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NY's immigrants stranded by banks

Branch influx snubs hundreds of thousands

by Tom Frederickson
Crain's New York Business

On a recent Thursday afternoon, 17 people waited in line at the Citibank branch on Myrtle Avenue in Bushwick, a heavily Latino neighborhood in Brooklyn that has 110,000 people and only two banks.

At banks in Manhattan's Washington Heights, lines of customers frequently stretch out onto the sidewalk. The neighborhood, home to a large population of Dominican immigrants, has 250,000 people and 18 banks - or one institution for ever 14,000 residents.

"It's a pain in the ass to bank here," says Dennis Reeder, executive director of the Washington Heights and Inwood Development Corp.

Banks' early eagerness to serve New Yorkers is plain to see in the hundreds of branches on street corners in many parts of the city. When it comes to immigrant neighborhoods, however, it's a far different story.

A new study by the Neighborhood Economic Development Advocacy Project has quantified a problem that many residents experience daily: The established financial industry is not adequately serving many immigrant neighborhoods. The group found that branches are sorely lacking in 33 of 41 areas - defined by zip code - in which at least 40% of residents are foreign-born.

The study found that nine of those zip codes averaged fewer than 0.5 bank branches per 10,000 residents; three of those areas had no branch at all. Another 24 zip codes averaged only one branch per 10,000 residents.

Just a handful of immigrant neighborhoods that are heavily commercial, such as Flushing in Queens and Chinatown in Manhattan, are thick with banks. In those communities, which have large groups of Asian immigrants, many banks have been opened by institutions from their customers' countries of origin, giving the neighborhoods a critical mass of branches.

The scarcity of banks in most immigrant neighborhoods contrasts with the plethora in wealthy nonminority areas: Brooklyn Heights has a branch for every 1,000 residents, and Manhattan's Upper East Side has about one branch per 3,000 people in the blocks below 80th Street.

Ana Perez, owner of a small grocery store in Bushwick, walks six blocks to deposit receipts at the local Citibank branch. "In this neighborhood, it's not so easy," she says.

Wine salesman Andres Uribe is part of a group trying to bring a credit union to the East Elmhurst, Queens, area - a largely Latino neighborhood with more than 20,000 people and no branches. He says getting to the bank is a major hassle for most residents, who walk 10 blocks or more to reach the nearest location. "People do it because they have no choice," he says.

The city's biggest banks, Chase and Citibank, insist that they serve huge numbers of immigrants with their vast branch networks and multilingual staffs.

"We want to make it convenient for anyone in the city to bank with us," says a Chase spokeswoman. "We continue to open and evaluate new locations that would make us even more accessible."

Deprived of opportunities

Nonetheless, the apparent shortage of banks deprives many immigrants of the chance to enter into banking relationships, sometimes for the first time in their lives. Many come from countries where banks are available only to the elite; others mistrust the institutions.

No one knows for certain how many of New York's 2.8 million immigrants lack bank accounts, but most experts estimate that the number runs into the hundreds of thousands.

"This is one of the ways that immigrants are further isolated socially and economically from the mainstream," says Deyinara Del Río, who directs the neighborhood advocacy group's Immigrant Financial Justice Project. "As a result of the lack of banks, they are targeted for high cost services, they can't build credit and they can't gain a toehold on economic security."

One of the consequences of the absence of local banks is the prevalence of loan sharks in many immigrant neighborhoods. Small business owners and people financing large purchases in Washington Heights are accustomed to shelling out 4% to 10% in interest per week to loan sharks, known as prestamistas, who might be neighbors on the corner or family acquaintances.

Many immigrant neighborhoods lack adequate branches for two reasons. Decades of consolidation have left fewer locations in many parts of the city. Meanwhile, immigrants have flooded into many of those areas. Banks that have begun aggressive expansions in New York, such as Wachovia and Bank of America, have gone where they see the most potential for gains - primarily, wealthy areas of Manhattan.

Putting out feelers

A few institutions, including community development credit unions, are seeking customers in immigrant areas. A handful of the credit unions are relatively large and expansion-minded.

"We are growing at our fastest rate in the last five years," says Jack Lawson, executive director of the 3,300-member Brooklyn Cooperative Federal Credit Union in Bushwick.

However, the cooperatives are constrained from adding locations by a small funding base. To cope with that issue, Bethex Federal Credit Union in the Bronx has begun offering limited banking services through check-cashing businesses in order to extend its reach into more immigrant neighborhoods.

Mr. Reeder, the director of the Washington Heights and Inwood business organization, is working with a group that is applying for a federal bank charter to start Savoy Bank. The community bank is slated to have $20 million to $30 million in startup capital. Savoy will make a concerted effort to lend to Dominican small business owners in Washington Heights. The bank will consider nontraditional credit criteria, such as an applicant's character and history in the community.

Near East Elmhurst, Commerce Bank is close to announcing plans for a branch at Queens Boulevard and Albion Avenue. The branch, on a busy thoroughfare, will have a drivethrough lane that's expected to draw customers from miles around, says Peter Meyer, Commerce's senior vice president for Queens and Brooklyn. "That location will be an enormous billboard for Commerce," he says.

So far, though, there's more opportunity than action.

"If banks opened in these neighborhoods, it would provide a lot of financial benefit to the population," says Brian Gurski, assistant director of the Office of Economic Development at LaGuardia Community College's Small Business Development Center. "And done right, they can make money for themselves."