Learn More: Financial Institutions

Metadata

Variable Definitions:
Financial Institutions: The number of banks and credit unions in a given area
Source:
Reference USA Business Database
Years Available:
2018
Geographic Unit:
Census Tract

Why are these Variables Important to Measure?

Financial Institutions
The number of banks in a neighborhood is a useful measure of residents' access to mainstream financial services like small business credits and mortgages. Since the financial crisis in 2009, almost 5,000 bank branches have closed in the U.S., creating what some researchers are calling "banking deserts." A banking desert is a census tract that has no bank branch within ten miles of the center of the census tract. This can be especially problematic for elderly and low income residents without access to reliable transportation and can leave such communities vulnerable to predatory lenders and expensive check cashiers.
Credit unions can serve as key resources for community development through small loans that traditional banks are often unwilling to give. Credit unions differ from traditional banks in their not-for-profit,member-owned structure. They are governed in a democratic style with a volunteer board of directors and usually place a large emphasis on local community relationships. Because of their not-for-profit structure, credit unions are often able to make small loans to low-income communities at competitive rates that for-profit banks would be unwilling to give. As a result, they can serve as a key component of the development of local business and infrastructure in low-income communities.

Sources:
Morgan, Donald et al. "How do bank branch closures affect low-income communities?" World Economic Forum, 7 March 2016. Link
Tansey, Charles D. "Community Development Credit Unions: An Emerging Player In Low Income Communities." The Brookings Institution, 1 September 2001. Link
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