Rethinking the Role of Banks

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Beneficial State Bank open house

By Michael D. Evans

Beneficial State Bank is a different kind of bank. Community-oriented rather than profit-centered, the bank is committed to providing banking solutions specifically for those persons who have not been well served, or completely ignored, by the traditional banking system.

“We are using our depositors’ funds and our equity capital to fund a lending practice that produces a new economy that’s fully inclusive, racial and gender just, and environmentally restorative,” says Kat Taylor, co-CEO and co-founder of Beneficial State Bank. “One hundred percent of the economic rights are held by a nonprofit. We don’t serve a single shareholder. We don’t maximize profit.”

Indeed, the bank’s profits are reinvested in the low-income communities served by the bank and the environment that sustains us all. “We are a social enterprise pursuing our triple bottom line: social justice, environmental well-being and financial sustainability,” states Taylor.

Taylorco-founded Beneficial State Bank, which is a Community Development Financial Institution (CDFI), to bring beneficial banking to low-income communities in an economically and environmentally sustainable manner. Taylor is also a founding director of TomKat Ranch Educational Foundation (TKREF), which advocates for a sustainable food system through ranching, training, tours, research, and school food and garden programs. The “Tom” in TKREF is Tom Steyer, Taylor’s climate/energy activist husband.

“Our magic tool as a business is as a force for change,” says Taylor. “We do best when we’re pursuing a business channel to power change. And we’re about power change, no doubt about that.”

Taylor believes that business should be held to a high standard because “economic and societal outcomes are driven more by business than anything else. And government and philanthropy aren’t going to clean up after bad business. We need to be mindful of when businesses are doing bad things to us, and how we tell them ‘No, we’re not going to take that.’”

Currently, the primary focus of Beneficial State’s Fresno branch is auto lending. Auto loans “tend to be one of the first touch points of a person with a bank if they’re seeking financing,” notes Taylor. “70% of our clients prefer to only speak Spanish. A lot of them make their own payments in cash, and we find that they don’t have enough of a banking relationship of any sort.”

Taylor refers to Beneficial State as a “high road auto lender.” Much like the pay day lending industry, auto lending is rife with practices that cause consumers more harm than good. “There are a lot of shenanigans in auto lending,” says Taylor. “Financing a car that has 50 months life left over 90 months, which means you have negative equity in the car. Issuing sham warranties with a big up-front charge on it that when you go to collect on it doesn’t cover anything.

“We have to quietly persist in offering a good auto loan product. We’re really trying to serve what we call a pre-prime market—those people who have the worst access to credit and get the highest price, the worst terms and the most abuses.”

Taylor also laments the failure of the banking industry generally. “One-third of bank tellers in the United States are on some form of public assistance. They are underpaid so badly they have to access public resources. That’s a massive shift of a private cost from some of the most profitable corporations in the world to public resources.

“We lost nearly five million homes in the foreclosure crisis. That was an explicit transfer of wealth that disproportionately punished communities of color.”

Through Beneficial State, Taylor is looking at different kinds of banking relationships and interactions with the community. “We’re thinking about how a bank can be not just a network of financial capital but also social and political capital. We’re going to have to have a place where you can walk into once. If after that you never walk in again, what do we do with this costly infrastructure? That cost gets passed to the consumer ultimately; there’s no way to avoid it.”

Last year, Beneficial State began using all its California branches for voter registration and citizen applications. In fact, the Fresno branch of Beneficial State served as a polling site in the 2016 general election. “Can we restore the trust in banking institutions so that they will be a trusted place to vote as well?,” asks Taylor.

An issue throughout the Central Valley is the lack of access to banking services in rural communities. Beneficial has considered a “food truck kind of bank” as it works to determine the optimal “new world branch strategy.”

“We don’t need to throw up a bunch of brick and mortar,” states Taylor. “That would not be ecologically smart, and it isn’t even the way people want to bank. They want to go into a bank once to make a person-to-person connection; this is what the studies show. After that, they just assume they can go to their phone or bank at a more mobile outlet. We’re trying to figure out if we can be sort of fashion forward in that.”

“Have patience while we figure out the best way we can be of service,” says Taylor. “Let us know what the community needs are. Introduce us to important community leaders so we could learn from them and be in partnerships. Come bank with us.”

“We’re really a bank trying to make change,” notes Taylor. “We’re very open to partnership and community engagement so we can be informed.”

“Our stakeholders are broad. They’re depositors, borrowers, transactors, communities, the planet, the public—those are all our stakeholders,” states Taylor. “They need to know what we’re doing and they need to voice their concerns if we’re doing something they don’t like.”

“We’re a bank where you can align your money with your values and that really matters,” says Taylor. “The sleeping giant among us is us. If we put our money only in institutions that respect our value system, and finance the world we actually want to live in, we can be very powerful. There’s $12 trillion in deposits in the American banking system right now. No single person has enough to move anything, but all of us together, it’s a lot like voting. It’s voting with your money.”

The Fresno branch of Beneficial State Bank is located at 170 W. Shaw Ave. To learn more about Beneficial State Bank, contact 559-271-4733 (Fresno branch) or visit www.beneficialstate.com. To learn about the bank’s social and environmental impact, visit beneficialstate.org/impact.

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Michael D. Evans is a political activist, editor and writer. Contact him at evansm@usa.net.