Bank closures present access challenges for rural communities

Cashing a check, talking about loans, that’s why we go to a bank. But at Southern Bancorp, there’s a little more.

“Southern Bancorp is a CDFI, and that stands for community development financial institution,” explained Nathan Pittman, senior vice president of policy and communications at Southern Bancorp. credit unions, loan funds that exist to serve an underserved population.

A CDFI is different from some of the larger banking institutions.

“I think it really comes down to one word, intentionality. CFDIs are very intentional in their work. We are specifically going to serve an underserved population. For us, it’s rural America,” he said.

This is where credit counselors like Charlestien Harris come in.

“I had a lot of people to help me get back on my feet, so I promised the Lord that when I got back on my feet, I would come back and help others and that’s why I’m so passionate about this. I do, because I’ve been rock bottom,” said Harris, credit counselor at Southern Bancorp.

Instead of turning someone down for a low credit score, for example, Harris works with clients to get them where they want to be.

“We make about 7,000 loans a year, and just over half of them are under $10,000,” Pittman said.

Rural communities have been slowly forgotten by banks as brick-and-mortar locations close at record rates.

“In this country, we’ve seen a drastic reduction in the number of bank branches over the years and the pandemic has exacerbated that,” Pittman said.

It’s an issue the National Community Reinvestment Coalition has tracked for years.

“Between 2012 and 2018, we saw a 31% drop in small banks and an almost 12% drop in intermediary banks,” said Jesse Van Tol, CEO of the National Community Reinvestment Coalition. “These are the types of community banks that you see in rural communities and low-income communities.”

A study by the coalition shows that more than 13,000 bank branches closed in the United States between 2008 and 2020. This represents almost 14% of all branches.

“We are seeing a particular impact on small business lending, a large portion of small business lending is relationship banking. It is always face to face,” Van Tol said.

Foe Kinchen O’Keefe, having banks physically in your community is important.

“In Clarksdale, Mississippi, we need that human connection, that person to person. Often these bank tellers are the first to see a need for their customers,” he explained.

O’Keefe has lived there all his life and now fulfills the role of Director of Tourism for the area. But during his lifetime, he played a big role in the revitalization of this city, where the banks gave him what he needed to bring the place back to life.

“The bank saved this inner city from dying. It was dying. It was right there, at death’s door,” he said. “The bank has nothing to do with when I was young. I totally changed. It’s a totally different industry.

Now there is also a heavy reliance on technology, which is not always an option for people in rural areas.

“A lot of people don’t have access to phones. Many people who might have access to phones don’t know what an app is. It’s hard for most people to get through the process,” O’Keefe said.

“For younger people, they can build an app and the first thing you’ll get from the average person is what an app is,” Harris said.

The lack of a physical bank presence has also left the market open to payday lenders in the region.

“When a person uses a payday lender, they’re paying a lot more in fees and interest than they would at a traditional financial institution,” Pittman said.

A handful of storefronts exist within a one-mile radius of Southern Bancorp’s physical location in Clarksdale, Mississippi.

“You won’t see many payday loan stores on the wealthy side of town and I think that says a lot about who they focus on,” Pittman said.

Southern Bancorp is expanding its presence in more rural communities to fill a void left by other banks and provide support to those in need.

“Our hope is that with all the attention that has been given to CDFIs during the pandemic, more people will seek out a CDFI, see how they can engage with them, learn about the products and services they offer, and see if they can help them on their own wealth-building journey,” Pittman said.