“The Effect of Community Banks on the Progression of City Neighborhoods” – Robyn Dean

Name: Robyn Dean

Department: Institute for Policy and Civic Engagement

Advisor: Dr. Joseph K. Hoereth, IPCE

The role of a community bank is to provide a supply of loanable funds to local neighbors and local business owners to ensure the economic growth of the community through the circulation of money within that specific community. According to “The FDIC’s Community Banks Study”, banks work to have a great relationship with local customers by the use of their community’s knowledge and input to make their credit decisions. The purpose of this study is to look at community banks as a tool to circulate the flow of money in the community to encourage reinvestment and stimulation of economic growth. This literature review will examine the advantages and disadvantages of community banks, and their impact on neighborhood crime, housing, and job creation. We will look at a case study to compare the economic growth progress of two different communities in Chicago — Roseland, an impoverished neighborhood with no community bank, and Bridgeport, a relatively wealthier neighborhood that has a community bank. Findings have revealed that low income communities do not invest their money in banks and lack credit qualifications to be eligible for loans. Crime is also an impairment that prevents community banks from investing in a specific neighborhood. Recommendations include community banks providing accessible housing practices to create an entrance for residents and a pathway to homeownership, which would prevent gentrification of such neighborhoods. Furthermore, these practices would include providing support for small business owners with incentives to promote job creation in the community, and investing in resources for neighborhood schools.

Keywords: community banks, low-income, reinvestment