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Guide to sustainable banking: Helping communities thrive

Sustainability is a huge topic. On the global scale, the buzz around sustainability tends to focus on initiatives that impact the world as a whole. Now more than ever we realize how interconnected we all are, mutually affected by climate risks and health concerns with global ramifications. 

But in your neighborhood, and your mom’s neighborhood, and the neighborhood across town, there's a surprising new sustainability focus, and that's sustainable banking. Sustainable banking helps support communities by enabling local banks and credit unions to help their account holderslocal businesses, and neighborhood economies thrive. 

How does that work, in practice? It's much simpler than solving a global crisis: we sustain local businesses, local initiatives, and local programs that make a difference in our daily lives. Sustainable banking isn’t about complex financial systems criss-crossing between New York, London and Tokyo — it’s about the brick-and-mortar bank down the street. 

You might already be leading the charge toward sustainable banking without even knowing it. When you wander into Margaret's Buds and Blooms flower shop and purchase a bouquet for your friend who just had a baby, you're helping sustain Margaret's business. When you take your trousers to Sew Many Good Things to get them hemmed, you've just supported the livelihood of the Vincent family. Shopping locally kickstarts the process of supporting responsible banking in your community.

 

What is sustainable banking?

The word “sustainable” probably makes you think that sustainable banking has something to do with providing financial services to environmentally friendly initiatives. You’re on the right track, but "sustainable" can mean more than just green initiatives to save the planet — it’s also about improving the everyday lives of the people on it. In order to sustain an economy, you first need a robust set of financial services: lending, checking, and savings, for example. 

Think about your own neighborhood for a second: What financial services are available to neighborhood small business owners like Margaret and the Vincent family? At the community level, what financial services are available to you and your neighbor with the new baby?

 

Many people rely on financial institutions to meet their daily banking needs, like paying a bill, sending money to a grandchild, or depositing this week's paycheck. For some people, that institution's central bank may be hundreds of miles away, perhaps in another state or across the country. When we say sustainable banking, we mean that for many communities, the fundamental way to support the local economy is to keep your money with a local bank or credit union. 

Sustainable banking creates a positive impact within the community by providing financial products designed to meet the needs and service levels of traditional banks. Most people believe big banks have more sophisticated technology and digital product offerings than small community institutions, putting your neighborhood bank or credit union at a disadvantage. Our vision for sustainable banking is to provide cutting-edge tech so the mom-and-pop financial institutions can compete. 

Local financial institutions also offer broader financial services, from extending loans to families and businesses, to investment advice designed to help families and businesses prosper close to home, with the personal service only a local business can provide. Local financial institutions then reinvest those dollars throughout the community, creating a virtuous (and sustainable) economic cycle. 

Sustainable banking bolsters equitable business opportunities for local companies, family-owned retailers, and even your favorite coffee shop, Regular Joe. Helping single-store locations, not just the national chains, benefits community operations and provides economic empowerment to businesses of all sizes.

 

Why is it important to keep money within your community?

Many of the key principles of sustainable banking are designed to provide a fair and inclusive process by which everyone can access financial products and services. Local financial institutions, like the community banks and credit unions Kasasa serves, excel at exceptional customer service because they know their customers and members on a more intimate level as members of the same community. They care about their account holders and develop personal relationships that go beyond financial transactions, which just isn't possible with a megabank or a so-called “neobank” — a new wave of online-only banking options even further removed from person-to-person interaction. 

Let’s illustrate this with a concrete example. When the Vincents’ daughter is ready to buy her first car, the community bank already knows their family and can help them finance this purchase. They've known her since she opened her first savings account, they sponsored her school's softball tournaments, and they know how her getting her own vehicle will impact the family when she starts college next year. This auto loan isn’t just another transaction for the community bank; it’s a shared life milestone. 

In addition to serving the Vincent family, your local bank's support of the community leads to a ripple effect across the local economy. That loan also means a sale made by the local car dealership, and maybe insurance coverage with a nearby agent. Banking and borrowing locally supports additional businesses fueling economic growth throughout the local economy, and leads to sustainable investment throughout the community.

 

How do sustainable banking practices help small businesses grow?

Margaret takes the money you used to buy flowers at her shop and deposits it at her local bank. When Mr. and Mrs. Vincent decide to invest in new sewing equipment to expand their business, Margaret's deposits allow your local lender to offer Sew Many Good Things a small business loan. The bank's investment allows the Vincents to land a new contract with the Good Eats Catering Company, which has been looking for a company to help them mend their linens. The money continues to be reinvested locally and sustain all three businesses, and the broader community. 

Sustainable banking bolsters Buds and Blooms and Sew Many Good Things, but your community is more than a florist and a tailor and a caterer. Sustainable banking boosts the bookstore, the food pantry, the thrift store, the gym, and the grocer. And although sustainable banking is fundamentally about going local, your neighborhood financial institution is part of a bigger, national picture. Community banks were an essential lifeline in the early days of the pandemic, distributing Paycheck Protection Program  (PPP) loans that allowed small businesses and their employees to stay afloat. A recent study found that 80% of community banks and credit unions participated in the PPP loan program, and that they distributed funds more efficiently and effectively than the comparatively slow-moving and out-of-touch megabanks.

 

Who is impacted by sustainable banking?

Let's look at your community through a wider lens. Local financial institutions also provide funding that can impact investing and development plans by local governments, water departments, school districts, and non-profit organizations. Whether it’s a repaving project (thank goodness – those potholes just seem to keep growing), repairs to the high school gym roof, or unclogging sewer drains, local community services you use without thinking about it sometimes require funds from local lenders prior to tax collection. Community banking provides the lending tools these public utilities need to pay for repairs and get projects underway, supporting the sustainability of the community's infrastructure. 

Your cousin's husband, Craig, works for Haul Away, which has just secured the contract to assist both the school roof repairs and the repaving work. In addition to the sustainable development of buildings, roads, and the water system, local investment by the community creates jobs for government employees, local contractors, and Craig. When your cousin's family uses their good credit to secure a loan from their credit union to buy a camping trailer, your summer plans might look brighter, too. 

Ultimately, sustainable banking serves to support individual families, local businesses, and community programs, creating a healthy and robust local economy. Everyone wins when local financial institutions provide sustainable finance to the community!

 

How does this guide to sustainable banking develop a sustainable economy?

On a cool fall weekend, you and your family visit the local farmer's market to enjoy the seasonal harvest, listen to live music in the heart of your community, and support your favorite vendors (including Regular Joe, of course). From the farmer to the musician to the vendors, every individual and small business relies on your dollars, and the dollars of every other member of your community, for their financial sustainability. 

The businesses and all the members of the community who invest in the local economy are all stakeholders in the community's ability to remain financially strong and vibrant. The farmer receives a loan to pay for the seed for next year's crop. The musician purchases her audio equipment from a local business. You use your earnings to help Regular Joe compete with a larger chain based out of state, not to mention they keep you caffeinated while you and your family shop downtown. 

When those dollars are sent to companies outside the community, it becomes less likely that money will make its way back into the community. By practicing sustainable banking techniques, such as shopping locally, eating locally, and banking locally, you are building a sustainable economy within your community's financial sector. You influence impactful investing in your community, in your own small way, rather than giving your money to megabanks. A community that includes healthy financial institutions creates sources of available loans and continued re-investment and growth, empowering the entire community to build sustainable development goals. As you stroll through the open market with your family, you can see this sustainable investment in action. 

Kasasa believes that sustainable banking is the economic bedrock of every local community. For this cycle to strengthen and support your community, we all must support local businesses, local initiatives, and local programs. If sustainability is something you value, it's an easy choice to move your money where it matters: Shop, bank, and borrow local.

Tags: Sustainable Banking, Bank Local