kate_sept 2004/Getty Images
- The FDIC and NCUA track and define bank and credit unions as minority depository institutions (MDIs).
- An MDI is owned or led by Black Americans, Native Americans, Hispanic Americans, or Asian Americans.
- An MDI often serves low-income, rural, and underserved communities.
Low-income and underserved groups often have limited banking opportunities to build wealth. Government agencies, such as the Federal Deposit Insurance Corporation and National Credit Union Administration, have created programs to recognize institutions that serve these communities in an effort to provide more access to banking products and tools.
One type of financial institution that's highlighted by the FDIC and NCUA is a minority depository institution (MDI). If you're curious about minority-owned banks and credit unions, here's what you should know.
What is a minority depository institution?
An MDI is a financial institution recognized under the FDIC's Minority Depository Institution Program or the NCUA's MDI Preservation Program. The FDIC tracks and monitors all federally insured banks that meet MDI requirements, while the NCUA oversees all federally insured credit unions.
Each agency has its own definition of an MDI, but the requirements are similar. The FDIC and NCUA state that banks or credit unions must be primarily owned or led by Black Americans, Native Americans, Hispanic Americans, or Asian Americans. Financial institutions may also be required to serve these respective groups in their communities.
Why is a minority depository institution important?
Manuel Chinea, chief operating officer at the Hispanic American-led Popular Bank, says that MDIs tend to share the common goal of addressing banking needs for underserved communities.
"It's the feeling that there is a vacuum in that community," says Chinea.
In his experience, Chinea says that MDIs have notably helped Asian Americans and Hispanic Americans who may not have culturally assimilated into US culture by providing strong bilingual services and breaking down personal finance concepts.
"A lot of times they come from backgrounds or countries where credit was not a good thing. They didn't want to owe anything, so they would work and accumulate cash to buy things cash," explains Chinea. "But the notion of having to operate that way in the US doesn't make sense because the reality is it can take you 20 years before you can buy a home under that premise."
According to a 2019 report by the FDIC, MDIs offer a greater share of their mortgages and small business loans to low-income and underserved groups when compared to non-MDIs. MDIs are often located in areas with more of these groups, and as a result, they also bridge significant banking gaps for unbanked groups.
What financial resources are available at minority depository institutions?
Many MDIs have special bank products or services that you may not be able to find at other financial institutions. Below is a brief overview of some of the financial resources available:
- Second chance bank accounts: A second chance bank account is offered to people who may have had an involuntary bank account closure or poor banking history. The accounts are a temporary banking tool. Once you build back your credibility, you'll be able to open other bank products.
- Secured credit cards: A secured credit card may be used by people with low credit scores or minimal credit history. Credit card companies won't carry out a credit check, and the limit of the secured credit card will depend on how much money you deposit upfront.
- Prepaid debit cards: A prepaid debit card is a card that carried funds you load onto it. Prepaid debit cards can be used to make purchases or withdraw money from ATMs. Keep in mind a prepaid debit card isn't normally tied to a bank account.
- Nuances in banking relationships: An MDI might provide bilingual online banking services or address cultural affinities that aren't addressed by mainstream banks. Many will also reflect the makeup of their community since local banks and credit unions tend to provide local job opportunities.
- Easier opening requirements: Some MDIs have Bank On certified accounts. To receive certification, bank accounts must fulfill specific criteria by the non-profit organization, such as low minimum opening requirements and minimal bank fees.
Where can you find minority depository institutions?
MDIs make up a small percentage of insured financial institutions. As of December 2021, the FDIC has 143 banks listed under its Minority Depository Institution Program. Meanwhile, the NCUA last reported regulating 520 credit unions with MDI designation in June 2021.
MDIs tend to be concentrated in particular regions, so your options will largely depend on where you live.
Native American-owned banks — which are the smallest MDI group — are primarily located in the state of Oklahoma.
Most Hispanic American-owned banks can be found in California, Florida, and Texas. Black-owned banks are mainly available in the Southern region of the US.
Asian American-owned banks are the largest MDI group, and you can find many of these institutions in California, Georgia, Illinois, and Pennsylvania.
source https://www.businessinsider.com/personal-finance/minority-depository-institutions