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The King Institute for Regional Economic Studies (KIRES) has released its sixth report.
The study, “Banking Practices and Needs of the Low Income Population of Southwest
Virginia,” was conducted by King University student, Nathan Berg, under the guidance
of Dr. John Dodge, professor of Economics for King. Berg is working towards his Bachelor
of Business Administration through King’s Graduate and Professional Studies Online
According to Berg, “High quality banking services are an important component to economic
development. Banking services can lead to increased savings and investment in income
generating assets, and access to credit can provide much needed income smoothing in
times of emergency. While the problems facing low-income Southwest Virginians cannot
be solved by any one economic development initiative, access to high quality financial
services is one of many possible tools that can be used in mitigating some of the
challenges that face the region.”
Berg’s research found that, for a variety of reasons, many households in Southwest
Virginia either do not have access to high quality financial services or do not use
them. Data from the Federal Deposit Insurance Corporation (FDIC) show that approximately
26 percent of Southwest Virginia households either have no bank account, or if they
have a bank account, they still rely on low quality alternative financial services
(AFS), primarily payday loans, title loans, pawnshops, and check cashing services.
The study also found that 73 percent of this population use low quality AFS.
Berg states that “low quality AFS do not offer any avenues for developing credit or
savings. Very often, instead of helping low-income individuals smooth income gaps,
make investments and manage risk, low quality AFS often exacerbate the problems associated
The study demonstrates that a potential market exists in Southwest Virginia for high
quality financial services, tailored specifically for low to moderate-income households
with relatively small-dollar credit needs. Currently, the primary alternative to
low quality AFS are traditional financial establishments such as banks and credit
unions. “Although these institutions offer valuable services, they are in many ways
ill-suited for small dollar credit customers,” according to Berg.
Berg concludes, “If the needs of this population are to be met, a third option should
exist that addresses the unique requirements posed by small- dollar credit clientele.”
The study offers some recommendations for how this demand can be satisfied in a sustainable
and profitable manner.
KIRES Paper No. 6, “Banking Practices and Needs of the Low Income Population of Southwest
Virginia,” is available in electronic format at http://kires.king.edu. The five previous KIRES reports are also available in electronic format on the
KIRES Paper No. 7, expected to be released in May 2013, will profile and present an
analysis of the economy of the First Congressional District of Tennessee.
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