Community effort seeks solutions to prevent banking deserts
A federal credit union has agreed to establish a presence in the Southbridge neighborhood of Wilmington and the neighboring Route 9 Corridor— as a result of a grassroots effort to bring financial services to the area that is underserved by banks.
Delaware Public Media’s Sophia Schmidt reports on efforts to keep banking deserts from emerging in the First State.
Monique and Tarik Wheeler exit a liquor store located south of Wilmington on a rainy Friday night. They came there to cash a check.
“Four dollars to cash a check,” said Monique. “[Out of] fifty dollars. They took four dollars out of it. That’s a lot.”
Tarik says many residents of the Route 9 Corridor, where they live, go to liquor stores to cash paychecks because banks are out of reach. “The bank’s not really near our way anyway, and most people are either on bikes or walking, so it’s out of range. So we just work with the liquor stores, and that’s how they make their money off of us.”
“If [there] was a bank, I’d go straight to the bank, instead of here,” said Monique.
Tarik agrees. “Because they’re not taxing us for the money to come back. We could just get all of our money back and not [just] a little bit of it.”
Residents of the Route 9 Corridor and south Wilmington are beginning to get access to more financial services, thanks to an effort by area residents known as the Banking Desert Initiative.
Del-One Federal Credit Union opened a new ITM, or interactive teller machine, at the Rose Hill Community Center along Route 9 earlier this month. Del-One also plans to open a branch at the former Elbert-Palmer Elementary School in Southbridge, just to the north of the corridor.
"If it was a bank, I would go straight to the bank, instead of here." - Monique Wheeler, Route 9 Corridor resident
The credit union approached the Banking Desert Initiative after the project gained publicity this summer.
Claymont resident Larry Lambert started the project. He says he got the idea when a friend who worked on Market Street in Wilmington asked for a ride home to the Route 9 Corridor.
“She said to me, Larry, can we stop at the liquor store so I can cash my paycheck? And I thought to myself—There are no banks in this area, are there?” he said. “When I started going back, I couldn’t even think of a bank anywhere near here. So when I did my research, I found out the nearest bank is 2.8 miles away from [the Route 9] Library ... which makes it that much farther away from the rest of the Route 9 Corridor. ”
Google Maps shows an M&T Bank branch in Old New Castle at the southern tip of the Route 9 Corridor, roughly 3 miles from the Route 9 Library at the corridor’s center. There are several bank branches in the City of Wilmington to the north of the corridor, with the closest— a Chase Bank on N. Walnut Street— almost three miles from the library. There is also a Wells Fargo branch on nearby Route 13, more than 2.5 miles away.
Several studies, including one by the Federal Reserve Bank of New York (New York Fed), have defined a banking desert as a census tract containing no bank branches and with no branches within ten miles of its center.
"'Banking desert' is a relative term. It's what services do I get, as opposed to the other person." - Dr. Russell Kashian
By this definition, most banking deserts are located in rural areas of the western and southwestern United States. A 2018 study by the New York Fed using 2010 census data and 2017 bank branch location information from the Federal Deposit Insurance Corporation (FDIC) found no banking deserts in Delaware. It reports 4.8 percent of Delaware residents are “unbanked,” or lack bank or credit union accounts.
Dr. Russell Kashian, professor of economics and director of the Fiscal and Economic Research Center at the University of Wisconsin-Whitewater, has used another definition of “banking desert” in his research. He defines the country’s banking deserts as the five percent of census tracts with bank branches furthest from their centers.
“Banking desert is a relative term,” said Kashian. “It’s what services do I get, as opposed to the other person.”
The Route 9 Corridor was an early African-American suburb. The corridor now contains African-American, white and Hispanic residents, but most neighborhoods within the corridor are racially and ethnically segregated, according to a 2017 plan for the corridor by the Wilmington Area Planning Council (WILMAPCO). Southbridge and the neighborhoods on the northern end of the corridor are predominantly African-American, while the neighborhoods on the southern end of the corridor are predominantly white.
Median annual household income in Southbridge and the corridor neighborhoods range from around $21,000 to $62,000, according to the 2017 WILMAPCO plan.
Kashian’s research has found a link between banking deserts nationwide and demographics. “Your population in your neighborhood, as the African-American percentage increases, so does the distance to the bank branch.”
Kashian says the same goes for the proportion of the population living below the poverty line. This link between poverty and banking deserts presents a problem.
“People who don’t have access to banks tend to be poorer, and their fees go up,” said Kashian. “And they don’t have the discretionary income to pay these extra fees to begin with.”
Kashian says the higher fees associated with cashing checks at liquor stores, payday lenders, and even ATMs are due to the fact that— in banking deserts— these outlets have a monopoly.
Route 9 Corridor resident and Banking Desert Initiative co-chair Ronald Handy, Sr., has seen the cycle of relying on payday lenders.
“You don’t have the money to pay them back, but you can pay a percentage of what you owe to roll it over, and really just take the loan out again. Then you pay another percentage to roll it over to take the loan out again. What started out as $500, you’re now at almost $3,000,” he said. “You never catch up that way.”
Dunleith resident and carpenter Clayton Joyce uses a bank now, but remembers his experiences cashing his paychecks at a liquor store on Route 9.
“Let’s say [I brought] a check for $348, and [the liquor store owner] is giving you like $327 or something weird back,” he said. “But you don’t really have any other options.”
Kashian says it is understandable that people without easy access to a bank use these expensive services. “When you factor in the distance, the time and the cost of getting from your residence to that actual bank branch, it actually may be greater than going to the liquor store. So people are using rational behavior that’s forced upon them because of a lack of access.”
The new financial services Del-One plans to bring to the Route 9 and Southbridge area may change this equation.
Del-One CEO Ronald Baron says for members of the credit union, the ITM now open at the Rosehill Community Center has more functionality than a normal ATM. “It acts as an ATM, but also you can interact with a live teller and therefore be able to have financial transactions done.”
Del-One staff will also visit the community center twice a week to answer questions and enroll those who qualify into the credit union.
The branch planned for the former Elbert Palmer Elementary School in Southbridge will share the space with the International Longshoremen’s Association’s new hiring hall and a Port of Wilmington training center planned for the building.
“Gulftainer has invited us to share part of the building where we will be able to locate a branch, which will be used not only by the workers at Gulftainer, but also by the community,” said Baron.
Baron hopes the branch could open within a year, but says the timeline is dependent on Gulftainer’s renovation schedule.
Marie Reed, president of the Southbridge Civic Association, says her community is excited about the project. “It’s an opportunity for us to show financial literacy to our citizens and our community and to our young people— so that they don't have to travel for miles to pay a bill. They can go right to the credit union and pay their electric and phone bill.” She adds they look forward to having “a bank that’s [theirs].”
Baron says Del-One plans to offer financial literacy training in the community after the start of 2020, and later work with community organizations to establish additional banking availability there.
“We don’t know what that’s going to be like,” he said. “It could be a mobile branch— one that looks like a minibus, but it’s a branch. Due to technology, we have a lot of flexibility. And we don’t have a book — there’s no book written on how a financial institution begins to do this in a community.”
Baron says the goal is improving the lives of residents of the Route 9 Corridor and Southbridge— and that Del-One is “in it for the long haul.”
"The problem is going to get worse over the next ten years, not better." - Dr. Russell Kashian
That commitment may be swimming against the tide. According to the advocacy organization National Community Reinvestment Coalition, the country lost more than 6 percent of all its bank branches between 2008 and 2016— mainly in urban areas.
Kashian says this trend is not likely to turn around. “Banks are continually looking at branches that are not profitable. If you don’t have wealth in your community, that’s going to basically define ‘not profitable.’ So the problem is going to get worse over the next ten years, not better.”
But Kashian says the Del-One’s investment could prime the pump for more banks to move into the Route 9 area. He says more choice means more competition, and lower rates.
“I think the credit union, since they’re a nonprofit, have a greater obligation,” he said. “What I would hope is that their success would basically alert commercial banks, which are more likely to make business loans, their success would alert other people that there’s a market here, and there’s money to be made.”
Route 9 resident Ron Handy is hopeful the project translates into a brighter future for his neighbors.
“Dealing with financial literacy, homeownership, having accounts— not going to the liquor store, check cashing places, giving away all the money,” he said. “You can actually see how much money you can recoup that you were just spending negatively. Now you can actually have something for your kids, to pass on to.”