Banking deserts are areas with inadequate banking services. They are usually in rural space due to being less populated, thus there are less profit opportunities for large institutions.
Especially vulnerable to the issues associated with banking deserts are low-income residents and the elderly. If basic financial services are unavailable, residents become "vulnerable to predatory lenders and pricey check cashers".
In the US, banking deserts are more often found in communities of color than they are elsewhere.
History
Banking deserts had been mentioned as early as the 1870s, by Tullio Martello and Augusto Montanari in their book, ''Stato attuale del credito in Italia e notizie sulle istituzioni di credito straniere'', regarding
Italian unification. The term had also been used to describe the situation in
Newfoundland and Labrador
Newfoundland and Labrador (; french: Terre-Neuve-et-Labrador; frequently abbreviated as NL) is the easternmost provinces and territories of Canada, province of Canada, in the country's Atlantic Canada, Atlantic region. The province comprises t ...
during the period of 1993 to 2003, when the
Canadian provinces had lost 23% of its bank branches.
Bank deserts have been growing in the United States since the 1990s. Due to federal deregulation, mainstream banking companies were allowed to focus the most on more populated and profitable areas and close banks that didn't produce much revenue, which were usually those in low-income communities and places consisting of people of color. This made way for higher-priced
alternative financial services
An alternative financial service (AFS) is a financial service provided outside traditional banking institutions, on which many low-income individuals depend. In developing countries, these services often take the form of microfinance. In develo ...
, such as
payday lenders
A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a short-term unsecured loan, often characterized by high interest rates.
The term "payday" in payday loan refers to ...
and
check-cashing stores, to occupy these areas.
The amount of banking branches in the United States peaked at 99,163 during the
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
and fell to 88,070 by 2018; major cities that have had banks close the most in non-white areas include
Baltimore
Baltimore ( , locally: or ) is the List of municipalities in Maryland, most populous city in the U.S. state of Maryland, fourth most populous city in the Mid-Atlantic (United States), Mid-Atlantic, and List of United States cities by popula ...
,
Chicago
(''City in a Garden''); I Will
, image_map =
, map_caption = Interactive Map of Chicago
, coordinates =
, coordinates_footnotes =
, subdivision_type = Country
, subdivision_name ...
,
Philadelphia
Philadelphia, often called Philly, is the List of municipalities in Pennsylvania#Municipalities, largest city in the Commonwealth (U.S. state), Commonwealth of Pennsylvania, the List of United States cities by population, sixth-largest city i ...
,
Detroit
Detroit ( , ; , ) is the largest city in the U.S. state of Michigan. It is also the largest U.S. city on the United States–Canada border, and the seat of government of Wayne County. The City of Detroit had a population of 639,111 at t ...
and
Las Vegas
Las Vegas (; Spanish for "The Meadows"), often known simply as Vegas, is the 25th-most populous city in the United States, the most populous city in the state of Nevada, and the county seat of Clark County. The city anchors the Las Vegas ...
.
Impact
It's much harder for citizens to build wealth, credit, and savings with only expensive alternative services and without a physical bank nearby.
In addition, children who grow up in banking deserts are less likely to be exposed to parents and other adults using local banks for finances, increasing their chances of financial illiteracy as they grow older.
A 2020 ''
Making Sen$e'' piece that studied banking deserts in Native American reservations found they had very poor credit scores as a result of financial illiteracy and a lack of trust in banking.
See also
*
Book desert
*
Food desert
Food is any substance consumed by an organism for nutritional support. Food is usually of plant, animal, or fungal origin, and contains essential nutrients, such as carbohydrates, fats, proteins, vitamins, or minerals. The substance is ing ...
*
Medical desert
Medical desert is a term used to describe regions whose population has inadequate access to healthcare. The term can be applied whether the lack of healthcare is general or in a specific field, such as dental or pharmaceutical. It is primarily used ...
*
Transit desert
A transit desert is an area with limited transportation supply. Developed from the concept of food deserts, various methods have been proposed to measure transit deserts. Transit deserts are generally characterized by poor public transportation o ...
*
Underfunded public school system
References
Bibliography
*
Banking terms
Urban decay
{{business-term-stub