On April 24 at Johnson Square, the Banking Taskforce of Step Up Savannah, Inc. and the City of Savannah launched a new banking program, Bank On Savannah, designed to appeal to those who are unbanked. This program aims to those currently not using mainstream financial products and services to become banked.
The unbanked populations rely upon nonmainstream financial services for their basic financial services. The high cost basic financial services certainly exacerbate poverty within unbanked families. Hundreds of dollars could be potentially saved every year by unbanked family by shifting from predatory financial services to mainstream financial services.
A financial services survey was conducted in August 2008 to provide data for the benchmarks of this new banking program. This survey investigates the financial services usage and attitudes of residents in poor neighborhoods in Savannah. A team of graduate students at Savannah State University who took my research methods class in Fall 2008 conducted face-to-face surveys to residents in six census tracts with the highest proportion of people living below the poverty line. A total of 201 surveys were completed from the 392 randomly selected addresses in these six Savannah’s high-poverty census tracts.
The random sample survey finds 38% of the respondents lived without any bank accounts. Eighty-six percent of the respondents earn less than $30,000 a year and the education attainment of 58% of the respondents are high school diploma or less. A statistical analysis reveals respondents with lower income and educational attainment are more likely to be unbanked.
The survey reveals the fringe financial services, such as check cashers, payday loan, pawn shop, title pawn shop, rent to own and money order are more often used by the unbanked residents than the banked residents. The differences of the uses of check cashers, money orders and pawn shop between the unbanked and the banked residents are statistically significant.
There is a significant difference between the unbanked and the banked residents in how they get paid for work. None of unbanked respondents had direct deposits to their checking accounts for the payment of their work. Most of the payments for the unbanked respondents were made in checks. On the contrary, one in every three banked respondents had direct deposit for the payment of their work. The unbanked respondents were more likely than the banked respondents to go to a check casher when they get paid by check for work.
Nearly forty percent of unbanked respondents asserted several issues about mainstream financial services including the fees are too high, they need instant access to their money and banks take too long to process, and the creditor could take money out of their account. The unbanked respondents are also less likely than the banked respondents to trust banks as the sources for financial information.
The misperceptions of mainstream financial services make the unbanked residents stay away from mainstream financial services. The perception of mainstream financial services of the unbanked residents can be restored by providing financial services that meet their financial needs and ability. The banks need to be a resourceful and truthful of financial source for the unbanked families.
The survey reveals the unbanked residents rely on fringe financial services for their basic financial services. Bringing unbanked residents to mainstream financial services will save their money from spending more fees on predatory financial services. It will also provide new opportunities for unbanked families to build their financial stability. That’s why the Bank On Savannah is essential in our efforts to alleviate poverty in Savannah.
Further information about Bank On Savannah can be found at this link. The completed report of the Financial Service Survey can be found at this link. The video of Bank On Savannah can be watched from this link.
This post also appeared at the Savannah Morning News on May 20, 2009.