- Author: Pamela Kan-Rice
To enhance funding for food and agriculture businesses in the Central Valley, more than 60 people involved in small business finance gathered at the AgPlus Funders Forum Dec. 12 to contribute ideas.
Representatives from financial institutions, economic development organizations, universities, government agencies and innovative funders like community development financial institutions (CDFI) attended. Participants shared innovative financing tools for business and discussed obstacles for people in rural communities to access capital at the forum at the UC Agriculture and Natural Resources building in Davis.
Two primary challenges faced by people trying to start a new business are figuring out how to get started – such as their supply chain – and gaining access to capital to finance their endeavor, according to keynote speaker Glenda Humiston, University of California vice president for agriculture and natural resources.
“There are actually an array of sources of capital beyond just the traditional bank loan, the problem is people don't know about them or how to access them,” Humiston said. She added that much more capital could be available to Central Valley businesses if residents would invest locally. “If you had brought home just one percent of the retirement accounts held by people in the AgPLUS region back in 2010, you would have had over $1 billion to invest in this region,” she said.
Marc Nemanic of 3CORE, Carrie Ellinwood of U.S. Small Business Administration, Ismael Herrero of Fresno State's Office of Community and Economic Development, and Catherine Howard of Northern California Community Loan Fund discussed some of the challenges for financing new businesses and alternatives to traditional bank loans.
Nemanic noted that many millennials are carrying student loan debt, which may make them averse to taking on more debt or prevent them from qualifying for business loans.
Howard said her organization is creating a tool to help people satisfy collateral requirements for credit.
To build their businesses, entrepreneurs often need technical assistance so Herrera's office pairs young companies with experienced mentors and other services. Herrera said he is working to create public and private partnerships in rural communities, such as commercial kitchens for people to turn farm produce into value-added products to sell at farmers markets.
Panelists pointed out that jobs in the gig economy, such as driving for Uber or Lyft, don't provide the stable income that tradition lenders seek in borrowers so they need to create a flexible product.
In the afternoon, participants split into four groups to focus on identifying opportunities for supporting economic development, supporting small business and microenterprises, effective intermediaries to connect investors with entrepreneurs, and regional finance funds. Each topic was discussed by a diverse group of people as peers and experts, bringing their own expertise to the table.
To address the interplay between higher education, student debt and the structural changes in the nation's economy, Meg Arnold, who moderated the session, said she could foresee policy implications.
“Student debt is not forgivable,” said Arnold, managing director of Valley Vision. “At the same time we are making a four-year university degree both more necessary and less affordable, the economy is also changing, to the point that some graduates may need to think of self-employment or gig economy employment.”
“We need everybody who participated today to share those examples of where something kind of unique or innovative is really working,” said Humiston.
Ideas generated during the forum will be used to inform the work of the Central Valley AgPLUS Food and Beverage Manufacturing Consortium, which hosted the AgPlus Funders Forum. The information will also be used by Humiston to update the 2012 Access to Capital Report by California Financial Opportunities Roundtable (CalFOR). The report highlights financial needs for businesses in California, reviews financial tools and capital sources and provides policy recommendations. Humiston will also convey the outcomes to the California Economic Summit.
The AgPlus Funders Forum was sponsored by Chase Bank, Valley Vision, the Center for Economic Development, First Northern Bank, the Federal Reserve Bank of San Francisco, Employment Training Panel, Blue Tech Valley, Fresno State Community and Economic Development and UC ANR.
- Author: CNN Money by Tanzina Vega
According to data from the Economic Policy Institute, only 26% of Hispanic families had savings in a retirement plan like a 401(k) or IRA, in 2013. Meanwhile, 65% of white families and 41% of black families and 58% of Asian families and those of other races had savings in such accounts.
Part of the reason for this gap is that many Hispanics, particularly those that work in low wage jobs, don't have access to retirement plans, said Monique Morrissey, an economist at the EPI who analyzed data from the Federal Reserve for the report.
Immigrant Hispanic workers, for example, are often more likely to be undocumented and therefore working off the books or work in low wage jobs that don't offer access to retirement accounts, Morrissey said. Native-born Hispanics, however, are more likely to have access to and participate in retirement accounts at rates closer to those of African-Americans, Morrissey said.
"Most whites are not doing well, blacks and Hispanics are doing terrible and immigrant Hispanics are doing the worst of all when it comes to retirement savings," Morrissey said.
Low rates of participation also contribute to low rates of retirement savings. In 2013, white workers between the ages of 32 and 61 had an average of $125,000 in retirement savings compared to $26,500 for blacks and $16,800 for Hispanics. For Asians and those of other races or ethnicities, the average retirement savings in 2013 was $100,000.
"[The] savings in these accounts magnify income inequality," Morrissey said.
The retirement savings gap also closely mirrors the overall racial wealth gap in America. Wealth, or net worth, is the value of assets including your home, retirement savings and income minus the debt owed against those assets. According to federal data, the median wealth for white families in 2013 was around $141,900, compared to Hispanics at about $13,700 and blacks at about $11,000.
For Morrissey, the trends are troubling. Initially, plans like 401(k)s and IRAs supplemented pension accounts or provided an alternative for employees who did not have access to a pension, Morrissey said. But since the 1990s, they have become the main source of retirement savings for many private sector workers. And since many employers have begun matching less of their employees' contributions, more of the savings burden has been placed on employees.
Access is another issue. Hispanics and blacks often work for small businesses and in low-wage, non-union jobs that offer few retirement savings options, Morrissey said. The overall number of public sector jobs with secure pensions, which were often considered a clear path into the middle class, has also been on the decline.
That has only served to widen the gap.
At least two-thirds of all of the wealth in 401(k) accounts is concentrated among the top 20% of earners, Morrissey said. Those who get paid more "can afford to put in more, they can afford to invest in higher return assets, they are more likely to have more generous employee matches," she said.
As a result, many Hispanics rely on Social Security as their sole financial support in retirement, a move that experts say puts many workers in a precarious situation.
Since Hispanics are more likely to live longer than blacks and whites, they are also more likely to work longer into their old age, Morrissey said. Some Hispanic workers "are going to work longer, and they are going to rely on their families and they are going to be poor," she said.
Undocumented workers who may not be using their own Social Security card to qualify for employment and for tax purposes will also see little, if any, of the Social Security benefits they accrue over the years, Morrissey said.
"We have that huge swath of the demographic that is underprepared and underfunded and Social Security is not going to be enough," said Ramona Ortega, founder of Mi Dinero Mi Futuro (My Money My Future), a financial technology company that helps Hispanic millennials manage their money.
When they do have access to employer retirement plans, Hispanic workers generally don't contribute as much to those plans "either because they can't afford it or because they don't understand it," Ortega said. Hispanics are also less likely to buy life insurance and more likely to borrow against their 401(k), she added.
They are also more likely to rely on family for financial support. While that provides a certain amount of security and stability, it can also come at a cost for younger family members. That's why millennial Hispanics are Ortega's focus. "We don't think about financial planning because we are in survival mode," Ortega said.
Young Hispanics need to start saving for retirement much earlier, Ortega said. They also need to think about estate planning, buying insurance and watching their credit. Doing so, she said, can help prevent "a financial emergency from becoming a financial crisis."
Source: Published originally on CNN Money as The retirement crisis facing Hispanics by Tanzina Vega, March 2, 2016.
- Author: National Council of La Raza
Latinos continue to be among the most unbanked ethnic minorities in the United States. The report highlights the challenges confronted by the unemployed, differences in financial engagement by citizenship status and the use of bank technology by participants.
The report found an important link between naturalization (citizenship) and increased usage of financial systems—noncitizen Latinos were less likely to engage in banking practices. The report also found that 73 percent of the participants managed to put away some savings despite the down economy and that good customer service was paramount to deciding where to bank.
“As the Senate debates how to overhaul our nation’s immigration system, it is interesting to note the link between immigration status and engagement in our financial institutions,” stated Janet Murguía, President and CEO of NCLR.
“Many eligible immigrants have been unable to naturalize because of the cost prohibitive fees, while others may be struggling with finding a way to fully legalize their status under current law. There is no doubt that Hispanics are an increasingly critical consumer base, particularly in times of economic recovery when their full participation helps to stimulate the economy through purchases and savings. The more engaged and fully participating in our financial services they are, the more they and the nation benefit.”
The survey also delved into the use of technology for banking purposes, finding that younger Latinos were more likely to use mobile banking technology when compared to older Latinos. Those who had a bank account were more likely to have access to the Internet than Latinos without a bank account and were more likely to have performed a financial transaction using this medium. Those who demonstrated reluctance to using the internet for this purpose were primarily concerned with the security of personal information.
The report details a body of recommendations to increase Latino financial engagement, including expanding citizenship and economic integration, increasing account ownership through goal-based outreach and product development, promotion of personal savings and bridging the tech divide with trusted partners that can help assuage fears of privacy violations.
“Bringing Latinos into the practice of engaging financial institutions to create savings, make purchases and manage their personal finances will be of huge benefit not just to their long-term success, but to the nation’s short- and long-term economic growth and stability. We are encouraged that through building the right partnerships and engaging in purposeful outreach and educational efforts, we will be able to effectively reach the underserved Latino community,” concluded Murguía.
Source: Originally published on National Council of La Raza as Latino Financial Access and Inclusion in California, June 6, 2013