"Bank deserts" harm underserved communities
The term "food desert," a neighborhood without sufficient access to healthy foods, has quickly become an accepted phrase for anyone thinking about cities. Now the Federal Deposit Insurance Corp. has released data suggesting that the same phenomenon has been occurring with newly opened bank branches. They've been able to identity a pretty strong positive correlation between the siting of new banks and the median income of an area. Out of more than 10,000 branches opened in the last five years, only 1 out of 10 were placed in an urban location with high minority populations.
So what? Given all of the toxic asset and bank failure mayhem being announced everyday, it may seem that folks are better off if Citigroup doesn't want to set up shop on their block. However, without a physical bank within easy reach, many low-income residents have had no choice but to pay higher fees for check-cashing services, often businesses that also wave fast money in their face with unreasonable interest rates attached. The same demographic that may be more likely to receive a physical paycheck and less likely to have access to internet banking happen to be the ones who are being underserved.
I see this every day. There's a "payday loan" operation and two "Quik Mart"-type convenience stores right across the street from me. Why is it that expensive low-quality food and expensive low-quality financial services cluster together? It's probably because of a lack of market options due to spatial barriers and transportation infrastructure deficiencies. We can have a conversation about personal responsibility to eat well and make sound financial decisions, but as this data and my own experiences indicate, these decisions too often run into the simple barriers of geography.
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