Policy Studies

The Hmong Study

An investigation into credit availability in the Minneapolis-St. Paul Hmong community

Background

Congress mandated that the Federal Reserve System ensure that commercial banks meet the credit needs of their communities by passing the Community Reinvestment Act of 1977. Capital and credit market access is particularly important for immigrant or refugee small business owners because self-employment has been an important channel for building wealth and increasing the economic status of ethnic communities.

To develop a better understanding of immigrant/refugee small business financing, the Federal Reserve Banks of Chicago and Minneapolis surveyed Hmong and white small business owners in Minneapolis and St. Paul. The Hmong are immigrants from Laos and other Southeast Asian countries who settled in the United States as political refugees following the Vietnam War in the late 1970s.

Despite their roots in an extremely underdeveloped part of Asia and relatively recent migration to the United States, the Hmong small business owners appear to have well-developed access to credit; that is, their utilization of credit from formal financial institutions is largely comparable to that of white-owned businesses. Moreover, Hmong and white business owners have similar views on the barriers or obstacles posed by their access to credit. Focus group discussions with local community leaders and commercial banks indicate that unique lending strategies (for example, employing Hmong loan officers and being active in Hmong community affairs) may be partially responsible for the well-developed credit access of the Hmong entrepreneurs.

Resources

Between Two Worlds: How Do Credit Markets Work?,
David Fettig and Arthur J. Rolnick, Federal Reserve Bank of Minneapolis 2002 Annual Report Essay

Credit Availability in the Minneapolis-St. Paul Hmong Community,
Maude Toussaint-Comeau, Arthur J. Rolnick, Robin Newberger,
Jason Schmidt and Ron Feldman [106k pdf] Revised July 1, 2003

Hmong and Control Household and Business Data, via Chicago Fed