CDFIs Provide Critical Financial Access Despite Growing Banking Deserts, Report Finds
January 31st, 2025
The Federal Reserve of Cleveland has published an article, “The Last Branch Standing”, that examines the rising concentration of banking deserts and potential banking deserts, particularly among low-income communities. The report also highlights how Community Development Financial Institutions (CDFIs), like HOPE and Southern Bancorp, provide affordable financial services and products in communities most is need.
Bank Deserts in the Deep South
According to the FDIC, the rate of unbanked households has steadily decreased since 2009. Approximately 4.2% of households do not have a bank account, nationally. The rates of unbanked households, however, increases for the Deep South. The rate of unbanked households is twice as high (8%) in the Deep South households.[1] There are several reasons for a household to be unbanked which include distrust, balance requirements, and account fees. In other instances, there are simply no branch branches in communities to provide easily accessible services. The Federal Reserve has published a new data resource, Banking Desert Dashboard, that provides insights on the number of banking deserts and potential banking deserts. The data shows that 8% of Deep South census tracts are banking deserts, which is twice as high as the national rate (4%), and 5% of tracts have only one bank branch.
Without access to a physical branch location, communities are more likely to engage alternative financial services, such as payday lenders, which provide small dollar loans with high interest rates as high as nearly 600%.[2] Financial institutions and financial technology companies have increased access to online banking services, yet in many rural communities don’t have adequate access to broadband to benefit. can lead to increased reliance on alternative financial services, such as payday lenders, which often come with higher costs and risks. While online banking offers convenience, it may not be accessible to all, especially in areas with limited broadband access or among populations less familiar with digital technology.
HOPE’s Impact
Since 1994, HOPE has worked to increase financial inclusion among the most vulnerable populations throughout the Deep South states of Alabama, Arkansas, Louisiana, Mississippi, and Tennessee – a region that is home to more than a third of the nation’s persistent poverty counties, most of which are rural. HOPE branches are located in areas with less public, private and philanthropic investment, with 86% of its branches located in counties where the majority of the residents are Black. A third of HOPE’s 24 branches are located in persistent poverty counties, and one out of five are located in towns situated in the Mississippi Delta – three of which that have no other depository institution. Of HOPE’s nearly 40,000 credit union members, nearly half did not have a bank account upon joining the institution. Nearly, 120,000 people live in households reached by HOPE every day. Since inception, this approach has generated over $3.9 billion in financing that has benefitted upwards of 2.7 million people. Even with these outcomes, increased and sustained investment from the federal government is needed. To see more of HOPE’s impact, read our annual impact report.
CDFIs like HOPE represent for many communities the sole opportunity for financial inclusion as many bank branches close or shift services to digital platforms. Despite this steady increase of banking deserts, investments into CDFIs will remain beneficial to communities in which CDFIs are the only branch with open doors.
[1] Federal Deposit Insurance Corporation. (2023). “FDIC National Survey of Unbanked and Underbanked Households”. https://www.fdic.gov/household-survey/2023-fdic-national-survey-unbanked-and-underbanked-households-executive-summary
[2] Center for Responsible Lending. (2023). “ Annual Percentage Rates on $400, Single-Payment, Triple-Digit Payday Loans in the U.S.“ https://www.responsiblelending.org/research-publication/red-alert-rates-annual-percentage-rates-400-single-payment-payday-loans-united
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