On April 9, more than 60 lenders, community development professionals
and small business owners gathered in St. Paul to discuss lessons
learned from the Federal Reserve's recent study of credit access
in the Twin Cities Hmong community.
The occasion was the first Twin Cities Community/Lender Luncheon
of 2003, sponsored by the Federal Reserve Bank of Minneapolis. The
quarterly luncheon series was created in 1999 to foster debate about
community development issues. Past luncheon topics include affordable
housing, demographic changes, commercial corridor revitalization
and workforce development.
Creating a bridge
The theme on April 9 was "Successful Strategies for Reaching
Urban Markets: Lessons Learned from the Hmong Business Community,"
and the program featured a panel of community bankers and Hmong
small business owners who shared their perspectives on credit access
in urban minority and immigrant communities.
Following opening remarks from Minneapolis Fed Community Affairs
Manager Jacqueline Nicholas, Community Affairs Officer Dick Todd
provided an overview of "Credit Availability in the Minneapolis-St.
Paul Hmong Community," a recent study commissioned by the Federal
Reserve Banks of Chicago and Minneapolis. (For more information
on the study, see our cover story.) Todd
summarized the study's history, methodology and major findings.
In conclusion, he commented that the study depicts the Hmong community's
overall experience with credit as a success story, but some challenges
and unanswered questions remain.
Moderator Rick Bonlender, a Wells Fargo business banking officer,
introduced the panelists, who spoke in turn about their impressions
of the Fed study and their experiences with credit access in the
Hmong small business community.
Heuky Chu-Yang-Hue, assistant vice president of Liberty State Bank
in St. Paul, commented that although the study found few major differences
between the Hmong business owners and members of the white control
group, a number of barriers still prevent Hmong individuals from
accessing small business credit. They include language differences,
a lack of formal credit histories on the part of potential borrowers
and a cultural aversion to debt. According to Chu-Yang-Hue, the
best way for banks to overcome these barriers and reach a minority
group is to hire a lender from that group.
Xiong Thao, owner of 7th and Hope Laundromat in St. Paul, pointed
out the Catch-22 of small business lending: risk-taking is necessary
to build business experience and credit histories, but lenders are
reluctant to lend to business owners who take risks. Thao commented
that risk-taking is the only way to create jobs and opportunities
within a community, adding, "You have to do something different
from what you did in the past in order to create a new frontier."
Western Bank President Steve Erdall described the strategies his
bank has used to attract and retain Hmong customers. Two of Western
Bank's six offices are located in St. Paul neighborhoods with large
Hmong populations, and several years ago the bank's market share
of Hmong customers declined. "We needed to do more," recalled
The bank hired more Hmong employees, including a commercial banker,
and offered printed materials and ATM screens in English and Hmong.
It also modified its consumer-loan policies, allowing many more
consumers—inside and outside the Hmong community—to obtain credit.
Hmong customers returned to Western Bank, and the local Hmong Chamber
of Commerce recently recognized the institution for creating a bridge
between the Hmong and white communities.
Dan Vang, operations supervisor for Asia Supermarket in Brooklyn
Center, Minnesota, echoed Chu-Yang-Hue's concerns about the barriers
that Hmong entrepreneurs face. He also noted that Hmong business
owners who wish to expand their retail establishments or create
manufacturing companies are hampered by a relative lack of experience.
"A more experienced businessperson can get a $200,000 line
of credit, no problem. For the Hmong community, $20,000 is a challenge,"
Vang commented. He expressed the belief that many Hmong entrepreneurs
are on the verge of tremendous business growth, but need financing
and support to make it happen. Lenders can do more to attract Hmong
customers, according to Vang, but Hmong people can do their part,
too, by establishing relationships with bank managers.
The final panelist, David Reiling, described his experience as
president of University Bank in St. Paul. When Reiling and his father
purchased the bank in 1995, it was a small, troubled institution
serving an economically depressed area. Today, the bank is thriving,
much of the area is bustling, and Reiling credits the Hmong community
for the growth and revitalization. Some 40 percent of the bank's
customers and 30 percent of its employees are Hmong. According to
Reiling, University Bank has learned important lessons from its
experience with the Hmong community: emphasize respect for individuals,
offer flexible products and recognize that, for some borrowers,
accessto credit—not the priceof credit—is the central
Taking the chance
In a question-and-answer session that followed the panelists' remarks,
a luncheon participant asked about the use of credit scoring in
relation to immigrant or minority customers. In response, several
of the panelists stressed the importance of flexibility in dealing
with customers who have unconventional credit histories. The lenders
on the panel indicated that they do not rely solely on credit scores
during the loan-approval process, and sometimes use alternative
credit histories such as utility-payment records to evaluate potential
At the close of the event, panelist Vang commented that the Twin
Cities Hmong community has prospered in the last decade, and most
likely will prosper even more in the next. According to Vang, the
challenge for lenders and the Hmong community is to "take the
chance"—to take the necessary risks that can raise the community
to the next level of economic success.
Twin Cities Community/Lender Luncheons are held quarterly in
the Minneapolis-St. Paul area. For more information, visit our events
calendar at minneapolisfed.org/community/events.