It\u2019s easy to miss important parts of the Delta. At first glance, a juke joint could be mistaken for a roadside shack. A flooded field is actually the start of a productive rice crop. And a neon-lit payday lender might be a debt trap.<\/p>\n\n\n\n
Also perhaps overlooked, immigrant communities in the Delta might\nprovide a useful lens to see why Arkansas and Mississippi have higher unbanked\nand underbanked rates than the rest of the United States. As noted in a 2017\nNPR story<\/a>, the physical and cultural isolation within many such communities\ncan breed financial isolation. There can be language barriers. There might be\npressure just to fit in, fly under the radar, or not ask for help until you\nunderstand and trust the system. <\/p>\n\n\n\n According to a 2016 FDIC working paper, immigrants from\nMexico or Latin America are more likely to use nonbank financial services even\nif they are banked. The report continued to explain that the use of nonbank\nfinancial services might reflect underlying cultural and structural\ndifferences.[1]<\/a> <\/p>\n\n\n\n For instance, in 2017, the consumer bank participation rate was only 35 percent in Mexico.[2]<\/a> So, if you\u2019ve never had a banking relationship in your native country, then when you move to a new place, joining the financial mainstream can be difficult for at least two reasons: 1) you might be unfamiliar with how banks work in general, and (2) you\u2019re unfamiliar with the country and systems within which banks work.<\/p>\n\n\n\n It also stands to reason that the information asymmetry\ncould lead people to pay for the convenience of check cashers or other\npredatory options, without knowing there\u2019s another choice out there. <\/p>\n\n\n\n A new working paper from the Federal Reserve Bank of Atlanta\nillustrates that as income increases, so do payment options.[3]<\/a>\nLower income consumers are less likely to have credit or debit cards, once\nagain perpetuating a negative feedback loop and making alternative financial\nservices more attractive. <\/p>\n\n\n\n Research has also asserted that immigrants might be able to better\ntraverse these financial roadblocks when they are in a cultural enclave of\npeople like them. They are less likely to use alternative financial services if\nin a concentrated ethnic enclave.[4]<\/a>\nUnfortunately, Arkansas and Mississippi aren\u2019t known for such dense,\nhigh-social capital communities. <\/p>\n\n\n\n So, the complexity of the system and the different norms\nthat Americans have about banking can help explain why immigrants might have a\nharder time building wealth. For instance, the 7 percent of Hispanic or Latino\npeople in Arkansas and 3 percent in Mississippi might build more wealth if the\nsystem was easier to navigate.[5]<\/a>\n<\/p>\n\n\n\n But beyond an understanding of the system, there\u2019s the\nelement of trust \u2013 or lack thereof \u2013 that contributes to a higher unbanked\npopulation. As Thomas Friedman said in his book, Thank You for Being Late, <\/em>\u201cCollaboration moves at the speed of\ntrust.\u201d[6]<\/a>\n<\/p>\n\n\n\n According to an FDIC survey, the second most commonly cited\nreason that unbanked households don\u2019t pursue accounts in the financial\nmainstream is that they don\u2019t trust banks.[7]<\/a>\nUnderserved folks have reason not to trust the financial sector. <\/p>\n\n\n\n It is easy to be distrustful when banks have actively disinvested in your community. From 2012 to 2017, 794 rural counties lost a combined 1,553 bank branches.[8]<\/a> This makes a difference in rural states across the South, where the nearest bank branch might be a 15- or 20-mile drive from your home. <\/p>\n\n\n\n If you live in a so-called \u201cbanking desert,\u201d there are fewer places to get a loan to buy a house and build individual wealth. There\u2019s also less access to capital to start a business. Further, this creates a negative feedback loop: because there aren\u2019t safe places to access financial services or build wealth, people often resort to paying fees or exorbitant interest rates for alternative financial services. As this effectively siphons wealth from a community, it becomes harder for the remaining banks to operate. <\/p>\n\n\n\n Banking deserts don\u2019t just exist in rural areas, though. In Little Rock, a census tract that includes part of the Heights has 14 bank branches.[9]<\/a> Meanwhile, a census tract just south of I-630 at the 12th Street Corridor only has one credit union branch.[10]<\/a><\/p>\n\n\n\n From lack of familiarity to trust or simply access to a\nfinancial institution, there are many reasons why unbanked and underbanked\nrates are higher across the South. <\/p>\n\n\n\n There are opportunities in these challenges. Not only is addressing the unbanked and underbanked problem the right thing to do, but serving the underserved is a smart business decision. It makes sense to be wealth builders for everyone, everywhere. [1]<\/a>\nNorthwood, Joyce and Sherrie Rhine. 2016. \u201cUse of Bank and Nonbank Financial\nServices: Financial Decision Making by Immigrants and Native Born.\u201d Federal\nDeposit Insurance Corporation. <\/p>\n\n\n\n [2]<\/a>\nWorld Bank. 2013. \u201cAccount at a formal financial institution (% age 15+).\u201d\nGlobal Financial Development Database. https:\/\/www.worldbank.org\/en\/publication\/gfdr\/data\/global-financial-development-database<\/a><\/p>\n\n\n\n [3]<\/a>\nShy, Oz. 2020. \u201cLow Income Consumers and Payment Choice.\u201d Federal Reserve Bank\nof Atlanta Working Paper Series. https:\/\/www.frbatlanta.org\/-\/media\/documents\/research\/publications\/wp\/2020\/02\/20\/low-income-consumers-and-payment-choice.pdf<\/a><\/p>\n\n\n\n [4]<\/a>\nNorthwood and Rhine. 2016. <\/p>\n\n\n\n [5]<\/a>\nPolicyMap. \u201cEstimated percent of all people who were Hispanic or Latino,\nbetween 2014-2018.\u201d <\/p>\n\n\n\n [6]<\/a>\nFriedman, Thomas. 2016. Thank You for\nBeing Late: An Optimist\u2019s Guide to Thriving in the Age of Accelerations<\/em>.\n359. <\/p>\n\n\n\n [7]<\/a>\nApaam, G., Burhouse, S., Chu, K., Ernst, K., Fritzdixon, K., Goodstein, R.,\nLloro, A., Opoku, C., Osaki, Y., Sharma, D., & Weinstein, J. 2018. \u201c2017\nFDIC National Survey of Unbanked and Underbanked Households: Executive\nSummary.\u201d https:\/\/www.fdic.gov\/householdsurvey\/2017\/2017execsumm.pdf<\/a><\/p>\n\n\n\n [8]<\/a>Hayashi,\nYuka. 2019. \u201cBank Branch Closings Weigh on Rural Communities, Fed Finds. Poorer\nresidents and large minority populations are reported to be particularly hard\nhit.\u201d The Wall Street Journal.<\/em> https:\/\/www.wsj.com\/articles\/bank-branch-closings-weigh-on-rural-communities-fed-finds-11574722948<\/a><\/p>\n\n\n\n [9]<\/a>\nPolicyMap. \u201cBank Branch Offices.\u201d FDIC.<\/em>\n<\/p>\n\n\n\n
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