By Tulsi Parida, Intern, Innovation and Research
Before making a product, it is important to see who your customer base is. Seems like a basic first step, right? Yet, many providers of services for the underbanked have overlooked a large segment of the population: immigrants. Minorities and immigrants specifically, comprise a significant chunk of the underbanked population. Immigrants naturally face a lot of barriers to entry due to language and cultural differences. Products and services therefore for the underbanked must be culturally relevant for immigrants. Given the large number of unbanked immigrants, financial products and services designed to include immigrants are in large demand.
One of CFSI’s grantees, Mission Asset Fund, has begun to embrace inclusion, build trust, promote success, and create opportunity for Latino immigrants. Their target population is low income Spanish speaking immigrant adults. Mission Asset Fund responsibly expands access as the product strives to include traditionally underserved communities. The Cestas Populares (CP) Replication Project piloted by the Mission Asset Fund is meant to help low income Latino immigrants build credit histories, learn smart ways to use credit, and increase overall financial independence and financial capability. CP replicates lending circles that are common and historically successful in immigrant communities. In Mexico these lending circles are called tandas, cundinas, or cestas and are extremely common. By offering culturally relevant loan products, CP is able to build trust among its customers. Additionally, one of the prerequisites for building trust is to educate consumers on the best use of the product. In addition to the formal lending circles, CP requires all customers to open a bank account and undergo financial training that will help them learn how to use credit responsibly. Customers receive ongoing support from Mission Asset Fund and develop long term relationships with Mission Asset Fund.
CP takes culturally relevant products one step further, by ensuring that they promote success and create opportunity for the customers. All customers have to sign a contractual agreement – this formalizes the lending circle concept and makes customers accountable, not just for themselves, but also for their peers. Each peer lending circle is given the freedom to determine the amount and frequency of the loan, but every customer is required to sign legal promissory notes in which they agree to make payments towards their peer loans. In addition, customers are given product centric financial education to help them successfully manage the product. Customers learn basic information about financial management and more specific information regarding their CP peer loans. Lastly, Mission Asset Fund has partnered with the Credit Builders Alliance. The partnerships allows Mission Asset Fund to report the customers’ payment activities to Experian and TransUnion. This helps their customers create and improve credit scores for long term financial satisfaction.
What good are financial products for the underbanked if they do not attend to the needs of a large segment of the population? For a product to be truly successful, it must cater to the needs of all potential customers and promote success and create opportunity in a culturally relevant manner. Mission Asset Fund truly aspires to all four of CFSI’s compass principles.