#680 – Where have all the bankers gone?

One of the keys as defined in my book, BoomtownUSA – The 7 ½ Keys to Big Success in Small Towns, is Maintaining Local Control. In BoomtownUSA, we shared how towns with local ownership of financial institutions, newspapers, retail stores, and manufacturing plants, to name a few, have a much greater chance of being strong and vibrant than the towns without. Local banks have as much to gain from an investment as the local business folks and the town itself; they’re all in it together. Often, what stalls a community’s growth is not a lack of vision or leadership, but a lack of capital. That capital is often more readily available through locally owned banks. With that being said, we wanted to pass along the following piece by Brian Depew, the Executive Director at the Center for Rural Affairs, a nationally recognized advocacy and development organization headquartered in Lyons, NE.

Where have all the bankers gone?
By Brian Depew, Mar. 8, 2018

The Center for Rural Affairs first examined consolidation in the banking industry in a 1978 report, “Where Have All the Bankers Gone?”. We have long understood the critical link between credit, who has access, who doesn’t, and how it shapes communities.

That’s why a recent report in the Wall Street Journal caught my eye. It detailed how banking in rural communities has fared in the years since the financial crisis.

The report found that small business lending in rural areas has dropped by half since 2004. Loans now account for less than 10 percent of total small business lending, according to the analysis.

There was a correlation between the closure of local banks and a declining rate of new business startups two years later.

The challenge is compounded by the closure of many rural bank branches. Larger banks often buy smaller banks, then close branches in more rural markets. There are now 625 rural counties in the country without a community bank. There are 37 counties without a single bank, and 115 counties served by just one bank.

The report told the story of one small business owner who now drives 19 miles each afternoon to make deposits and get cash.

When we lose access to credit, we risk losing control of our future.

Access to credit is fundamental for the whole community. Few among us have started a business or bought a house without a loan. Schools, child care centers, and community infrastructure all rely on credit.

There are bright spots. In many areas, community banks and credit unions still thrive. Large banks, often due to the requirements of the federal Community Reinvestment Act, make low interest investments in Community Development Financial Institutions (CDFIs).

You can take action, too. What credit gaps exist in your community? What local response might be possible? Individual communities are setting up revolving loan funds to invest in local businesses, housing, and new value-added agricultural enterprises.

A network of community banks, credit unions, and nonprofit lenders can knit a new fabric of local banking. Doing so will take our active involvement. Our success will help us control our future.