June 29, 2006
Sending Funds Home to Mexico Just Got Cheaper for Latino Community Credit Union Members
by Bill Baue
The Durham, North Carolina-based community development credit union will charge a flat $3 fee, use
the exchange rate set by the Fed, and allow recipients to set up accounts in Mexico.
While the US is embroiled in debate on the flow of immigrants, especially across the Mexican
border, the flow of money across this border may help address at least some of the contentious
issues. Latino Community Credit Union (LCCU), a Durham, North Carolina-based community
development credit union (CDCU), launched a program earlier this month that lowers the cost and
increases the effectiveness for its members sending remittances to Mexico.
became the first credit union to use the "Directo a México" program recently
established by the Fed and the Central
Bank of Mexico (Banxico) for transferring funds
between the two countries through the Automated Clearinghouse (ACH) network. In collaboration
with the BANSEFI (one of Mexico's largest
banks) and its strategic partner L@
Red de la Gente, LCCU will charge a flat $3 fee for transferring any amount of money.
"We've been sending remittances across borders since we opened out doors in 2000," said Allison
Yonas, LCCU's director of financial management. "What's novel about this new way of sending
remittances is its lower cost, and also our ability to open accounts for the recipient in Mexico
and send money account-to-account."
Whereas some commercial financial institutions
generate profits on remittances by charging a high exchange rate, LCCU will protect its members'
interests by charging the rate set by the Fed.
"The preferential foreign exchange rate
applied by Directo a México is another key benefit to remittance senders because their loved ones
in Mexico will receive more pesos for every dollar sent back home," said Elizabeth McQuerry,
assistance vice president of the Fed's retail payments office.
LCCU's new remittance
system stands to benefit not only its members' families, but also the broader social systems.
"If one of our members wants to send money to his mother, but she doesn't have an account in
Mexico, he can open an account for her from here," said Ángel Romero, LCCU's marketing director.
"This allows a lot of unbanked people in Mexico to be banked, so they can start saving and creating
a credit history."
"When you start creating wealth in other countries, it creates
stability there and gives less reason to migrate," Mr. Romero told SocialFunds.com. "By charging
less for remittances, we're helping stabilize some of the population--it doesn't mean we're going
to solve the problem, because that's not our job as a financial institution, but we do think our
new program has a positive effect in all senses."
While the new system clearly caters
primarily to Mexican immigrants and their families, they are not the only ones who stand to
"There are growing pockets of retirement communities in Mexico formed by American
citizens taking advantage of the lower cost of living, as well as the weather," explained Mr.
Romero. "Having a system like this is really convenient to them, because they can send wires to
themselves in Mexico."
While LCCU is one of the leading CDCU's targeting Latino
populations, this is a growing segment of interest to many other CDCUs. Indeed, the National Federation of
Community Development Credit Unions hosts two conventions annually--its annual meeting and a
Latino conference. In its fourth year, this year's Latino conference was hosted in LCCU's
hometown of Durham.
"There are community development credit unions that are not focused
primarily on the Hispanic community, but they do want to serve it," said Mr. Romero.
that LCCU has set the precedent, these other CDCUs can follow its example and adopt the Directo a
México program. In addition to spreading to other CDCUs, there is promise of this type of program
spreading to other geographies.
"We hope that in the near future more countries will have
the capacity to provide a similar product," said Luis Pastor, CEO of LCCU.