Latino Community CU in Durham, N.C., was recently featured in the University of Virginia’s Darden School of Business and Tayloe Murphy Center study, “Perdido en la Traduccion: The Opportunity in Financial Services for Latinos,” as a base model of the positive effects of mainstream financial services on the unbanked.
Researchers conducted a case study of Latino Community CU for insight into how more financial institutions can earn the trust of unbanked households.
The little over $105 million credit union was selected because it is one of the fastest growing credit unions in terms of members and has demonstrated positive results with its practices targeted to unbanked and under banked households, particularly low-income Latinos.
The study measured how much money is left simply floating due to unbanked households and explored how incorporating unbanked populations into the financial system can create significant benefits not only for individuals and families but also local communities by lowering the number of robberies and raising property values.
“This study gives the financial services industry, policymakers and market watchers information they can use and a real measurement of the scope of this hidden market. At the same time, it not only represents a significant financial opportunity with more than $169 billion outside the formal banking system attributed to unbanked households, but it also highlights the wide-ranging benefits for communities,” said Greg Fairchild, executive director of the Tayloe Murphy Center and Darden professor.
According to the study, currently community grocery stores and markets, called “tiendas,” which offer check-cashing, wire transfers and bill paying with significantly marked-up service fees serve the unbanked.
Fairchild added that remaining unbanked can not only be expensive, but, more importantly, it can be dangerous. Unbanked households, especially Latinos, are often the victims of robberies because of their tendency to carry cash.
“Latino Credit Union began as a grassroots movement to curb violence against Latinos and turned into a full service credit union. We pair culturally appropriate financial education with affordable and accessible financial services to help our members understand the system and ultimately create wealth for themselves and their families,” said Luis Pastor, president/CEO of LCCU.
In reviewing statistics from 1990 through 2008, the study found that each time LCCU opened a branch in North Carolina, the number of robberies dropped by an average of 57 per year, almost 4% percent in each county. The decline in crime also led to an increase in property value in those same counties.
The LCCU branch openings from 2000 through 2008 were credited with raising property values by 4% compared to the total appreciation, or $9.8 billion.