US Fed News
June 29, 2010
New York City's 600,000-plus Dominicans are more likely than Latinos nationwide to have accounts at a bank or credit union. However, they continue to rely heavily on alternative financial institutions such as check-cashing businesses, and use costly financial instruments such as money orders and tax refund anticipation loans because the mainstream financial institutions are not meeting their needs.
Those were among the key findings of a study by the CUNY Dominican Studies Institute (CUNY-DSI) of financial literacy and behavior in New York's Dominican community. The aim of the study, in which 613 persons of Dominican heritage participated, was to enhance understanding of the fiscal habits and financial literacy of Dominicans in the New York City area and to produce data that can be used to compare the experiences of Dominicans with other Latino communities in the United States. In addition, this study seeks to inform policy makers and community leaders in designing approaches that will effectively address financial asset building and management within the Dominican community.
More than four out of five respondents - 82 percent - said they had accounts at banks or credit unions. This compares favorably with data from the Pew Hispanic Center indicating that 65 percent of Latinos nationwide have bank or credit union accounts. However, a surprisingly high 25 percent of respondents reported using check-cashing businesses, money orders and/or tax refund anticipation loans.
"The common wisdom is that low-income communities use alternative financial institutions and tools because they don't have checking or savings accounts at mainstream banks or credit unions," said Dr. Ramona Hernandez, director of CUNY-DSI and lead investigator for the report. "Our study of the Dominicans in New York City reveals that even when they do have such accounts, low-income and working-poor customers of those banks are not accessing all the services they provide - perhaps because their experience at the banks is a negative one.
"The most significant revelation, however, is that there is a tremendous need for financial literacy education in these communities, and mainstream financial institutions are not providing it."
Among the other key findings:
* Study respondents expressed strong interest in financial literacy topics, especially home ownership, 26.2 percent, and planning for retirement, 13.8 percent. The study reveals that Dominicans in New York City want access to information about asset-building opportunities and more prudent personal financial management and planning.
* More than 82 percent of respondents say that they have a bank account in the United States. The majority of those who don't, however, have accounts in the Dominican Republic. Nearly 17 percent of all respondents stated that they have accounts in the Dominican Republic. Lack of documentation or negative experiences at U.S. banks were the most cited reasons for not having U.S. accounts.
* More than 35 percent of respondents qualified for the Earned Income Tax Credit (EITC) and received tax refunds of more than $5,000. These significant sums underscore the importance of leveraging the tax-filing process as an opportunity to improve financial behavior and kick-start savings opportunities.
* Few respondents were aware of important savings vehicles such as Individual Development Accounts (IDAs), which provide some degree of matching funds for savings by low-income individuals, and New York City's innovative $aveNYC program, which encourages low-income individuals to put their tax refunds into savings by contributing 50C for every dollar saved.
* The vast majority of respondents opted to complete the survey in Spanish, highlighting the extent to which the language barrier may contribute to the low level of financial literacy among Dominicans in New York. This finding was in sharp contrast to a similar study in southwestern border counties, where more than four-in-five participants selected the English language survey.
The study was made possible by the cooperation of three tax preparation sites in the heart of the city's largest concentration of Dominicans: Northern Manhattan Improvement Corporation, led by Executive Director Barbara Lowry; Nunez Tax Service, led by founder and director Hector Nunez, and Alvarez Tax Franchise, led by President and CEO Rafael Alvarez. In February and March 2009, the agencies allowed CUNY DSI researchers to distribute and collect the study questionnaire and then, with the consent of the participants, provided researchers with information relating to their income and tax filings.
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