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Wealth inequality and new Americans

Written by José Quiñonez on .


The racial wealth gap is real, and it’s growing. But where do immigrants fit into this analysis?

This post first appeared on the Aspen Institute’s blog. It was written by MAF’s CEO José A. Quiñonez in preparation for a panel on the Racial Wealth Gap at the Aspen Institute’s 2017 Summit on Inequality and Opportunity. 

Here’s what we know about wealth inequality in America today: It’s real, it’s huge, and it’s growing. Barring substantial policy change, it would take 228 years for black households to catch up to white households’ wealth, and 84 years for Latinxs to do the same. This matters because wealth is a safety net. Without that cushion, too many families live just one job loss, illness, or divorce away from financial ruin.

Here’s another thing we know: Contrary to popular opinion, wealth inequality between racial groups did not come about because one group of people didn’t work hard enough, or save enough, or make savvy enough investment decisions than the other.

How did it come about, then? The short answer: history. Centuries of slavery and the bitter decades of legal segregation laid the groundwork. Discriminatory laws and policies against people of color made things worse. The G.I. Bill of 1944, for example, helped white families buy homes, attend college, and accumulate wealth. People of color were largely excluded from these asset-building opportunities.

Today’s racial wealth divide is the financial legacy of our country’s long history of institutionalized racism.

The factor of time is, in some ways, foundational to these findings. Sociologists, economists, and journalists alike all underscore how the racial wealth gap was created and exacerbated over time. But when it comes to the question of new Americans—the millions of us who have joined this nation in recent decades—time often gets glossed over in racial wealth gap conversations.

Immigrants’ creative survival strategies and rich cultural and social resources could help inform better policy interventions.

Reports generally illustrate the racial wealth gap by, understandably, placing the average wealth of different racial groups side by side and observing the gaping chasm that divides them. For example, in 2012, the average white household owned $13 in wealth for every dollar owned by black households, and $10 in wealth for every dollar owned by Latinx households. This story matters. There is no denying that. But what might we learn from investigating wealth inequality with more attention to immigration?

A report by the Pew Research Center divided the population of adults in 2012 into three cohorts: first-generation (foreign-born), second-generation (US-born with at least one immigrant parent), and third-and-higher generation (two US-born parents).

Clearly different racial groups have very different American stories.

The vast majority of Latinxs and Asians are new Americans. Seventy percent of Latinx adults and 93 percent of Asian adults are either first- or second-generation Americans. In contrast, a mere 11 percent of white and 14 percent of black adults are in the same generational cohorts.

By comparison, the latter groups have been in the United States for much longer. And given their relatively comparable tenure in the US, it makes sense to place their data side by side.

But comparing the wealth of Latinxs—half of whom are first-generation Americans—to that of white families, 89 percent of whom have been in the US for many generations, seems to raise more questions than it answers.

Instead, we could add nuance and context to our analysis by measuring the differences in wealth between racial groups within generational cohorts; or by comparing members of different groups who share key demographic characteristics; or even better still, by measuring the financial impact of policy interventions within specific groups.

For example, we could investigate the financial trajectories of young immigrants after they received Deferred Action for Childhood Arrivals (DACA) in 2012. Did they improve their income, build their savings, or even acquire appreciating assets, as compared with their peers?

We could go further back in time and explore what happened to the generation of immigrants who were granted amnesty under the Immigration Reform and Control Act of 1986 (IRCA). What did emergence from the shadows mean for their assets and wealth? How does their wealth compare with those who remained undocumented?

These contextual comparisons can give us space not just to quantify what’s missing from people’s lives, but also to discover what works.

Their creative survival strategies and rich cultural and social resources could help inform better policy interventions and program developments. Bringing the story of new Americans into our conversations about wealth inequality will deepen our understanding of these disparities and the distinct forms they take for different groups. That’s what we need to develop the bold policies and innovative programs needed to narrow the stark racial wealth divide we face today.

Lending Circles at the Brown Boi Project

Written by Elena Fairley on .


Building Credit & Confidence in LGBTQ Communities of Color

Carla’s first experience with a lending circle came long before she began working with Brown Boi Project, and long before she’d heard of MAF.She knew them as “cundinas,” and she first encountered them at the Los Angeles clothing factory where she started working as a teenager.

She and her coworkers formed the cundina to support each other in saving money. They each agreed to make a weekly contribution of $100.

It wasn’t an easy amount to save. Carla worked overtime to ensure she could make each payment. Eventually, she saved enough money through the cundina to finance a trip to Mexico, where much of her family was living.

Carla had taken the factory job knowing that her ultimate goal was to continue her education, and soon she enrolled in night classes at a local community college.

Money was tight, and the classes were expensive, so she took on heavy debt to finance her studies. She didn’t realize that she could have qualified for financial aid.

Shortly after beginning her studies, Carla suffered a back injury at work. Her employers stopped giving her hours, and she eventually went on disability and became a full-time student. She transferred to UC Santa Cruz, and a professor assisted her in applying for financial aid. Carla loved her coursework in Feminist Studies and Sociology, but the burden of her growing debt lurked in the background. She began skirting calls from debt collectors. She scraped by this way for years.

She spiraled deeper into debt. Her strong credit score of 720 plummeted, dipping below 500.

From Cundinas to Lending Circles

Shortly after graduating from college, Carla came across an job opening announcement with Brown Boi Project, an Oakland nonprofit that brings together masculine-of-center womyn, men, two-spirit people, transmen and allies to change the ways communities of color talk about gender.

She knew right away – this job was for her. Brown Boi’s mission and values echoed her own identity and experience. She applied without hesitation. Competition was steep, with over 80 applicants vying for the position. But Carla was right about her fit for the role. As she tells it, she and the staff at Brown Boi “just kicked it off well.”

She’d landed her dream job. But her debt and damaged credit continued to limit her.

She struggled to find housing in Oakland that would accept her low credit score. Fortunately, Carla had a friend who helped her find an apartment. But without a credit card, she couldn’t afford to furnish her new home.

“All of those things are so emotionally draining and stressful. I was feeling depressed. Your credit score can almost feel attached to your own worth.”

It was at Brown Boi that Carla learned about the Lending Circles program that MAF manages. She was familiar with the concept from her earlier experience with the cundinas. The promise of improving her credit score through participation lifted her spirit – she began to imagine the relief she would feel if her life were no longer controlled by debt, her options no longer curtailed by her credit score. After so many years of financial exclusion, Carla appreciated that Lending Circles were open to her regardless of her credit score.

Carla brought the same discipline and dedication to her Lending Circle that she had brought to the cundina years before. After Brown Boi became an official Lending Circles provider, Carla seized the opportunity to become the lead staff organizer for the program.

Carla finished her Lending Circle with 100% on-time payments. She paid down her debt and even managed to build up savings.

But despite her perfect track record, she was nervous to check her credit score. She had come to equate a credit score with feeling disheartened, discouraged, and stuck.

For almost a month after the Lending Circle ended, Carla delayed checking her credit. The same month Carla completed her Lending Circle, she was invited to attend a summit for innovators of color at the White House. She took herself suit shopping, comforted by the fact that she now had enough savings to cover the costs.

Carla found the perfect outfit: a grey suit with a red tie. At the register, the cashier offered her an application for the store credit card. Carla was accustomed to declining these offers, knowing she would likely not qualify. But this time, she applied.

And to her shock, she qualified.

“I qualified at a $500 limit! I was super surprised. I said, wait… What? I qualify?!”

Buoyed by this news, Carla finally pushed herself to check her credit score. She checked: it had risen 100 points to 650.

She paid off the store credit card and applied for a different card that offered airline miles. Again, she was approved – this time for a $5000 limit. Her next goal is save enough money to fly her mother to Europe next year.

What the Future Holds

Financial stability has transformed Carla’s outlook on life.

“I’m gonna be real,” she says. “I feel good. I have a credit card in case of emergency. I’m less stressed knowing that when I need the money, it’s there.” She adds, “I feel more grounded, like my life is coming back together.”

Carla feels passionate about starting more Lending Circles and encouraging more open conversations about financial exclusion with people of color in the LGBTQ community:

“There’s a lot of shame. It’s often taboo to talk about financial struggles in our community… Sometimes we think we don’t have these types of problems, but we do.”

She now keeps her spending under 25% of her credit limit and pays off the full balance of her cards each month. These skills are practical, but they have a larger significance to Carla. She sees financial education as a powerful way of mastering an economic system that so often excludes and disadvantages people of color and members of the LGBTQ community.

“No one has taught us how to play this game,” Carla explains. “But with financial education modules, we learn the rules.”

Sonia: A Future Chicago Homeowner

Written by Samhita Collur on .


Building Credit and Community through Lending Circles at The Resurrection Project

Sonia arrived in Chicago from Puerto Rico one year ago with hopes to turn over a new leaf. As a result of a difficult divorce, her credit report was dotted with blemishes.

A low credit score and considerable debt were keeping Sonia from accessing affordable loan options and achieving an important personal goal: purchasing a home.

In her search for a solution, Sonia discovered my organization, The Resurrection Project (TRP), in a local newspaper.  She learned that TRP provided Lending Circles and became interested in this opportunity to re-establish her credit—so much so that she didn’t mind taking a 45-minute bus drive from the north side of Chicago to our south side neighborhood to meet with me.

Like all Lending Circles participants that come to TRP, Sonia began by meeting with me one-on-one for an initial financial coaching session. Together, we reviewed her monthly income, budget and credit history, and we discovered several discrepancies on her credit report. While we completed her Lending Circles application, she reached out to the credit bureaus to address and resolve these inconsistencies.

At her Lending Circles formation in April, Sonia became a member of Los Ganadores—“The Victors.” As the name implies, Sonia has since won several small victories, leading her closer to her ultimate goal of rebuilding her credit and becoming a homeowner.

Since participating in Lending Circles at TRP, Sonia has increased her credit score by 65 points, decreased her debt by nearly $7,000, and increased her savings by $1,000.

Since joining Los Ganadores, Sonia has not only made significant strides in her personal finances, but she has also gained a new friend. Sonia and Alicia, another participant, connected at their Lending Circles formation and established a beautiful friendship. One wonderful aspect of the TRP Lending Circles program is the sense of community that participants form, both at the start of a circle and beyond. Alicia and Sonia formed a close bond through their Lending Circle. Alicia now volunteers at Sonia’s church food pantry and even joined Sonia at her wedding last May.

Sonia has embarked on the journey to make a new life for herself in Chicago, and we are so happy to support her in reaching her goal. Sonia will be telling her story in her own words at TRP’s next Lending Circles Brunch, where all of our participants come together to share their experiences and celebrate their accomplishments.

About the Author: Madeline Cruz is a Senior Financial Coach at The Resurrection Project (TRP), which offers financial coaching, homeowner education, entrepreneurship support, and immigration services in Chicago, IL. She’s a featured speaker on the panel “True Heroes: Engaging Clients in the Digital Age” at the 2016 Lending Circles Summit.

Celebrating the Many Moms of Our Community

Written by lending8 on .


This Mother’s Day, we’re celebrating all the “MAF Moms” working hard to create better lives for their families through Lending Circles.

This Sunday is a day dedicated to the strong, wise, generous, and caring mothers in our lives. In the spirit of Mother’s Day, we’re celebrating a few MAF clients who are working hard to build bright financial futures for their families.

Three Generations of Chefs

For Guadalupe, cooking authentic Mexican cuisine has always been a family affair. As a girl, she and her mother made the tastiest tortillas from scratch, and now she and her daughters do the same. She used her Lending Circles loan to buy equipment and help pay for a van to expand her catering business, El Pipila — which she runs with her daughter to support their family.

When we last shared Guadalupe’s story in 2014, she dreamed of opening a small, brick-and-mortar food stand. Now, she’s a food vendor at The Hall in San Francisco and a food truck regular at Bay Area festivals. Guadalupe’s family is key to her success. “I am doing this for my daughters. I want to make sure that neither of them has to work for anyone but themselves”.

A Mom on a Mission

Helen, a single mom from Guatemala, came to MAF with a simple dream: to have a safe home for her children. Because she couldn’t afford the hefty security deposit and didn’t have a credit score, she had no choice but to rent rooms in shared apartments — including one with families living in hallways.

After joining a Lending Circle, Helen saved up enough for a security deposit and built her credit score. Now, she has her own three-bedroom apartment for her daughters, and even bigger dreams.

Whipping Up Cupcakes with Her Son’s Support

Elvia’s son ignited her passion for baking with a simple question: “Mom, what do you love to do most?” After building a reputation for having the best desserts at parties, her family and friends encouraged Elvia to start a bakery.

She used a $5,000 loan from MAF to invest in a fridge, business license, and a number of necessities to grow her bakery, La Luna Cupcakes. She now has a cupcake shop in Crocker Galleria in San Francisco, and her children continue to be her North Star. “I always taught them if you want something, you can do it! Believe in your dream!”

Thanks to Lesley Marling, MAF’s newest Partner Success Manager, for her contributions to this post.

Respect, Meet, Build: A Model for Financial Inclusion

Written by lending8 on .


Financial inclusion is about respecting people for who they are, meeting them where they are, and building on what’s good in their lives.

Last week as part of CFED’s Assets & Opportunity National Week of Action, Mohan Kanungo—an A&O Network Steering Committee Member and Director of Programs & Engagement here at MAF—wrote about how your credit report can impact important personal relationships. Building on those themes, Mohan is back this week to highlight MAF’s strategy for empowering financially underserved communities to build credit. This blog was originally published on CFED’s “Inclusive Economy” blog.

There are more payday loan shops in the United States than McDonald’s or Starbucks.

That might surprise if you live in a neighborhood where all your banking needs are satisfied by mainstream financial institutions instead of payday lenders, check cashers and remittance services. Sources including the New York Federal Reserve, the CFPB and the Assets & Opportunity Scorecard reveal that there are millions of people who experience financial exclusion, particularly around credit and basic financial products. These disparities are well-documented among communities of color, immigrants, veterans and many other groups who are isolated economically. How can we address these challenges and lift folks out of the financial shadows?

First, as leaders in our field we need to have a frank conversation about how we engage communities around financial services and assets.

It’s easy to cast judgement on those who use alternative products due to the high interest rates and fees, but what do you do if mainstream products are not responsive to your needs? Increasingly, banks and credit unions have been closing brick and mortar locations to move online, while rural and urban areas may not have had access to “basic” financial products many of us take for granted—like a checking account—for generations. Traditional “assets” like homeownership may seem completely out of reach even if you are well-off, educated and savvy with credit, but live in a costly and limited housing market like the San Francisco Bay Area.

Similarly, non-traditional “assets” like deferred action may seem more urgent and important for an undocumented young person because of the physical and financial security that comes with a work permit and permission to stay in the US, albeit temporarily. We need to listen and appreciate the unique challenges and perspectives of financially excluded communities before coming to a conclusion about the solution.

Second, we need to understand that the values and approach driving any solution can tell us a lot about whether the outcome of our work will be successful.

MAF started with the belief that our community is financially savvy; many in the immigrant community know what the exchange rate is with a foreign currency. We also wanted to lift up cultural practices like lending circles—where people come together to borrow and loan money to another—and formalize it with a promissory note so that folks know their money was safe and gained access to the benefit of seeing this activity reported to the credit bureaus.

It is about building on what people have and meeting them where they are rather than where we think they should be.

We need to be innovative in our fields to come up with long-lasting solutions within the financial system that are responsible to the communities they serve. Small-dollar loans by non-profit lenders like Mission Asset Fund’s Lending Circles program does just that.

Third, we need to think about how to bring our products and services to more communities who can benefit from such programs, while maintaining the respectful approach to our community.

Early on in our work at MAF, there was a clear sense that the challenges people experienced in the Mission District of San Francisco were not unique and that communities across the Bay Area and the country experienced financial exclusion. We perfected our model and then scaled slowly. While MAF sees itself as the expert in Lending Circles, we see each nonprofit as being the expert in their community. MAF also knew it was impractical for us to build a new office everywhere in the country. So we relied heavily on cloud-based technology to build a robust social loan platform and the existing banking infrastructure to facilitate transactions using ACH, which encouraged participants to get a checking account and put them on a path towards realizing larger financial goals, like paying for citizenship, eliminating high cost debt, and starting a business.

MAF was founded in 2008 with the vision to create a fair financial marketplace for hard-working families.

Since launching our social loan program, we have expanded to provide Lending Circles through 50 non-profit providers in over 18 states plus Washington D.C. We have serviced over $5 million in zero-interest loans and offer a range of financial products, including bilingual online education, to turn financial pain points into credit and savings opportunities. And we have done all this with a default rate of less than 1%.

Currently, we are expanding Lending Circles in Los Angeles, and we have plans to expand further across the country while deepening our reach in places where we already have non-profit providers. Check out LendingCircles.org to see if there’s a provider near you or express your interest in partnership. Financial institutions, foundations, government agencies, private entities and donors can champion the work of MAF and non-profit organizations working to lift people out of the financial shadows.