Why you should care
Because the ability to lend money can be the first step toward a region’s economic recovery.
Crocodile-colored marsh reaching as far as the eye can see. Fields of white cotton tufts floating above the ground for miles. Colonial plantations, dilapidated church buildings and the sporadic town center, with all the attendant fixtures, from gas stations to food marts.
But not a Wells Fargo in sight.
Like the food deserts that plague inner cities, the Mississippi Delta may as well be the Sahara when it comes to banks, leaving its inhabitants, largely poor and black, prey to predatory lenders. Except, that is, in places in the South where one man, Bill Bynum, has livened the stark financial forecast by setting up a thriving community credit union, with a dozen branches that lend to people and businesses that most banks would avoid. “The wealthy have personal bankers, but the people who need them most don’t have access,” say Bynum, CEO of an outfit called HOPE.
And none of this is small potatoes. What started out a couple of decades ago as a $1.5 million small-business fund is now one of the country’s largest community-development financial institutions, a nonprofit lending close to $2 billion in total. All of this at a time when other banks have been fleeing with a vengeance a region that stretches from Tennessee to Arkansas to Louisiana.
But the 56-year-old Bynum — who grew up in a trailer in North Carolina during an era when schools were still segregated and whites would throw rocks at his home’s windows — doesn’t waver easily. He’s a solid man, with a broad frame, gray goatee and formidable stare, so it’s not hard to see why people listen to him, including three presidents, the latest of whom named him chair of the Consumer Finance Protection Board in 2014. “He was one of the first real pioneers in this work,” says Michael Barr, a professor of law at the University of Michigan. And today Bynum sees himself as a civil rights activist as much as a banking pioneer, one who considers that many of today’s racial tensions are the result of income inequality.
Speaking via Skype, he says he got into this business largely by coincidence, when, after graduating from college and waiting to get into law school, he happened to get a job with a company that gave loans to worker-owned businesses. Then, in 1994, he and a friend headed to the Delta with $1.5 million from the Pew Foundation to start a lending program that would become the foundation for his empire.
Of all the places in need of help, the desolate swamps of the Delta may need it most. Here, there have always been limited fiscal resources, but with the recession, banks have fled like never before. A Bloomberg report shows that since 2008, banks have closed nearly 2,000 branches, 93 percent of which were in low-income communities. In a rural outpost that may have had only one bank to start, that means residents no longer have access to any financial services.
Unless they go to a payday lender, as many of Carol Burnett’s low-wage employees at the Moore Community House (a nonprofit that provides early childhood education) used to have to do. Burnett says it often looked something like this: A caretaker’s car breaks down, and she gets one of these subprime cash advances. But the interest rate is so high that she can’t keep up with payments, so she gets another loan to pay off the first — and before she knows it, a repair that should have cost a couple of hundred dollars has cost thousands. By working with HOPE, Burnett (who is now on HOPE’s board of directors) started a program that provides employees with emergency loans, which they repay through payroll deductions, with the stipulation that they open a checking account and get financial counseling.
But not everyone thinks institutions like HOPE are a save-all. The American Bankers Association actively lobbies against nonprofit credit unions, which aren’t held to the same regulatory standards that traditional banks are and don’t have to pay income tax. That doesn’t mean, though, that HOPE’s interest rates are necessarily lower than a big bank’s. The ideal is that credit unions will reinvest the money they’re saving into underserved communities, but that doesn’t always happen and can be hard to track. And to be sure, HOPE’s executives are paid comfortable salaries.
Still, Barr contends that the only problem with credit unions is that “there aren’t more of them.” There may not have been any in the Delta, at least, if Bynum had gotten into law school, where he’d hoped to become someone, specifically Thurgood Marshall.
Photography by Allison Muirhead for OZY.