Banking on our communities

By Susan Taylor and Andy Loving

Where you bank is first on the list of ten things we can do as consumers to make a difference to people and planet, according to The Better World Shopping Guide, a well-known primer that rates the sustainability of companies and specific products. Number one? Really?

How can where you bank make so much difference? U.S. banks have more than $7 trillion in loans circulating in the domestic economy.  That’s a lot of capital and a lot of power to decide who has access to that capital. Because banks seem so generic, we tend to choose our bank by convenience – can I stop by its ATM during lunch hour? – or by services we want, such as online bill paying or free checking. But banks are far from generic.

Since the bank bailouts of 2008, the “Move Your Money” campaign has called for taking capital, and therefore power, away from multinational banks and moving it to local banks and credit unions.  The campaign has focused attention on the impact of where we bank, emphasizing that local banks lend to local small business and create local jobs.

It’s not as easy as just going local, though. The deeper question is how your bank or credit union contributes to the quality of life for everyone in the community.   By that criterion, some local institutions may not measure up.  For example, a local bank in our area (Louisville, KY) has loaned enormous sums to payday lending companies and tax preparation companies that promote refund anticipation loans; these predatory lending practices exploit people on the financial edge and undermine our community.

It’s not easy to change our banking habits, either. Changing where we bank may mean having to learn new ways of handling our accounts as well as updating our automatic bill paying instructions (ouch!). If that’s daunting, please consider this: These one-time changes for us can be life-changing for the people who may benefit from our deposits.

What if you could put your money in a bank that intentionally loans its capital in lower-income communities for affordable housing, child care centers, small businesses, and energy-saving building upgrades?  Would it be worth going a little further to an ATM to be part of the difference you could make with your deposits?

What if you could hold your CD at a credit union that makes loans to people affected by Hurricane Katrina or one that focuses its loans to small businesses preserving the environment of the Pacific Northwest? Would that be worth changing your banking habits to include mailing in a deposit if necessary?

If you’re not accustomed to thinking about banks, it may be hard to know where to start looking for one where you can feel good about the difference your deposits make.  Here are some places to begin:

  • Look for community development financial institutions (CDFIs). CDFIs create economic opportunities for people who have traditionally not had open, fairly-priced access to financial services.
  • Consider banking online. If the community development mission appeals to you regardless of location, some CDFIs offer online banking. There are even cooperatives among some CDFIs that allow you to use ATMs at partner institutions in your area if your account is at a CDFI in another city, overcoming a potential hurdle to online banking
  • Ask your bank whether its CRA rating is “outstanding,” which indicates that it exceeds the minimum requirements of the Community Reinvestment Act. That law requires that banks provide financial services to all parts of their communities, including low-income neighborhoods, but some banks are more committed to these efforts than others.
  • Examine the thorough analysis of your bank using the “database tool” on the web site of the National Community Investment Fund.

If we are serious about making a difference for people and the planet, and committed to living out our values in the 21st century economy, where we bank is a crucial choice.

(By the way, the other nine items on The Better World Shopping Guide’s list of ways to change the world through our consumption choices are gasoline, supermarket, retail stores, car, seafood, chocolate, coffee, credit card and cleaning products.)

This article originally appeared in the Autumn 2011 Natural Investments newsletter

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Susan Taylor

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