Indigo Financiera

Mexico-U.S. hometown clubs and social networks

2007-12-13T09:50:09-08:00

Liz Ryan blogs on Indigo and Tierra Natal in her October posting of "Mexico-U.S. hometown clubs and social networks.

She writes about the growing hometown association movement:

"I say politically active, because the formation of HTAs is a grassroots movement awakening to the huge amount of power it has. Mexican-Americans send more than $23 billion a year to Mexico, mostly through individual and family ties. The HTAs or Clubs de Oriundos, by consolidating some of that money, are gaining political power. We'll see in the next few years how blogs and social network software will help that process. Other countries may also begin using social software to make the power of their remittance economies more transparent."

A Platform for HTAs - Tierra Natal

2007-12-13T09:37:56-08:00

While this blog has been somewhat dormant, my efforts toward creating new models for productive investment through hometown associations (HTAs) have not. One of the outcomes of the behind-the-scenes work is my involvement with a new social networking startup called Tierra Natal.

Tierra Natal is the brainchild of Liliana Miranda Townshend. Liliana and her family are originally from Jocotopec, Jalisco, Mexico. She has spent most of her life in California and her background includes high tech entrepreneurship. Her parents are part of the active Jocotopec community in California and she initially built a website, www.jocotopec.com so her parents could communicate with the larger Jocotopec diaspora.

She and I have had a running conversation on the potential of hometown associations to alleviate poverty and spur economic development in their communities of origin. One thing we quickly realized in working with HTAs is the need for basic infrastructure - governance, communications, etc.

Tierra Natal is the first social networking site designed around place. Unlike other social sites (Myspace, etc.) that is centered around the individual, Tierra Natal is centered around municipios in Mexico. Individuals can look up their municipio and join that group, contributing photos, videos, news, and other events that are of interest to that community.

In addition, hometown associations can have their own webpage within Tierra Natal and communicate with their members, fundraise and organize projects, etc.

This social network is one-of-a-kind and has the potential to vastly accelerate the capacity of the hometown association movement.

Northern Californian Jaliscan HTAs welcome Governor of Jalisco in Silicon Valley

2007-11-30T14:44:24-08:00

It's been a bit of a whirlwind week in Silicon Valley for the Northern Californian Federation of Jaliscan Clubs. This emerging umbrella organization of hometown associations, in partnership with Hispanic-Net and TierraNatal, hosted representatives from the governor's office of the state of Jalisco. The prestigious law firm of Fenwick & West was kind enough to provide the venue for Tuesday evening's kick off presentation. Over 60 club presidents plus governor's entourage and Hispanic-Net members gathered for the largest HTA meeting of its kind in Northern California.

The bulk of the program was focused on the Tres por Uno or 3-for-1 program in Jalisco.

- What is the 3 x 1 Program
- How it works
- Who can participate
- Why 3 x 1
- When does the 3 x 1 Program starts – ends

There was quite a bit of interaction between the politicians and the HTA presidents. Mitch Posada, founder of Grupo Entrada, was struck by the grassroots leadership evident among the HTA presidents. He felt that the HTA movement would provide the next generation of civic and economic leadership for newly arrived immigrants just as MALDEF and NCLR had done for previous generations of Hispanics.

The federation held a gala dinner the following evening in Silicon Valley. Originally planned for 400 people, over 600 club presidents and members gathered at the DoubleTree in San Jose. Talking to people after the event, many who were unaware of the hometown association movement, were stunned by the numbers. I think that the Jaliscan politicians and curious Silicon Valley observers were surprised by the size of the crowd in a geography not typically considered an HTA stronghold. (Los Angeles takes the prize there.) One HIspanic Silicon Valley technologist present told me 'There's a huge market here.' No kidding.

ADDENDUM:
The ability of the HTA community to mobilize very quickly tends to be underestimated. Here's a point of comparison. I attended the Hispanic Foundation Silicon Valley Charity Ball in October and they had an impressive 700+ people attend. Most of the tables were sponsored and only a minority of individuals bought their own tickets. Teresa Alvarado and her board worked very hard for months to put the gala together, marketing, fundraising and pitching to sponsors such as Citibank and Wells Fargo. In contrast, the Jalisciense federation had barely a month to put their gala together. There were no big sponsors - not even a Western Union in sight. They sold 600 INDIVIDUAL tickets at $85 each. $51,000. All through email, phone calls and word of mouth. I don't know what they'll net after their costs but imagine the huge philanthropic and seed capital potential of these organizations with a little more fundraising savvy?

Tierra Natal and HTAs

2007-07-06T10:20:29-07:00

I had the opportunity to witness the formation of the Northern California Federation of Jaliscan Clubs at the invitation of Liliana Miranda Townshend, board member of the Jaliscan federation, a Jocotopec HTA president and founder of Tierra Natal, an online social networking site for HTAs and their members. I've known Liliana for almost 8 years now, having incubated her first startup, Tuzona, when I ran the Women's Technology Cluster (now known as Astia).

Lili has acted as a sounding board for me as I developed the Indigo concept -- in fact, she was one of the first persons with whom I tested the idea of a remittance-based development fund. Through her I gained a first hand insight on the behavior and thinking and activities of close knit diaspora groups and clubs.

As we brainstormed over what Indigo could be, it became apparent that we needed to create an infrastructure so the various hometown associations could connect and collaborate. Liliana took the initiative and created Tierra Natal. Now every single municipio and EVERY TOWN in that municipio in Mexico is online through this site - even my grandparent's hometown of El Cargadero, Jerez, Zacatecas, Mexico.

Tierra Natal has the promise and potential of accelerating the organization, sophistication and effectiveness of hometown associations overnight.

Hometown Associations Organize in Northern California

2007-07-06T10:18:28-07:00

On a quiet Saturday morning, over 15 HTA leaders from Modesto to Eureka, Sacramento and the East Bay travelled to meet at the law offices of McDermott Will & Emery in Palo Alto to form the new Federacion of Jaliscan Clubes de California Norte. Over fresh fruit and juices provided by the HTA presidents, lawyers from McDermott set up Powerpoint presentations as they educated the audience on the ins and outs of non-profit incorporation, technology, email, websites and the internet.

It was truly a watershed event -- HTA presidents who are small restauranteurs, landscape gardeners, caterers and the like - getting instruction from some of the best Silicon Valley lawyers on how to leverage the internet.

After a full morning of seminars and mini-tutorials, each HTA president spoke a little about his/her own background and why each is involved. The stories fascinated me and I was touched by how much each individual was driven to give back to their community in some manner. They all told stories of how economic opportunity was so limited in their communities of origin, the success they found here just by being in a different context - after all, it's not like they suddenly had more education or skills here compared to Mexico - simply that they were in a cultural, economic and regulatory environment where they could successfully build businesses here.

Why Hispanics Don't Use Banks - Part 2

2006-09-29T12:03:26-07:00

In my work on Indigo and m-Via, I often run into the received wisdom that Hispanics don't trust banks. It has become the catch-all reason to explain product failures in financial services. Why did Bank of America withdraw their SafeSend product? Well, you know, Hispanics just don't trust banks. The other assumption is that, 'well, Hispanic immigrants aren't very financially literate.' If they were smarter, it would be obvious to use banks. And while there is an element of truth to both assumptions, it doesn't tell the whole story and it may cause you to give up too soon. After all, it's much easier to blame the customer than to acknowledge that your product design or market strategy was in error.

I was checking in on Clara recently. She started working as a nanny for a new family. The other morning over cafe y pan dulce, I asked her how things were working out. Clara said the work was fine but she had to ask her employer to pay her in cash. Clara has a checking account with a well known retail bank but was having problems. (She opened the account with her Matricula Consular card.) Her employer wrote her checks issued from an out-of-state bank. Because Clara has a low balance, the bank consistently held her newly deposited paycheck for 10 days at a time.

Now let's think about this. Clara thought a checking account would be a good idea, not because she writes lots of checks - she only has a few - but because she wanted a place to put her earnings that was separate from her husband. Clara didn't want to keep her earnings in currency because it's too easy to spend and she wanted to keep some in reserve. Hence the checking account.

But the checking account isn't meeting her needs. The bank, in order to make money on low balance accounts, holds new deposits in order to earn interest on the float. Clara doesn't have a high enough cash flow to allow her money to be tied for ten days every time she gets paid. After all, she needs to buy groceries and take care of all the various school expenses for her four children.

If she's not careful, the check account fees will slowly erode her low balance. There are few things more depressing than watch your meager bank balance slowly drop over time due to ATM fees, monthly fees, check processing fees, etc.

So what's a woman to do? She can take her paycheck and pay a high fee to a local check cashing facility. She gets her money instantly but then she has it in currency. So, she keeps some in her wallet and then deposits the rest in the bank. She solves the access to cash problem but it's cost her an extra fee on top of the fees she already pays to maintain her not very useful checking account.

Or she can get paid in hard currency from her employer, forcing her employer to go to an ATM on payday. Not very convenient for the employer.

Many Hispanic immigrants and low income people don't put up with this type of scenario for very long. They feel more in control using money orders instead of checks, stashing their currency in a hidden place in their homes instead of in a bank account, and using check cashing facilities for their payroll checks.

Just one example of why Hispanics and low income people don't find banks very useful.

A Matter of Dignity

2006-01-10T18:56:29-08:00

Recently a friend shared a recent banking experience. My friend, Clara, is an undocumented worker who makes her living cleaning houses. Her current employer is a wealthy woman with an 8 bedroom mansion in an exclusive suburb in Silicon Valley.

Her employer recently paid her by check before leaving town. Clara and her co-worker, the other cleaning woman (it takes two women to clean this house every week), went to the local bank from which the check was drawn thinking that would be the most efficient way to get their money.

The teller asked for a social security card and a drivers license. Having neither, Clara presented her Matricula consular and credit cards. The teller, apparently unfamiliar with the Matricula called up on the branch manager. The branch manager then instructed the teller that the check could be cashed upon two conditions - that Clara be photographed and her full fingerprints taken.

When I heard this story I was taken aback. All that was lacking was the number held up to her chest to make it a full mugshot. All to cash an $80 check.

Often, experts wonder why immigrants refuse or are reluctant to engage with banks. Are they ignorant? Are they financially illiterate? Don't they know that check cashing facilities exploit them?

Perhaps they behave the way they do to avoid the humiliation.

New Horizon Investment Club

2005-11-15T20:24:34-08:00

In my previous post I discussed the vision of small groups organized as hometown associations becoming the source of investment capital for their communities of origin. This summer I had the pleasure of meeting José Francisco Ávila, a Hondoran immigrant who is the founder of the New Horizon Investment Club, a group composed of Afro-Caribean Honduran immigrants who have pooled their capital to make productive investments.

The New Horizon Investment Club Overview:

Structure

New Horizon Investment Club
New Horizon Real Estate Partners, LLC
Garífuna World, Inc. –

Capital Structure

100% owned by Honduran Americans
There are 100 partners

Focus on larger investments:

Real Estate
Tourism

NHIC offers Honduran immigrants the opportunity to invest efficiently in the USA or Honduras by facilitating the capital raising process:

Either raise funds for clients on a case by case basis
Pool investors’ assets into a legal vehicle ready to invest

A Vision of Grassroots Venture Capital

2005-11-15T12:55:27-08:00

When I was a venture capitalist, I was often asked what it would take to create a venture capital industry in Mexico or Indonesia or just about anywhere outside of Silicon Valley. There were often many very good reasons why it couldn't or hadn't happen - deal flow, amount of money that needed to be invested, cost of managing a fund, a service provider ecosystem, etc.

One of the biggest obstacles was just scale. Scale turns out to be a big deal in venture - you need to put large amounts of money in to get your 10x-100x return. In many communities, the businesses are small to medium size enterprises (SMEs). They needed small amounts of money - 4 or 5 figure amounts, not 6 figures and certainly not millions. They're never going to go IPO. What capital market could they go to?

So, if you live in a small community in Mexico, say, and there's no capital market to foster the creation of small businesses, what do you do? You join the ranks of millions of transnational workers and you come to the U.S. to work. And, strangely enough, through your remittances, YOU become the source of capital for your country.

In 2004, Mexican immigrants sent more than $16 billion back to their communities of origin. The remittances were used to take care of basic services such as food, clothing, healthcare. What if the Mexican diaspora could tap into a portion of those assets to create funding for their businesses? They wouldn't need Wall Street and they wouldn't have to wait around for some large institution to take a leap of faith and provide capital for them. The community could do it themselves.

As it is, Mexican hometown associations in the United States have already begun to organize social remittances to build schools, pave roads and pay for other infrastrcture improvements in their hometowns. The Zacatecan federation of clubs have gone so far as to negotiate a 3-for-1 investment program with the Mexican government.

Imagine if these small groups of social investors transformed themselves into small angel groups for start up businesses. Imagine that they were able to tap into a microequity fund that they helped create?

This is the goal of Indigo Financiera and the Indigo MicroEquity Fund. Hometown associations and other social groups can use the Indigo Scoot Mobile Money card to take care of basic banking needs. A portion of the profits from Indigo Financiera go into the Indigo MicroEquity Fund. The Fund then works with these bands of angels and co-invests in the businesses that they have sourced, evaluated, and support.

Indigo Financiera becomes a way for the diaspora to channel some of their funds into a capital market of their own. It's grass-roots venture capitalism.

2. Vision and Mission

2005-11-11T19:36:09-08:00

Our Vision

Create a for profit solidarity branded, high volume, low cost financial services company for unbanked diaspora communities

Create a non-profit micro-equity venture fund that makes successful and profitable investments in microfinance institutions and small and medium size enterprises founded or managed by transnational workers or entrepreneurs in their communities of origin.

Our Mission

To transform transnational workers from passive senders of money to active grass-roots micro-investors for their home countries.