Beginning this month, the Federal Reserve Bank of Minneapolis and the Wilder Research Center in St. Paul will conduct a survey of Hmong entrepreneurs and homeowners to determine how they use credit.
It is commonly believed that when the Hmong want to start businesses or buy homes, they borrow money from relatives, rely on their savings, or both, and rarely use banks to apply for loans.
About 400 home and business owners will be interviewed around the Twin Cities. The study, which will run until May, will be concentrated in north Minneapolis and St. Paul's Frogtown and Eastside neighborhoods, areas with large Hmong populations.
The study is modeled on a recent credit survey of African-Americans and Hispanics in Chicago. Results will be shared with bankers, financial institutions and others.
David Fettig, Federal Reserve Bank's director of Public Affairs, said the study is being done to comply with community reinvestment laws that require regulatory agencies to ensure that all people have fair and equal access to credit.
The bank also is considering using similar surveys for African-Americans, Somalis and Hispanics in the Twin Cities.
Richard Chase, Wilder Research Center's consulting scientist and study director, said the survey will be used to test beliefs and assumptions.
"Our hunch is that the Hmong rely more on informal sources of credit than formal. We've been told by several Hmong leaders that many Hmong people have no credit rating. It becomes a vicious cycle: you can't get a loan without a credit rating and you can't get a credit rating without a loan."
Lue Thao, Wilder Research Center's project director, hopes that the survey will help the Hmong. He said that he often sees family members pooling $10,000 to $20,000 each in personal savings to begin a business or to buy a home.
He thinks that system is counterproductive to the community's economic development and that Hmong people would enjoy more prosperity with a higher use of credit.
"Many of the Hmong don't make much of a profit in business," Thao said. "They just break even. They don't have money to buy more products. They don't have the money to make the business successful. It's a day-to-day living and family members who work in the business don't get paid at all."