Association for Public Policy Analysis & Management

Despite policy efforts at the federal, state, and local level a significant number of Americans continue to use non-bank credit, commonly referred to as Alternative Financial Services. The group most resistant to efforts to increase use of bank or “mainstream” financial services has been immigrants whose unbanked numbers remain higher than their native born counterparts. Current evidence suggests that the presence of immigrant enclaves reduces bank usage by immigrants in those areas. The assumption is that by remaining unbanked immigrant groups are not fully integrating themselves into the formal economy leaving them at a disadvantage. The goal of this paper is not to test that assumption but instead look deeper into the relationship between immigrant enclaves and demand for formal financial services. Instead of looking exclusively at bank access, in this paper I will examine both access to bank and alternative lenders (pawnshops, payday lenders, etc.). Building on previous work from Bohn and Pearlman (2013) I will use census track level data from the American Community Survey and interviews with Cambodian immigrants in Stockton, California and Dallas, Texas to investigate the relationship between the existence of same region and same country of origin immigrant enclaves and the number of formal credit suppliers. The intent of this paper is to better understand the relationship between foreign born status and use of formal credit and to provide evidence on the potential existence of informal lending within immigrant communities.