Lending Circles: Helping Immigrants in America Build Credit
From The World
By Jason Margolis
May 15, 2013
For most of us, when we want to make a major purchase we apply for a loan. The bank checks our credit score, and decides whether we’re worth the risk. But what if you have no credit score? That’s the case for many immigrants living in the United States – here legally or not – who save money outside of the formal banking sector.
Here’s how it works when many people in the developing world want to buy a piece of furniture or, say, a new radio. They turn to “savings clubs.” Jonathan Morduch a professor of public policy and economics at NYU uses the academic term: Rotating Savings and Credit Associations, or ROSCA’s…
Not long ago, [Juana Laura Chavero] Ramirez found out about the Mission Asset Fund in San Francisco’s Mission District, a heavily Latino neighborhood. The organization helps immigrants build up a credit history…
In the past four-and-a-half years, the Fund has helped some 2,000 people establish or improve their credit. An encouraging start, but it’s been a slow process. Neal Estey, the associate director of Boston University’s Center for Finance, Law & Policy, said that’s understandable.
“Borrowing amongst your friends, if you’ve been doing this for a while, you understand how it works. You don’t know how it works with this formal financial institution. All of a sudden there are agreements you have to sign, there’s all this technical jargon, that, really it’s difficult enough to understand if you’re an everyday person spending your entire life in the US.”
…Let alone somebody from a foreign country who grew up in a place where banks aren’t trusted. On top of that, many recent arrivals have also lost faith in US banks after the sub-prime mortgage mess and subsequent foreclosures, which hit immigrant communities particularly hard.
Read the full article and listen to the interview at TheWorld.org.