review

Financial education programs serving immigrant populations

Evidence type: Review i

Context
Key findings
Recommendations
Points to consider

Context

Immigrants make up a significant and growing share of the American population. For many reasons, immigrants may struggle to access appropriate financial services. Among other factors, limited English proficiency may act as a barrier. According to the 2010-2014 American Community Survey five-year estimates, approximately 25 million people in the United States speak English less than “very well.”

A Federal Deposit Insurance Corporation (FDIC) study found that households that include a foreign-born noncitizen or where Spanish is the only language spoken are less likely to participate in the mainstream banking system. The Federal Trade Commission has noted that some populations with limited English-language skills are more susceptible to fraud and predatory practices.

To better understand the unique financial needs and challenges of immigrants, including those who have limited English proficiency, and how financial education efforts can help address these challenges, the CFPB conducted this literature review.

Key findings

The literature review identified financial challenges facing immigrant communities as well as challenges facing the financial educators who try to support them:

Challenges facing immigrant communities:

Financial challenges facing immigrant communities can be grouped into three categories:

Challenges related to low income: While this set of challenges is not confined to immigrants, immigrants are more likely than non-immigrants to be on low income. Having a low income can contribute to issues such as a poor credit history and limited access to loans.
Challenges related to limited English proficiency: Immigrants are also more likely to have limited English compared to non-immigrants. This can lead to difficulties understanding financial terms and increase vulnerability to scams.
Challenges related to immigration status: Challenges that follow specifically from being an immigrant include not having the right forms of identity documentation to access financial services (e.g. to open a bank account), unfamiliarity with the US financial system and concepts, a lack of trust in US financial institutions, and a desire to return home.

Challenges facing financial educators:

The literature review identified several challenges, when tailoring programs to help immigrant populations. Issues included hard to reach populations, individual inaccessibility, a lack of financial materials targeted at immigrants, difficulty in hiring/retaining training staff and a lack of focus on aiding immigrants financially in US policy.

Recommendations

The report makes three detailed recommendations that would help to improve immigrants’ financial capability:

Outreach and awareness campaigns: Several organisations use awareness campaigns and mass media to bring unbanked and underbanked immigrant consumers into the financial mainstream by raising awareness about the landscape of U.S. financial institutions, trustworthy sources of financial education, and other topics relevant to navigating the U.S. financial system. These campaigns typically create partnerships between financial institutions, such as banks and credit unions, and community-based organizations and non-profits.
Financial education programmes: Financial educators have found several different pathways to delivering financial education to immigrants. These include: direct financial education, use of culturally appropriate and language-accessible materials, integration of finance education into social services systems, using employer-based financial education programmes and using school-based financial interventions.
Targeted financial products and services: Beyond financial education, financial institutions have developed an array of products and services tailored to immigrants. Financial products and services can improve immigrants’ financial capabilities by helping them to establish credit or build assets. Immigrants may prefer financial products they are familiar with from their country of origin, or products that have been developed to meet the unique needs of immigrants in the United States. Examples include remittance transfers, lending circles, accessible customer service/financial institute locations and having products that cater to a variety of religions.

Points to consider

Methodological limitations: This is an unsystematic literature review, and thus draws on a sample of sources. It is not exhaustive and so may not cover all of the challenges facing immigrants or the financial educators that are trying to help them.
Relevance: This review offers a good overview of the financial issues immigrants face in the United States, and presents a series of solutions based on some strong evidence.
Generalisability: This study is focused on the US context. Because the patterns of immigration and financial services are quite different between the UK and the US, this study’s findings and more detailed recommendations are unlikely to hold for the UK.
Applicability: This review can help organisations to understand some of the kinds of issues immigrants might face in accessing financial services in the UK. Although the study is focused on the US, it offers some good food for thought for those working in the UK context – for instance, about the difficulties posed by language barriers and ways of addressing this.