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Indian entrepreneurs can learn from Hmong, a success in the Twin Cities

MINNEAPOLIS - A study of indigenous immigrant experience in this country has found that Hmong people in the Minneapolis/St. Paul area have managed to carve out a vibrant entrepreneurial niche for themselves - an example that American Indian groups could profit from.

The Federal Reserve Bank branch here devoted 80 percent of its most recent issue of its quarterly publication "The Region" to the Hmong study and a related photo essay, concluding that the immigrants from Southeast Asia "have done surprisingly well" in starting up businesses and obtaining access to credit.

Arthur J. Rolnick, one of the co-authors of the article, said the Fed is hoping to study the experience of other groups, such as blacks, Hispanics and American Indians in the Twin Cities area over the next five years.

Anecdotally, he said Indian entrepreneurship in the Twin Cities is "far behind the Hmong." But he said, "the Hmong may be unique. We weren't expecting what we found."

Key to the Hmong success, he said, is the fact that they were very well educated, had ties to extended families for financial support and found good lending partners. "If banks are willing to make the outreach, you can get a lot done," he observed.

According to the 2000 U.S. Census, 3.3 percent of the residents of Minneapolis called themselves American Indian or Alaska Native alone or in combination, giving it the seventh-highest concentration of Indians in the country. But mitigating against a similar success for Indians in the Twin Cities and elsewhere is the fact that urban Indian populations tend to be fragmented among many tribes.

The Fed study, "Between Two Worlds: How Do Credit Markets Work?" written by David Fettig, vice president, and Rolnick, identified 170 Hmong businesses, mostly retail and personal service-related, in the Twin Cities area. Seventy-one percent of those owners answered a Fed survey.

Photos accompanying the essay depict Hmong storefronts, including ones for a clothing and shoe store, a pharmacy, a food store, and a funeral home.

"It appears that Hmong business owners use bank financing as much as their neighbors did at startup," said the two, who also noted "an engaged banking community willing to reach out and communicate with the Hmong."

They noted that the Hmong enclave here is the largest in this country, which has seen 169,000 members of the tribe emigrate to the United States in the wake of the Vietnam War. More than 35,000 of these immigrants from Laos and other Southeast Asian countries have moved to the Twin Cities area, with the largest Hmong concentrations "in the Payne-Phalen and Thomas-Dale neighborhoods in St. Paul."

Despite the fact that there are no words in Hmong for "access" or "credit," and that it takes five Hmong words to convey the meaning of "bank," about 25 percent of them got loans from financial institutions or government programs, the study said. The most typical financing was a small business loan from a commercial bank.

The Hmong entrepreneurs spent roughly $22,000 apiece to start up their businesses, and had $111,618 in startup capital - not much different than 131 white business owners the Fed used as a control group.

"Self-employment has traditionally been an important channel for raising the economic status of immigrant communities," the study notes. It also notes that the Hmong had no written language at all until the 1950s, and arrived in this country without understanding English, "let alone Western business and financial markets."

Despite this, "the Hmong community located in Minneapolis-St. Paul has developed a distinct, recognized and viable small business sector."

The study noted that Hmong are more likely to use personal savings to get their businesses off the ground. "Hmong owners utilized personal savings at higher rates and levels than their white counterparts ? nearly 90 percent of the Hmong owners reported using personal savings during the period of business formation, compared to less than 70 percent of the control group."

Total "internal" sources of startup funds (including family financing) came to nearly 60 percent for Hmong businesses, versus 50 percent for white businesses.

Hmong redlining did not seem to be a big problem, according to the study. "The Hmong were no more likely to report discrimination in the credit market than were their white counterparts," it said.

But, "while both groups reported little existence of bank-related financial barriers at startup, credit access appears to be an obstacle to the subsequent growth of small businesses in general. This was particularly true for the Hmong businesses."

As to characteristics of the indigenous owners, "the Hmong entrepreneurs seemed to reveal strong risk-taking dispositions, they have high educational attainment, they showed a willingness to invest large sums of money in their business, and they are open to leverage with their personal savings," the study concluded.

Interviews with a Hmong focus group and a bank focus group found that both groups "described similar themes that were necessary to ensure proper access to credit: cultural understanding, willingness to educate and flexibility in lending programs." The bank group identified hiring Hmong employees as a key to educating Hmong about finance.

The article was based on a paper written by Rolnick, along with Ron Feldman and Jason Schmidt of the Minneapolis Fed, as well as Maude Toussaint-Comeau and Robin Newberger of the Chicago Federal Reserve Bank. The photo essay on the Hmong appearing in the publication was by Wing Young Huie.