Though many of the 2.5 million legal permanent residents of California have bank accounts and credit cards, the biggest barrier to their gaining citizenship is simply the cost, according to a recent study by the Hispanic advocacy group National Council of La Raza.
A little over two years ago the staff of the tiny Pan American Bank in East Los Angeles recognized this difficulty and developed a microloan program to address it. In the past 18 months, the bank has helped more than 300 legal permanent residents attain citizenship by extending them a $1,000 loan.
"This type of product can have a real meaningful impact on the community. It gives a political voice to the community and gets them more engaged in civic life," says Jesse Torres, CEO of the $38 million-asset Pan American.
The loan has a 12 percent interest rate and terms of 12, 18 or 24 months, putting the APR on the loan in a range of 17 percent to 21 percent.
About two-thirds of each $1,000 loan is earmarked for U.S. Citizenship and Immigration Services, and the balance can be used toward related costs such as citizenship application assistance or English classes. All participants are encouraged to also take financial education courses.
So far, not one loan has defaulted, according to Torres, who says Latino immigrants see debt as a moral obligation.
The loan is not a huge moneymaker for the bank, but Torres says he sees the product as a useful way of bringing in new customers, many of whom are small-business owners.
"It's an entry point for immigrant entrepreneurs. We help them get their foot in the door and then they leverage it down the line into an SBA loan."
Marisabel Torres, a policy analyst with NCLR, says that a handful of community development financial institutions, including credit unions and a few other banks, offer similar products. (Pan American is also a CDFI.) Additionally, Citigroup works with nonprofits to provide microloans for citizenship needs.
But Marisabel Torres (no relation to Pan American's Torres) says that more banks must get involved in this type of lending if the need for such loans is to be sufficiently addressed.
There are 13.3 million legal permanent residents in the United States, according to the Department of Homeland Security Office of Immigration Statistics. Although the stereotypical profile of an immigrant is one that is off the banking grid, the majority of legal permanent residents have a bank account and more than a third use credit cards, according to NCLR.
Still, according to the group's 2012 survey of California immigrants, 51 percent of noncitizens—a majority of whom earn under $30,000 a year—say they cannot afford the $680 citizenship application fee and related expenses.
"It's a real missed opportunity for banks to get involved in this area," Marisabel Torres says. "It's an opportunity to use the citizenship process to get someone into the financial mainstream."
In fact, dozens of immigrants across the country have contacted Pan American about applying for the loan, and Jesse Torres says the bank has to turn them down because they don't reside within its footprint. But he hopes to one day take Pan American's program national by working with nonprofits in large immigrant communities.
Torres also is encouraging other community banks to consider setting up citizenship loan programs, advising that—like Pan American—they should work with nonprofits, which can evaluate, advertise and market the product for the bank.
"Let nonprofits do the heavy lifting," he says. "And invest in people that clearly understand the community and can take a really good look at the loans."