Progreso Financiero Is a Small Lender Leading the Way in Southern California
December 20, 2009
Progreso Financiero CEO and founder, James Gutierrez was born and raised in Chino, Pomona and it was there where he experienced for the first time, he says, the difficulties faced by Hispanics to enter the world of credit.
"Jose and Maria receive their bi-weekly check and change it in a business that turns it into cash." Thereafter all their transactions are made in cash.
While studying Business Administration at Stanford (he received his BS at Yale), Gutierrez studied the financial problems and hardships of Hispanics and concluded that large institutions were not serving their needs. "If you want a loan, the first thing a bank does is to check your credit score," he said.
Out of the eighty million marginalized in the banking system in the U.S.; 25 million are Hispanic.
His response to that neglect was Progreso Financiero, an institution based on a model that not only offers microloans (between 250 and 2,500 dollars), but also aims to help clients build a credit history. To this end, Progreso Financiero developed a scoring system, documents written in Spanish and simple rules.
"We have to educate people about credit," he says. At the time of signing a loan Progreso agents explain to customers how the system works (for a thousand dollar loan, customers pay back $1,200 in twenty payments of $60 each).
Gutierrez started his business in 2005 in the San Francisco area and is now expanding in Los Angeles through Liborio Market and other retail businesses. The whole process of management and approval of loans takes place inside a supermarket, a space, according to Gutierrez, where Hispanics feel at ease.
The Federal Deposit Insurance Corporation (FDIC) has tried to motivate the country's financial institutions to lend to the millions who do not participate in the banking system, many of whom succumb to payday loan companies. To this end it created the pilot program of small loans (SDL). To date, however, only 31 banks in 26 states are involved, a tiny number compared to the 24 thousand payday agencies that exist in the country. Recently the program announced that in its first year it has awarded 16 thousand loans.
Progreso Financiero, instead, prides itself of having approved 30 thousand already. His goal, says Gutierrez, is growing with the community.
"We want to serve one million people. We will begin to expand in Texas and then to Chicago," he said. His ambition is to become a kind of Amadeo Giannini, the founder of the Bank of Italy (now Bank of America), who launched the institution in the early twentieth century to serve the Italian community, then ignored by traditional banks.