In the fight to bank the unbanked, the banks themselves are one of our most important allies. By law, all banks have to dedicate some of their resources towards community initiatives- often financial education- but for many banks this is just another regulation. They satisfy the bare minimum and move on even if they have low participation. For many community banks and credit unions across the country, though, reaching the undeserved is a higher priority. We want to highlight their efforts. Following on their ideas, we can build better apps to serve the unbanked.
One of these community banks is the Albina Community Bank in Portland, one of the regions few CDFIs. CDFIs are “community development financial institutions”, and to be classified as one requires a proven record of giving back to an under-served community. They “provide a unique range of financial products and services in economically distressed target markets, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers, flexible underwriting and risk capital for needed community facilities, and technical assistance, commercial loans and investments to small start-up or expanding businesses in low-income areas” according to the CDFI website.
Cheryl Cebula, Chief Operating Officer of Albina identifies something unique about the culture at Albina, something lacking in the bigger banks. Most of the employees are involved in the community. Some of them used to work for the bigger banks, but decided they wanted to work for an organization that would give back more.
That all sounds great, but how do they really do it? Check out the 2010 Community Impact Scorecard:
- 1,307 volunteer hours by employees
- 466 non-profit organization customers
- $188,721 worth of micro-loans to businesses
- $2,257,292 worth Small Business Administration (SBA) loans
- Over 55% of their loans go out to low-to-moderate income people.
- Savings accounts with low points of entry for those with bad credit
- Local partnerships to bring financial education and internship possibilities to local schools
For a small community bank like Albina, these are fantastic numbers, but they do come with risk. It’s very difficult for a bank like this to be profitable, and Albina got a huge boost from the Recovery and Reinvestment Act, which gave them the resources to distribute special SBA-ARC loans that would be free interest for a year.
As hard as things can get, though, Ms. Cebula says she’s still incredibly inspired when she sees a small business that was able to stay open or get started because of the loans Albina is willing to risk.
So what can we take away from this as developers? Here are some questions to start the brainstorming.
First, it’s good to understand our audience and that many of them struggle with bad credit. The worse the credit, the harder the investments for the banks. Can apps be designed to help these banks that want to reach out? If we make an app about financial education, these kind of banks are potential key partners.
A way to locate CDFIs? Could the community impact scorecard of Albina turn into an app- not to be marketed at consumers, but at banks looking to polish their image? How about a step-by-step tutorial on ways to improve your credit utilizing social media and local partners to track progress?
Or can even just telling the story of Albina be enough to start restoring trust in the banking system?
Truly a great survey of the field based on a local model. In this recent NY times article, the need is underscored again. http://www.nytimes.com/2011/02/23/business/23banks.html?_r=1&emc=eta1
As to your thoughts relating to how apps and internet could help these banks reach their target audience and how the people who need it most can benefit from honest banking practices. I think you’re right on the money with the financial literacy part.
What if we created a white-label literacy app that any community bank could lease for a small fee? It would have social features and use our great database of financial literacy information along with simple calculators to encourage healthy banking and grow trust and membership for the bank.