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LINKING LENDERS AND COMMUNITIES SPRING 2011

P U BL I S H E D Q UA RT E R LY
BY T H E C O M MU N I T Y
DEVELOPMENT

BRIDGES
D E PA RTM E N T OF
T H E F E D E R A L R E S E RV E
B A N K O F S T. L O U I S

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w w w. s t lo ui sfed . or g
INDEX

Campus Microfinance Funds: Foreclosures in the


Insourcing the
Connecting Campuses to Eighth District: On
Outsourced
Communities the Rise Again?

All I Really Need To Know About Microfinance


I Learned in Bangladesh
By Daniel P. Davis sources of traditional financing. microfinance has served as a firsthand the country’s develop-
So I welcomed the opportunity catalyst to alleviate poverty and ment achievements and was

S
ince 2006, when Dr. to travel with colleagues from nurture social entrepreneurship prepared to bring back a few key
Muhammad Yunus and across the U.S. to examine how in Bangladesh. I hoped to witness takeaways from the experience
Grameen Bank received to assist in my work here at home.
the Nobel Peace Prize for their What I was not prepared for,
efforts to create economic and however, was the overarching
social development by providing discovery that all I really need to
banking services to the poorest know about microfinance would
citizens of Bangladesh, I have be learned in Bangladesh.
watched unfold—with great
curiosity—the story of microfi- Know the People You Serve
nance in the world’s most densely Grameen Bank is headquar-
populated nation. But I have been tered in Dhaka and was the first
even more interested to uncover modern microfinance institu-
how microfinance in Bangladesh tion in the world. In Bengali,
may influence economic develop- “grameen” means “village,” and
ment in our own nation. It seems the bank was designed with an
that, especially in a time of limited intentional focus to continually
financing for economic develop- understand the people the organi-
ment initiatives, it may be a good zation serves. This principle is
idea to look at models outside at the heart of the work being
America to understand how done by Grameen. I had the
development has taken place
and even prospered with few Rural microloan borrowers gather for a weekly group meeting. continued on Page 2

THE FEDERAL RESERVE BANK OF S T. LOUIS: CENTRAL TO AMERICA’S ECONOMY ™


Bangladesh these rates.
• Yellow Zone – Loans include
In this Issue...
continued from Page 1
the operational cost plus 10 to
opportunity to meet with Dr. 15 percent interest for over-
Muhammad Yunus, the bank’s sight. These are acceptable,
By Allen North
founder; he explained that “the but not preferred, rates for
people should not come to the microfinance institutions.
Community development professionals have a
bank, but rather the bank • Red Zone – Loans include
history of being at the forefront of important social
should go to the people.” With the operational cost plus more
initiatives, fostering engagement to bring more value
26,000 employees in 80,000 than 15 percent interest for
to the work to which they are committed. As we
villages serving over 8.1 million oversight. Any microfinance
welcome spring, this issue of Bridges shines light on
people, Grameen has made it a institution expecting custom-
some of these initiatives that are sure to impact the
priority to extend its services ers to pay interest rates above
lives of many.
throughout the country. It would this percentage should be
We begin with a couple of articles about microfinance. This broad
be easy for such a large organi- considered predatory.
category includes all the ways to provide financial services to low-income
zation to lose sight of its mission.
clients who don’t have traditional methods of access to banking products
Yet when I visited a branch office Encourage Entrepreneurship and
and services.
in a rural village, the manager Social Business
Daniel Davis writes about his trip from St. Louis to Bangladesh (a distance
noted, “We can only help our The first loans offered by
of more than 8,000 miles—or 13,000 kilometers—and seemingly a step
customers if we understand the Grameen were microenterprise
back in time) and the work begun by Nobel Prize winner Muhammad Yunus,
reality they face.” loans and they continue to be a
the father of modern microfinance. As Daniel’s title suggests, he learned
It was this understanding of a driver of the organization’s
a lot about microfinance in this very small country so far away from western
population in need that influenced services. The bank’s average
civilization. And he’s happy to share some of what he learned here.
Dr. Yunus to begin the Struggling microenterprise loan is $309. I
Lyn Haralson has a related story about college students starting
Members Program in 2003 to had the opportunity to meet
microfinance operations on campuses across the nation. These smart
extend loans to the poorest of face-to-face with some rural
kids have smart ideas, and they also seem to have a strong desire,
the poor, the beggars of society. women—they make up the
determination and commitment to help others.
With a philosophy that credit majority of borrowers and their
Then we move on to Drew Pack’s story about immigrant entrepreneur-
should be a human right, stories are compelling. Some
ship. In the 19th century, Ralph Waldo Emerson said, “America is another
Grameen Bank offers no-interest, used their loans to start corner
name for opportunity,” and it seems that is still true today. Immigrants
collateral-free loans (averaging markets, some invested in
have consistently found America to be a place that encourages creativity
$9 per loan) to the poorest livestock, two purchased sewing
and the entrepreneurial spirit. And the role of highly skilled immigrants
citizens of Bangladesh. machines, one opened a vehicle
and the economic contributions they make to this country are of growing
repair shop, and another started
importance for regional economies and struggling cities.
Traffic Light Interest Rates a neighborhood bio-gas plant.
Bill Emmons rounds out our feature articles with an update on
Acceptable interest rates should Regardless of the scope of their
foreclosure trends in our District—a very interesting and sobering analysis.
be a trademark for development. loan, each borrower is encour-
I encourage you to explore this issue, and I’d also like to encourage you
Dr. Yunus said, “The goal is to aged to use their financing to
to attend our spring conference, Exploring Innovation: A Conference on
help poor people, not to become create jobs for their village. Dr.
Community Development Finance. It’s not too late; if you haven’t
loan sharks.” Using the illustration Yunus explained, “We encour-
registered, do it now at 2011.exploringinnovation.org.
of a traffic light, he described age them to dream to be a job
three levels of interest rates: giver rather than a job seeker.”
• Green Zone – Loans include As a result, villages begin to
Allen North is vice president in the Federal Reserve Bank of St. Louis’ Banking
the operational cost plus less thrive with opportunity.
Supervision and Regulation Division, with responsibilities for Consumer and
than 10 percent interest for In Bangladesh, there is a
Community Affairs and Supervisory Policy and Risk Analysis.
oversight. Microfinance insti- movement toward social business.
tutions should strive to offer Dr. Yunus noted that he has

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always had a philosophy that households to increase their significant economic development reach of microfinance through-
businesses can be started to economic sustainability. Many over the last 30 years, substan- out the nation, developing a
solve problems, and Grameen Grameen borrowers have more tially decreasing its poverty rate. robust environment for eco-
encourages borrowers to money in their savings account Every Bengali dignitary I nomic development.
consider this as they begin their than they owe on their loans. encountered emphasized the Grameen brought their model
ventures. There are four main The borrowers I met empha- success of microfinance as one to the U.S. in 2008 under the
principles to developing a social sized that they struggled to make of two key factors that has led to auspices of Grameen America;
business: 1) it must be sustain- ends meet, let alone save money, widespread development (the currently, branches are operat-
able; 2) it must be able to cover before they received their initial other is the booming garment ing in New York and Iowa, with
operational costs; 3) it must make loan from Grameen. Many said industry). Grameen Bank has additional branches pending in
a small profit so that expansion that the receipt of that loan been a leader in microfinance California, Indiana, North
can continue to occur; and 4) an marked a turning point, allowing initiatives in Bangladesh; a Carolina and Washington, D.C.
investor can only profit up to the economic prosperity to enter portion of the success of the While it will be exciting to
amount of the initial investment. their lives. industry can be attributed to the watch the story of Grameen
Dr. Yunus said, “Profit-making complementary activities of America unfold, there is plenty
business can make me rich, Expansion to the U.S. other organizations (e.g., BRAC of room at the table for other
while social business can make Bangladesh has experienced and ASA) helping to spread the microfinance institutions to
a difference in the world.” address our climbing poverty
rate1 by offering individuals the
The Importance of Savings and opportunity to start their own
Investing in the Next Generation businesses. The U.S. certainly
As a prerequisite for receiving has a number of esteemed
a loan, Grameen’s borrowers are organizations promoting
asked to make 16 decisions, microfinance, but the field will
encompassing everything from need to expand significantly if it
choosing to drink only clean is to be used as a tool to rebuild
water to looking after the health our local economies. As that
of family members to making happens, organizations will be
repairs to their own homes. wise to keep in mind lessons
There is an intentional focus learned in Bangladesh.
on the next generation. Educa-
tion is a private privilege in Daniel P. Davis is a community
Bangladesh and there is no development specialist at the
public school system. However, Federal Reserve Bank of St. Louis.
every Grameen borrower that I He visited Dhaka, Bangladesh,
encountered who had school-aged in December 2010 as a chosen
children had them enrolled in participant in the 17th Biennial
primary school. And the educa- International Consortium on
tion loans offered by Grameen Social Development Symposium.
currently allow over 50,000 View a PDF presentation of Dan-
students (children of Grameen iel’s Bengali experience at www.
borrowers) to attend college in stlouisfed.org/publications/br/.
Bangladesh.
Dr. Yunus noted that an REFERENCE

important aspect of investing in 1 U.S. Census Bureau. (2010). Income,


poverty, and health insurance cover-
the future is the existence of a The home and family of a Grameen borrower in rural Bangladesh, crouched beside the age in the United States: 2010. Wash-
savings account that allows Bay of Bengal between India and Burma. ington, D.C.: U.S. Census Bureau.

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Campus Microfinance Funds: are small loans to very small
businesses. The client wants the
Connecting Campuses to Communities loan registered by the business
to build the organization’s credit
rather than a personal loan.
By Lyn Haralson students with a desire to help to $5,000; one-on-one strategy Intersect has served over three
others. While their models consulting; QuickBooks train- dozen clients, including:

T
he concept of microfinance vary, FIELD identified that the ing; business tax preparation; • $2,500 for a hot dog vendor
has been around in various most common offerings include vending events that net $1,000 to buy a second cart,
forms for centuries—as training and technical assistance, per hour; and graphic design. • a loan to purchase a used
“chit funds” in India, “tandas” in microenterprise loans and, in The Fund relies largely on stu- cargo van for an insulation
Mexico and “tontines” in West some cases, personal small- dent staff members to administer business, and
Africa. It has also taken a more dollar loans. Luz Gomez, a its business services, which • $700 for a commercial vacuum
formal structure as credit unions researcher on the study, reports keeps the services affordable. so a woman providing residen-
and savings and loans. Modern- that these organizations get their Rohan Mathew, co-founder tial cleaning could expand to
day microfinance is credited to funding from private individu- and executive director of The commercial buildings.
Dr. Muhammad Yunus, a Nobel als, small university grants, and Intersect Fund, provides some
Prize-winning economist from local banks and foundations. insight into the creation of a stu- The Fund’s goal in providing
Bangladesh. In 1976, Dr. Yunus these loans is to increase a per-
provided an interest-free loan of While their models vary … the most son’s income or earning capac-
$27 to a local stool-maker and ity after the loan is paid back.
other villagers, allowing them to common offerings include training Gretchen Campbell was a part-
purchase needed materials time seamstress working out of
without using a money-lender and technical assistance, microenter- her home when she received a
who charged exorbitant interest. loan from Intersect and attended
For more on Dr. Yunus and his prise loans and, in some cases, Entrepreneur University. Now
model, see Daniel Davis’ article she runs De RiChéek, a fashion
in this issue. personal small-dollar loans. business. “The loan and assis-
Microfinance has been the tance provided by The Intersect
buzz word for international The Intersect Fund dent-led MFI. “When you have Fund took my business to a
poverty alleviation for the past One of the most successful a program that provides funds to whole new level. It even helped
decade, and various platforms of the college-based MFIs, The help low-income people achieve me raise my credit score,” she
for this type of investment have Intersect Fund is a nonprofit a dream, they are skeptical. It says. For an in-depth look
been developed. In this article, organization offering services was important for the Fund to at Campbell’s story, visit
we focus on an emerging group to low-income entrepreneurs in partner with existing commu- www.stlouisfed.org/publications/br/.
of microfinance funds operated New Brunswick, N.J. Founded nity organizations that already To date, banks have provided
on college campuses. by students from Rutgers Uni- had the trust of the population Intersect with technical support
In a 2009 study for the versity in 2008 and launched we were trying to serve.” So and grants ranging from $5,000
Charles Steward Mott Founda- in a church basement with a they chose Elijah’s Promise, to $10,000. In the future, the
tion, the Microenterprise Fund $1,000 bank grant, the organiza- a soup kitchen and culinary Fund hopes to secure capital
for Innovation, Effectiveness, tion takes a long-term approach, school, issuing their first loan in from banks as well. Magyar
Learning and Dissemination helping entrepreneurs navigate July 2009. To secure additional Bank was the first corporate
(FIELD) at the Aspen Institute the path to the creation of a clients, students work with local sponsor of The Intersect Fund
identified 11 such domesti- successful enterprise. Inter- community organizations. The and has provided annual grants
cally focused microfinance sect’s services include Entre- Fund makes loans predomi- to the organization. Al Dolnick,
organizations (MFIs) run by preneur University, a business nantly to existing businesses vice president and commercial
young, highly motivated college boot camp; loans from $500 because, Mathew explains, these loan officer at Magyar, serves as

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a trustee on Intersect’s board and Measuring Performance important pieces of information in its assessment area. A CRA
as a member of the loan com- FIELD conducts annual for bankers. officer should be able to demon-
mittee. He also helped develop fieldwide surveys through In addition to other benefits strate that the bank understands
an initial process to review loan its MicroTest data collection that banks can receive from the needs in its assessment area,
applications and now provides program. According to Mott investing in MFIs, participa- a level of understanding as to
continuous guidance and researcher Luz Gomez, FIELD tion may also help them meet how those needs are being met,
leadership. He hopes to serve data collection is critical to pro- the requirements of the CRA. and where unmet needs still
as a guest speaker in one of the viding evidence of the sustain- Activities that could receive posi- exist. To the extent the bank
classes. Explaining why he got ability of these organizations; tive consideration include: cannot meet the area’s needs
involved with the Fund, Dolnick FIELD hopes to get the campus • providing a grant to the with current product offerings
says, “I liked the mission from MFIs successfully using MicroTest organization; in compliance with safety and
both a professional and personal in the near future. The overall • providing a line of credit or soundness, it should be able to
perspective. Professionally, I’m health of the entire MFI industry other lending facility (consid- demonstrate partnerships with
a commercial lender. Personally, is monitored by the Opportunity ered under the lending test); community-based organizations
I like to volunteer for organiza- Finance Network and published • community development and other entities that can help
tions that have a direct impact in the organization’s quarterly, service consideration, includ- with compliance.
on people who are looking to Market Conditions Survey. ing serving on the organiza-
improve their lives.” Conclusion
Magyar’s experience with Similar to CDFIs and loan pools, these While the microfinance indus-
Intersect is not dissimilar to that try has been around for years,
of other banks and nonprofits. entities represent opportunities for campus-based MFIs are fairly
When a bank has an established new on the scene. With the
relationship with a nonprofit and banks to reach areas of their markets appropriate support, this indus-
is intimately familiar with the try niche could have tremendous
organization’s operations, the previously untapped by their services. impact and break down the
bank is better able to see oppor- barriers that often exist between
tunities for investment. Getting the Most out of Bank tion’s board, providing technical college campuses and the com-
Partnerships assistance or sitting on a loan munities in which they exist.
The Campus Microfinance Alliance MFIs need to know all the review committee; and FIELD and the Aspen Institute
In 2009 Intersect hosted like- possible ways that banks invest- • making an equity investment are helping to strengthen this
minded students from eight ing in their organization could (including equity equivalent, or initiative by sponsoring sum-
schools in an attempt to share best receive favorable consideration EQ2, investments) (considered merlong internships at MFIs, the
practices and initiate collabora- under the Community Rein- under the investment test). goal of which is to strengthen
tions. From this gathering, the vestment Act (CRA), including underwriting technical assis-
Campus Microfinance Alliance was the types of data needed to An investment in a fund that tance, outcomes and impact, and
created. Co-founded by students substantiate the appropriate- subsequently loans those funds build industry leaders. Similar
from Rutgers (The Intersect Fund), ness of their investment for CRA to LMI borrowers has the poten- to CDFIs and loan pools, these
Yale (Elmseed Enterprise Fund) consideration. The mission tial for creating a “double dip” entities represent opportunities
and Brown (Capital Good Fund), of the organization—to serve scenario, where the investment is for banks to reach areas of their
the Alliance provides seed grants low- and moderate-income considered under the investment markets previously untapped by
and technical assistance to individuals—may not be enough test and the bank’s share of the their services.
emerging student-run micro- on its own to maximize invest- subsequent loan is considered
lenders. According to Intersect’s ment potential. Income data on under the lending test.
Mathew, chair and executive borrowers served, geography CRA examiners look for ways Lyn Haralson is a community
committee member, 12 funds in which the borrower operates that the bank has leveraged its affairs specialist at the Little Rock
have provided training and/or a the business and, of course, the community development part- Branch of the Federal Reserve
loan to domestic clients. health of the loan portfolio are ners to address the credit needs Bank of St. Louis.

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Insourcing the Outsourced more likely to be risk takers.
• Immigrants may face discrim-
ination and other barriers in
the workplace and may
By Andrew A. Pack believe that starting their
own business offers them the

A
s the U.S. works to move best chance for success.
the economy forward and • Organizations may offer
the unemployment figures immigrants low wages with
lower, much attention and little or no advancement
resources have been directed at opportunities.
small businesses, which account • Without better options,
for the majority of new jobs. But immigrants may start
within the small business sector businesses to supplement
there are many different types of their incomes.
businesses and entrepreneurs who • Immigrants may see a new
may require different approaches business opportunity where
to help grow their companies. the needs within their ethnic
One of the sectors with some of population are not being met.
the greatest potential for small • The tradition of higher levels
©Copyright iStockphoto/Juanmonino
business-related job creation of entrepreneurs among
and economic growth is among Immigrants are almost 30 percent immigrants may be a source
America’s immigrant population. of inspiration for other
According to the Small Business more likely to start a new business immigrants, propelling them
Administration (SBA), immigrants to open their own business.
are almost 30 percent more likely than native citizens living in the U.S.
to start a new business than Effectively reaching out to
native citizens living in the U.S. engineering firms in the U.S. do not come to America for the current émigré populations and
Additionally, immigrants make up For example, between 1995 and sole purpose of starting a business. attracting new immigrants could
12.5 percent of all U.S. business 2005 a quarter of all technology According to a 2007 report, only help many American cities reverse
owners and accounted for approxi- and engineering firms were 1.6 percent of immigrants in the population declines, recoup a
mately $67 billion of the $577 started with at least one foreign- technology sector enter the U.S. lost tax base, and decrease
billion of all U.S. business income born key founder; these tech with such a goal. Most come to commercial and residential
in the 2000 census.1 Cities are companies employed nearly this country for education (52.3 vacancy rates. Currently, the
taking notice, with community 450,000 workers in 2005. percent) or a job (39.8 percent).3 areas that benefit the most from
and economic development A high level of entrepreneur- So if immigrants are not these entrepreneurs are states
professionals and foundations ship among America’s immi- coming to America for the such as California, Florida,
looking at ways to better tap this grant population is not a new specific purpose of starting a Hawaii, New York and Texas.1
market in efforts to attract “a new phenomenon; in fact, every U.S. business, what explains their However, there is some evidence
wave of urban entrepreneurs, census since 1880 has shown higher levels of entrepreneurship? that more immigrant entrepre-
investors and consumers,” counter that immigrants are more likely There is no single explanation neurs are looking outside of
local depopulation and stabilize to own a business than native for this phenomenon throughout states with traditionally high
the local housing market.2 citizens.3 This is not unique to the world, but it is almost levels of immigrants to places
Foreign-born individuals have the U.S.; it is also true in the certainly a combination of many where real estate and other
a higher rate of entrepreneurship U.K., Canada and Australia.1 factors, including the following4: services are cheaper.4 The seven
than U.S.-born individuals, High levels of entrepreneurship • People willing to relocate to states that comprise the Eighth
especially in technology and notwithstanding, most immigrants another country may be Federal Reserve District account

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for only 7.6 percent of total
immigrant entrepreneurs in the
Foreign-born individuals have a higher CALENDAR
U.S.; much more could be done
to attract these proprietors to rate of entrepreneurship than U.S.-born APRIL
areas currently less represented by
immigrant-owned businesses.1 individuals, especially in technology 28-29
The Changing Landscape of Community
To achieve this goal and reap
the benefits of immigrant and engineering firms in the U.S. Development: Linking Research with
Policy and Practice in Low-Income
entrepreneurs joining their Communities—Arlington, Va.
community, organizations and in one day, leaving Microsoft important that America contin- Sponsor: Federal Reserve System
cities need to help these unable to hire one-third of the ues to attract the best talent www.frbsf.org/community/conferences/
2011ResearchConference
populations break down barriers foreign-born workers they from around the world to fuel
that are specific to immigrant needed. The ability to capitalize innovation and new enterprises,
business owners and that may on importing a talented work- and to fill labor shortages. Not
inhibit their ability to grow their force from other countries of the only are we revitalizing commu- MAY
company, including4: world could help to create more nities and creating new busi-
• language and cultural barriers, jobs and businesses within the nesses and jobs, we are also 4
• lack of understanding of U.S. Gates said, “If we increase creating the next generation Americas Center Consumer Banking
local regulations, the number of H-1B visas that of Americans. Conference: Strengthening the Financial
Safety Net in Emerging Markets—Miami, Fla.
• limited financial literacy and/ are available to U.S. companies,
Sponsor: Federal Reserve Bank of Atlanta
or no credit history, employment of U.S. nationals www.frbatlanta.org/news/conferences/
• being disconnected from would likely grow as well. For Andrew A. Pack is a community 11consumer_banking.cfm
many of the local community instance, Microsoft has found development specialist at the
and economic development that for every H-1B hire we Little Rock Branch of the Federal 9-11
organizations in communi- make, we add on average four Reserve Bank of St. Louis. Exploring Innovation: A Conference
ties, and additional employees to support on Community Development Finance—
St. Louis, Mo.
• inability of organizations to them in various capacities.”5 REFERENCES Sponsors: Federal Reserve Banks of St. Louis,
effectively engage immigrant Cities, states and America as a 1 Fairlie, Robert W. Estimating the Con- Atlanta, Dallas and Minneapolis
populations. whole benefit economically and tribution of Immigrant Business Owners http://2011.exploringinnovation.org
to the U.S. Economy. Small Business
culturally from immigrant Association, Office of Advocacy, 2008.
Many highly skilled immi- entrepreneurs. The late Senator 2 Herman, Richard. Will a Dying City
grants face difficulties in their Edward Kennedy explained,
attempt to enter the U.S. to start “Immigrant families have
Finally Turn to Immigrants?
newgeography.com, March 19, 2010. JUNE
a job or open a business. integrated themselves into our 3 Wadhwa, Vivek, and Rissing, Ben,
22-25
et al. Education, Entrepreneurship and
Current debate has centered communities, establishing deep Immigration: America’s New Immigrant National Community Development
around possible changes to the roots. Whenever they have Entrepreneurs, Part II. Duke University Association 42nd Annual Conference—
EB-5 program to encourage settled, they have made lasting School of Engineering, UC Berkeley
School of Information, Ewing Marion Cincinnati, Ohio
more immigrant entrepreneurs contributions to the economic Kauffman Foundation, June 11, 2007. www.ncdaonline.org
to invest in America, and to the vitality and diversity of our com- 4 Bowles, Jonathan, and Colton, Tara.
H-1B program to help the munities and our nation. Our A World of Opportunity. Center for an
Urban Future, February 2007.
United States capture more of economy depends on these
the global talent of immigrants hard-working, taxpaying 5 University of Dayton, Webpage of JULY
S. Clara Kim, Ph.D. Immigration-related
with specialized skills in workers. They have assisted articles. http://academic.udayton.edu/ 12-14
demand in this country. America in its economic boom.”6 clarakim/101-articles/10-race/immi-
Intro Energy Finance WebCourse—Online
gration-related.htm.
Referring to the H-1B program The competition among Sponsor: Council of Development
6 Delaware Immigration Lawyer Blog.
in 2008, Bill Gates noted that all countries for global talent will http://www.deimmigration.com/?p=4, Finance Agencies
65,000 H-1B visas were granted continue to be fierce. It is July 2008. www.cdfa.net

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Foreclosures in the Eighth District:
On the Rise Again?
By William R. Emmons tember 2010, the Eighth Illinois
Indiana
District share moved up

T
he share of Eighth District to 5.7 percent in December
mortgages in foreclosure 2010, remaining at that level Missouri
or seriously delinquent through February 2011. The
Kentucky
but not yet in foreclosure— national rate also ticked up in
defined as a borrower having January and February 2011 to
missed at least three consecu- 7.6 percent.
tive mortgage payments— It’s possible that the recent
peaked in January 2010 at 6.5 reversals of the downward Tennessee
percent (see chart). The trends are merely a blip—a
comparable national figure temporary interruption of a
Arkansas
peaked a month later at 8.6 continuing downward trend
Share of Mortgages
percent. The share of serious due to unusual circum- At Least 90 Days Delinquent or in
delinquencies and foreclosures stances or data-collection Foreclosure, February 2011
in the Eighth District and problems that will disappear Insufficient Data
nationwide then declined for soon. However, there are 0% – 5%
several months, raising the several reasons to believe that 5% – 10%
possibility of fewer households serious mortgage distress will Mississippi
10% – 15%
losing their homes during 2011. continue through 2011. from July 15% – up
Unfortunately, recent data First, trends in the data have, 2010 to Source: Lender Processing Services (LPS).
suggest the inventory of in- in the past, been very persis- Febru-
foreclosure and near-foreclosure tent. The share of mortgages ary 2011, areas show the highest con-
mortgages may be heading in or near foreclosure in the so it’s likely that centration of mortgages in or
up again. After hitting a low Eighth District has increased pattern will continue. near foreclosure.
point of 5.5 percent in Sep- or stayed the same each month Second, and more The most important factors
importantly, the underlying affecting households’ ability
Share of Mortgages fundamentals appear to be to service their mortgages and
In Foreclosure or at Least 90 Days Delinquent But Not in Foreclosure
weakening. The unemployment retain their homes are job and
11.0
rate in the counties that con- income growth along with
10.0
9.0
stitute the Eighth District has stable or rising house prices. If
8.0
drifted up a bit since early 2010, the nationwide economic recov-
7.0 while house prices in many ery gains traction this year, as
parts of the District remain very is widely expected, it may be
Percent

6.0
5.0 soft (flat or declining). possible for Eighth District fore-
4.0 The areas hardest hit by seri- closure trends to turn positive
3.0 ous mortgage delinquencies are again before the year is out.
Eighth District (90+ days/Foreclosed)
2.0
U.S. (90+ days/Foreclosed)
the Eighth District portions of
1.0 Mississippi, Tennessee, Indiana William R. Emmons is assistant
0.0 and Illinois (see map). Among vice president of Executive Special
Jan. 2006 Jan. 2007 Jan. 2008 Jan. 2009 Jan. 2010 Jan. 2011
our branch cities, the Memphis Projects at the Federal Reserve
Source: Lender Processing Services (LPS). Data are monthly through February 2011. and St. Louis metropolitan Bank of St. Louis.

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Boshara, Pack Join Community Development New CDAC Board
Members Announced

R
ay Boshara joined the at the Little Rock Branch
St. Louis Fed as a senior as a community development The St. Louis Fed announced the mem-
advisor in April 2011. specialist, providing advisory bers of the 2011 Community Development
In that capacity, he will work services to local community Advisory Council (CDAC). These members
across departments at the Fed, organizations throughout are experts in community and economic
with other regional banks, and Arkansas. development and financial education, and
with the Board of Governors Before joining the Fed, they complement the information developed
through outreach by the District’s community
on a broad range of policy Pack worked to promote
development staff. Current appointees are:
and research issues affecting the economic development ••Joe W. Barker, executive director, Southwest
low-income families and efforts of Pensacola, Florida, Tennessee Development District, Jackson, Tenn.
Ray Boshara Andrew Pack
communities throughout the as an intern at the Pensacola ••Rev. Adrian Brooks, pastor, Memorial Bap-
Eighth District and nationwide. research papers with academics Bay Area Chamber of Commerce tist Church; founder, Memorial Community
Development Corporation, Evansville, Ind.
After living in Washington, D.C., in the asset-building and financial during the summers of 2007 and
••Brian Dabson, president and CEO, Rural
for 20 years, Boshara and his family literacy fields. His book, The Next 2008. He also assisted in the Policy Research Institute, University of Mis-
relocated to St. Louis in the fall of Progressive Era, co-authored with establishment of iTenWired souri, Columbia, Mo.
2009 after his wife, Lora Iannotti, New America Senior Fellow (www.itenwired.com), a regional ••George Hartsfield, community volunteer,
accepted a faculty position in Phillip Longman, was published entrepreneurship network, and Jefferson City, Mo.
••Trinita Logue, president and CEO, IFF (for-
international public health at in April 2009. He currently a business incubator called
merly Illinois Facilities Fund), Chicago
Washington University’s new serves on many advisory boards, Gulf Coast Center for Inno- ••Edgardo Mansilla, executive director, Ameri-
Institute for Public Health. including at the Committee on vation and Entrepreneurship cana Community Center, Louisville, Ky.
Prior to joining the Fed, Boshara Domestic Justice and Human (www.gulfcoastinnovation.com), ••Paulette Meikle, assistant professor, Soci-
was vice president of the New Development of the U.S. Confer- helping business owners along ology and Community Development, Delta
State University, Cleveland, Miss.
America Foundation, where he ence of Catholic Bishops, and the the Gulf Coast. And he worked
••Sara Oliver, vice president of housing,
also founded and directed the Economic Mobility Project of the at Auburn University as a Arkansas Development Finance Authority,
Asset Building Program, Next Pew Charitable Trusts. graduate teaching assistant in Little Rock, Ark.
Social Contract Initiative, Global Before joining New America in International Political Economy ••Ines Polonius, executive director, Alt.
Assets Project and College Savings 2002, Boshara worked for CFED, and the American States Consulting, Inc., Pine Bluff, Ark.
Initiative. Over the last 15 years, the Select Committee on Hunger Administrators Project (www. ••Kevin Smith, president and CEO, Commu-
nity Ventures Corporation, Lexington, Ky.
he has advised the Clinton, and Rep. Tony P. Hall in the U.S. auburn.edu/outreach/cgs/ASAP).
••Royce A. Sutton, vice president and com-
George W. Bush and Obama Congress, the U.N.’s Interna- Pack is a native of Birming-
munity development manager, Fifth Third
administrations, presidential tional Fund for Agricultural ham, Ala. He holds a bachelor’s Bank, St. Louis
candidates and policymakers Development in Rome, and Ernst degree in political science with a ••Emily Trenholm, executive director, Com-
worldwide. He has testified & Young. He is a graduate of concentration in international munity Development Council of Greater
before the U.S. Congress and The Ohio State University, Yale relations from the University of Memphis, Memphis, Tenn.
given speeches around the world Divinity School and the John F. Mississippi, and a master’s in ••Sherece West, president and CEO, Winthrop
on ownership strategies for the Kennedy School of Government public administration with a Rockefeller Foundation, Little Rock, Ark.
poor, the U.S. economy and the at Harvard. minor in economic development Nine members of the original CDAC
American social contract. He from Auburn University. Pack board have completed their terms and are
will continue as a senior fellow Andrew “Drew” Pack started was a member of the Auburn stepping down this year: Tim Bolding, Alice
at New America. his career at the St. Louis Fed in chapter of Pi Alpha Alpha. He Burks, David Jackson, Leslie Lane, W. Thomas
Boshara has written for The 2009. He worked as a regional looks forward to continuing his Reeves, Ben Steinberg, Stephanie Streett,
Washington Post, The New York public policy specialist in the work at the Bank and serving Marita W. Willis and John J. Wuest. We extend
our sincere gratitude to these members,
Times, The Atlantic Monthly, Public Affairs department before organizations and communities
and are honored to have worked with this
Esquire and the Brookings his recent move to the community in Arkansas. wonderful group of leaders.
Institution, and has published development team. He is working

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SPANNING THE REGION
The region served by the Federal Reserve Bank of
Arkansas Baptist College Launches by Pulitzer St. Louis encompasses all of Arkansas and parts of Illinois,
Entrepreneurship Center and Prize-nom- Indiana, Kentucky, Mississippi, Missouri and Tennessee.
Microloan Program inee Clif-
Arkansas Baptist College in ton Taulbert and
Little Rock, Ark., launched the Gary Schoeniger. Help for Kentucky Homeowners 12 months, whichever occurs
Scott Ford Center for Entre- Drawing on the life Many Kentucky businesses first. The maximum amount
preneurship and Community lessons Taulbert learned from have been hit hard by the eco- that may be used for reinstate-
Development on Feb. 28. The his Uncle Cleve, an unlikely nomic downturn, and workers ment—all related fees and
Center will train entrepreneurs entrepreneur in 1950s Mis- in the state have been strongly payments to bring the loan(s)
to start businesses in under- sissippi, this special course is affected by the recession as current—is $7,500. The pro-
served communities and will designed to immerse par- work hours have been reduced gram launched statewide on
offer a microenterprise loan ticipants in eight life lessons or jobs eliminated. The Ken- April 1. For more details, visit
fund as a catalyst to spur (choice, opportunity, action, tucky Unemployment Bridge www.kyhousing.org/protect/
business development in core knowledge, wealth, brand, Program (UBP) is a new loan default.aspx?id=3586.
urban areas. The pilot fund community, persistence) that option administered by the
will be supervised by an inde- are fundamental concepts to Kentucky Housing Corporation BOOST Loan Program
pendent board that includes building an entrepreneurial to assist in making mortgage The St. Louis County Eco-
the college’s business faculty mindset. The Icehouse Project payments. To be eligible, nomic Council (SLCEC) has
and administration and local is supported financially by the homeowners must have expe- created a new loan program to
financial experts who special- Ewing Marion Kauffman Foun- rienced a job loss or reduced further help businesses that
ize in banking and venture dation and The Foundation income due to changing eco- have problems with access
capital operations. Loans will of Entrepreneurship, which nomic conditions, through no to capital. Believed to be the
range from $50 to $5,000. focuses on entrepreneurship, fault of their own, and dem- first of its kind in the nation,
The Center will also offer innovation and education. onstrate a need for assistance. BOOST provides an alternative
The Icehouse Project. Arkan- For more information about The job-related event must to the SBA 504 loan. It features
sas Baptist College is one of the the Center and microloan have occurred after Jan. 1, fewer eligibility requirements
initial sites selected to launch fund, contact Larry Bone at 2009. The maximum amount (e.g., no net worth, income size
the pilot program, developed 501-244-5139. of assistance is $20,000 or or personal liquidity limits)

Have you be completed over a 60-day period. 2011 Innovation Award one of their Training Institute education

HEARD
Choose from the following: During the 2011 Exploring Innovation programs, including travel, lodging and
•Community
• Stabilization: An Intro- Conference in St. Louis, the Innovation tuition (a $2,500-$3,000 value).
duction to REO Acquisition, Rehab, Award will be presented to a commu- Additionally, the Federal Reserve
Disposition and Management nity development corporation (CDC) Bank of St. Louis will provide the
Free NWA Courses •Fundamentals
• of Asset Management that recognizes the green economy recipient with a full scholarship,
NeighborWorks America is offering •Counseling
• Buyers of REO Properties as an important aspect of the future including travel and lodging, to attend
five community stabilization-related •Counseling
• Clients Seeking Rental of community development and has and receive the award at the confer-
e-learning courses free of charge Housing demonstrated a commitment to fund ence (May 9-11, 2011) at the Chase
(normally $195) until Sept. 30, •Stabilizing
• Neighborhoods in a initiatives promoting affordable green Park Plaza hotel. For more informa-
2011. The FDIC has provided a Post-Foreclosure Environment building or green job creation. The tion, contact Daniel Davis at the St.
grant to make this possible. Courses winner will receive a full scholarship Louis Fed (Daniel.P.Davis@stls.frb.org
usually require 3-4 hours and may Register today at www.nw.org/onlinereg. provided by NeighborWorks America to or 314-444-8308).

LINKING LENDERS
0 AND COMMUNITIES
and has the option of a variable Credit (LIHTC) equity fund alternative financial institutions
or fixed interest rate. This that provides equity invest- (e.g., payday lenders, check BRIDGES
innovative program is avail- ments for the construction and cashers) that sometimes charge Bridges is a publication of the Commu-
able for businesses expanding rehabilitation of low-income more than 300 percent interest. nity Development Office of the Federal
within St. Louis County and affordable rental housing in About 96,000 households in Reserve Bank of St. Louis. It is intended
to inform bankers, community develop-
is available for the purchase or Mississippi. An existing apart- Memphis and Shelby County, ment organizations, representatives of
construction of land, buildings, ment complex in Jackson will Tenn., are either unbanked or state and local government agencies and
others in the Eighth District about current
machinery and equipment. be the site of the first invest- underbanked. A similar issues and initiatives in community and
The program’s benefits include ment from the fund, resulting number have bank accounts but economic development. The Eighth
District includes the state of Arkansas and
financing of up to 90 percent; in $7.5 million in renovations don’t know how to use bank parts of Illinois, Indiana, Kentucky, Mis-
low floating interest rates; with New Horizons Develop- products to build wealth. sissippi, Missouri and Tennessee.
variable/fixed rate option; no ment, LLC. This remodeling Participating financial institu- Glenda Wilson
prepayment penalty for floating will create 40 two-bedroom tions will reduce minimum Assistant Vice President
rate; and 20-year term. and 20 three-bedroom afford- opening deposits for BOM and Managing Editor
314-444-8317
The Business Finance Cor- able housing units. The fund customers, offer accounts with
Yvonne Sparks
poration of St. Louis at SLCEC is co-managed by the Great no minimum monthly balance Senior Manager
will administer BOOST. The Lakes Capital Fund. More requirement, and offer ATM or 314-444-8650
program offers a maximum of information can be found at debit cards with no ATM fees.
Maureen Slaten
$500,000 in gap financing or www.hopecu.org or by calling Nonprofit organizations will Senior Editor
40 percent of the project cost. 1-866-843-3358. teach participants basic account- 314-444-8732
For more information, ing principles and then provide Community Development staff
call 314-615-7663 or visit Bank On Memphis a referral card that can be used St. Louis:
Matthew Ashby
www.slcec.com/boost.html. There’s a new plan in town! to open an account at participat- 314-444-8891
Daniel P. Davis
Launched in March, Bank On ing institutions, currently First 314-444-8308
Newly Formed Mississippi Memphis (BOM) focuses on Tennessee, Cadence Bank, Jean Morisseau-Kuni
LIHTC Fund people who don’t have bank Regions Financial and SunTrust. 314-444-8646

Hope Credit Union, along accounts (the “unbanked”) and The Federal Reserve Bank of St. Memphis: Kathy Moore Cowan
with investors including South- those who do have accounts but Louis, Memphis Branch, will 901-579-4103
Teresa Cheeks Wilson
ern Farm Bureau, Bank Plus, don’t take full advantage of them collect data and provide 901-579-4101
Trustmark and First Com- (the “underbanked”). The quarterly reports. Little Rock: Lyn Haralson
mercial Bank, has created a program encourages citizens to Full details can be found at 501-324-8240
new Low Income Housing Tax use banks instead of costly www.bankonmemphis.org. Drew Pack
501-324-8268

Louisville: Lisa Locke


502-568-9292
Economist Glenn Loury CD Finance Competition at the 2011 recommendations to advance the Faith Weekly
502-568-9216
Shares His Views Exploring Innovation Conference New Markets Tax Credit program.
During a visit to the Federal The Community Development Those with the best proposals will The views expressed in Bridges are not
necessarily those of the Federal Reserve
Reserve Bank of St. Louis, Finance Competition is an academic present their recommendations as Bank of St. Louis or the Federal Reserve
economist Glenn Loury from Brown research and writing competition a panel at the conference, and the System. Material herein may be reprinted
University was interviewed and sponsored by the Federal Reserve winner will be revealed, qualifying or abstracted as long as Bridges is credited.
Please provide the editor with a copy of
expressed his opinions on a variety Banks of Atlanta, Dallas, Minneapolis for a summer internship—the “Fed any reprinted articles.
of topics he has researched. Some and St. Louis in conjunction with the Prize”—at his or her choice of the
of the topics he addressed are 2011 Exploring Innovation confer- Minneapolis or St. Louis Feds. Ques- Free subscriptions and additional copies
are available by calling 314-444-8761 or
affirmative action, social capital and ence, to be held May 9-11 in St. tions regarding the competition may by e-mail to communitydevelopment@
incarceration. You can view a video Louis. Students from the partnering be addressed to Daniel Davis at the stls.frb.org.
of this very interesting interview at Federal Reserve Districts submitted St. Louis Fed (Daniel.P.Davis@stls.frb.
Follow the Fed on Facebook, Twitter and
http://stlouisfed.org/loury. an academic research paper with org or 314-444-8308). more at stlouisfed.org/followthefed.

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Resources
Understanding the Unbanked and
Underbanked
A Charter School Financing Alternative? New HUD Publication
>>> Only Online
The Center for Community Development HUD’s Office of Policy Development and
The availability, accessibility and affordability Investments at the Federal Reserve Bank Research has introduced a new publication, www.stlouisfed.org/publications/br/
of financial products and services are major of San Francisco has published a working “Evidence Matters,” highlighting policy-relevant
factors affecting the economic security of paper by Ian Galloway, “Charter School Tax research focused on a key theme. Quarterly In addition to the print version,
households, particularly low-income Credit: Investing in Human Capital.” The paper issues will provide information and diverse each issue of Bridges offers articles
households. It is also a growing concern considers how two existing policy tools— viewpoints that underscore HUD’s mission— that are exclusively online. Online
for impacts on community development. investment tax credits and charter schools— to create strong, sustainable, inclusive articles for the spring issue of
A better understanding of the dynamics could be combined to raise operating funds communities, and quality, affordable homes Bridges expand on topics in the
underlying household economic security is for charter schools that successfully close for all. The theme of the inaugural Winter current issue:
crucial for financial organizations, community the poverty-related academic achievement 2011 issue is neighborhood revitalization and
organizations and policy makers to build gap. Because of their different types and features Murphy Park in St. Louis; it can be >>> Microcredit and Development
wider economic security and social approaches, it’s difficult to identify the found at www.huduser.org/portal/periodicals/ in Bangladesh
mobility. The Federal Reserve Bank of St. variables present in successful charter em/EM-newsletter_FNL_web.pdf.
Louis and Washington University in St. schools that could produce the same results
>>> Campus Microfinance Funds:
Louis, in partnership with Beyond Housing, elsewhere. This paper acknowledges the
A Closer Look
Grace Hill Neighborhood Services and the difficulty of “silver bullet” school reform NALCAB Latino Entrepreneurship Best
West End Neighborhood, created a system replication and considers an alternative: Practices Publication
dynamics model of household economic cultivating a diverse array of education
security focused on understanding the approaches using tools developed by the “Latino Entrepreneurship: A 21st Century
underlying reasons that these households community development finance industry American Economic Engine,” the 4th
choose to be unbanked or underbanked. over the last 30 years. More information edition of NALCAB’s Best Practices
The final report on the study is available at is available at www.frbsf.org/publications/ publication series, is now available. It full publication is also available to read
www.stlouisfed.org/community_develop- community/wpapers/2010/working_paper_ highlights job creation via entrepreneur- online at nalcab.org/webdocs/
ment/assets/pdf/WashU-Social-Sci- 2010_08_galloway.pdf, or by contacting ship. You may request a copy by sending NALCAB%20_BestPractices_Latino-
ences-Design-Lab-Report-1-21-11.pdf. Ian Galloway at ian.galloway@sf.frb.org. an e-mail to erodriguez@nalcab.org. The Entrepreneurship.pdf.