, (6) inconvenient hours of operations to seek formal financial services, among others.

While these type of businesses offer consumers an alternative for services that they can not access from formal financial institutions, risks and costs of these mentioned barriers may hinder opportunities for both immigrant themselves and their communities as well as the local economies. In the long run these barriers might: (1) limit immigrants’ capacity to save and to build assets; (2) hinder immigrant’s children opportunities to access higher education; (3) continue to borrow money from “sharks” or from companies that offer credit cards with outrageous interest rates; (5) lose their entire or partial salaries if their money is not in a “safe place”, (6) increase their cycle of poverty; (7) increase capital flight to be deposit in foreign banks, rather than to have this money to stay in formal financial institutions that will used it to offer services in local financial institutions.