The Role of Banks
Often overlooked is the importance of banks to revitalization efforts. Financial institutions in a community can form the core of economic development. Although they shouldn't be expected to finance revitalization programs singlehandedly, they should be considered as essential to success.
Yet banks and other local financial institutions have largely ignored local improvement efforts in recent decades. In an increasingly focused effort to satisfy their stockholders, they have looked for investments which provide the highest rate of return. As a result, their investment money has gone elsewhere, to other regions of the country or even to other parts of the world. In doing so, often they have ignored their responsibilities to the local community in which they are based, and from which comes most of their business.
Local banks need to be reacquainted with their need to be locally involved. Downtown organizations should include local bankers, and downtown leaders should feel comfortable including them as integral members of revitalization programs.
As described by Shaffer,1 there are at least four ways in which bank practices can be examined against community goals and objectives.
- Where is the commercial bank using the dollars generated in the community? If the local bank is using a relatively large share of its available funds for nonlocal investments, it may be hampering the long-run economic health of its home community.
- How are local banks using community funds? Commercial loans to Main Street merchants are likely to be the source of continued employment oppertunities for the community. Are long-term loans available? Are the loan terms practical for smaller businesses struggling through growth pressures? Is the bank, through its loan policies, actively involved in promoting the growth of existing local businesses, the formation of new local businesses, and the attraction of new businesses?
- Are the types of services offered which promote downtown revitalization? Does it provide financial counselling? Does it "redline" deteriorated areas of the city in its lending policies? Does it have a development officer to help local businesses?
- What type of relations does it have with other local financial institutions? Has it worked with other banks on major community projects? Has it worked with state and federal agencies to help provide financing for projects?
These questions help clarify whether local banks and lending institutions are actively involved in local efforts, or whether pressure should be put on them to be more responsible to their client community. The financial leveraging which banks can provide gives an invaluable resource to local efforts, and should be considered a key ingredient of any revitalization effort.
1 Ron Shaffer. 1989. Community Economics: Economic Structure and Change in Smaller Communities. Ames, Iowa: Iowa State University Press. pp. 172-173.
