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Why small community banks are so important to the economic health of rural America


...and why you should support these rural banking institutions even if you don’t live near one

If you keep up with these articles, you may have noticed that we’ve been featuring a lot of smaller banks and credit unions in rural communities. This is partially because they tend to lend more in low- and moderate-income communities where they are located. But primarily, we like to shine light on the work these Better Banking Options do because community banks are the dam keeping small-town America from going underwater.

As mega-banks like Bank of America have pulled out of small towns, they’ve only made their intentions for investment in small towns more apparent. Recently, the trend among mega-banks is to open branches in metropolitan areas, and the mega-banks that remain open in small towns rarely do much lending in those towns. When you deposit money in a mega-bank when living in rural America, much more of that money is going to be siphoned toward those metropolitan areas than invested in your specific community.

By investing in your local community bank, you’re doing the opposite: directing your capital to the communities you want to support. This is essential in small towns, where assets pulled out of the local economy can cause everyone participating in that economy to suffer.

The Wall Street Journal has published two full-length articles in the past two years about the death of small-town, community banks. Although this rate of publishing on this topic may seem fast-paced, it’s nothing compared to the rate at which small banking institutions are closing and being absorbed by other banks. While some community banks have been able to step up and buy other closing institutions close to them, many don’t have the extra capital to intervene.

Another reason small community banks are disappearing is because many of them don’t have the resources to provide convenience technologies, such as mobile check deposits or easy money transfers. However, many small institutions have begun to prioritize these technologies, and it’s almost difficult these days to find a bank that doesn’t at least offer basic online banking options. Additionally, there are plenty of independent financial services, such as Venmo, which allow you to use these technologies while also keeping your money in a checking account without as many technological options.

While it is essential for people living in small towns to invest in their community through their local Better Banking Options, it’s also possible and vital for even those who don’t live in those areas to invest in them, as well. You may want to move some money to these kinds of institutions because relatives of yours live there, or you used to live in a rural community and moved to the city, but still care about the economic health of your hometown. These banks are also much more likely to invest in small farms, which are an important but struggling part of our food industry as they compete with much larger farms with much more damaging ecological footprints.

Regardless of your reasoning, there are plenty of ways and motivators to keeping at least some of your money in a rural community banking institution. If you want to keep your savings in a small bank and transfer the money through their online banking service when you need it, it’s entirely possible: check out our article about long-distance banking for more information. By directing our resources to these communities, we help them thrive and let their economies, businesses and housing market grow.

#smallfarmlending #smalltown #smallbusinesslending #ruralbanking