Community Development Banking

Posted by A. Caleb Hartley on March 21st, 2008 filed in banking, finance

Apologies for my long absence – I’ve been quite sick this week, and have been unable to post as regularly as I would have liked (read: at all).

To finish up – for now – environmentastic!’s eco-finance series, we’ll discuss one last way to make a difference with your money:  community development financial institutions (CDFIs).

A CDFI can be considered “self-help credit.”  This idea has been around nearly as long as banking itself – for instance, New York City had immigrant guilds in the late 1800s, and in the 1930s, African-American communities created community development credit unions. Many – if not most – of these institutions were created because traditional banks or credit unions ignored a community of people.  So the community chose to help itself.

One of the largest – perhaps THE largest – community development financial institution is Shore Bank.  It was started in 1973 as South Shore Bank on the south side of Chicago.  Since then, Shore Bank has grown and expanded into a $2 billion organization with offices in Chicago, Cleveland, Detroit, Washington, Portland, Oregon, and Michigan’s Upper Penninsula – and more; Shore Bank consults around the world.

A CDFI is defined as “a unique entity established to provide credit, financial services, and other services to underserved markets or populations” by wikipedia.  In the United States, financial institutions can be registered to officially become CDFIs through the Community Development Financial Institutions Fund, and it is believed that there are potentially thousands of institutions that serve the needs of underserved communities but have not registered as CDFIs.

In a broad view, many credit unions and other financial institutions could be considered a form of CDFI, since many credit unions only allow people who live in certain communities or who are employed in certain industries to become members of the institution.  Wings Financial Federal Credit Union, for instance, is a credit union for employees who work in the aviation industry.  While not, technically, a CDFI, these kinds of organizations do serve a specific community of people – whether it is a community based on proximity, industry, or interest. 

Wikipedia’s community development financial institution entry includes a list of notable CDFIs – including Alternatives Federal Credit Union in Ithaca, NY and Dryades Savings Bank in New Orleans, LA, among many others. 

I believe that one of the most important things that can be learned from CDFIs is that choice is what makes the difference – how you choose to spend your money – invest your money – makes the difference between maintaining the status quo and continuing to increase the gap between the rich and poor, to continue to degrade the environment, to continue to support sweatshops and slave labor, or to bring downtrodden communities help, to work with the environment instead of against it, or to pay a fair wage for fair work.

Namaste,
A. Caleb Hartley

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How could a community development financial institution help your community, or a community near you that is underserved by traditional institutions? Has your community benfitted from such an organization? Leave a comment to tell us all about it!

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