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King University News :: King Institute for Regional Economic Studies Releases Report on "Banking Practices and Needs of the Low Income Population of Southwest Virginia"

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 Programs. 

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 with poverty.”

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  The five previous KIRES reports are also available in electronic format on the website.

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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