A minority depository institution (MDI) is a bank or credit union consisting mainly of members of a minority group or board of directors, actively serving minority communities, or both. Under federal law, Black Americans, Asian Americans, Hispanic Americans, and Native Americans are designated as minority groups relative to these institutions.
Are minority depository institutions suitable for your savings, savings, loans, and business needs? Find out more about these financial institutions, how they work, and whether one might be a good fit for you.
Definition and Examples of Minority Depository and Settlement Institutions
There are many types of minority depository institutions, depending on the entity that oversees the bank. Federal Deposit Insurance Corp. (FDIC) directly oversees two thirds of all MDI insured by FDIC, and applies this definition to them:
- At least 51% of the voting stock is owned by a minority individual (who must be a US citizen or legal permanent resident of the US), or
- The majority of the board of directors are minority individuals and the communities served by the agency are predominantly minority.
The definition is similar in relation to credit unions. According to the National Credit Union Administration (NCUA), an MDI credit union is a federally insured credit union in which more than 50% of its current or eligible members or the board of directors and the community it serves are one of a federally defined minority.
For banks and credit unions, a “minority” is considered a member of this federally defined group: Black American, Asian American, Hispanic, or Native American.
Women-owned banks can be considered MDI by one supervisory entity: the Office of the Comptroller of the Currency (OCC).
How Minority Depository Institutions Work
Minority-owned financial institutions have long provided financial services that traditional banks do not or have not provided for non-whites, such as access to credit. The first black savings bank opened in 1865, named Freedman Bank. After the Civil War, black-owned banks flourished in the US Southern states between 1888 and 1934. Asian, Hispanic, and Native American banks also began to open.
The US federal government notes the important role that MDI plays in serving underserved communities, community development, and economic revitalization. Several initiatives—beginning in 1970—promoted government involvement and support. In 1989, the Financial Institutions Reform, Recovery, and Enforcement Act incorporated a new category of Minority Depository and Settlement Institutions (MDIs), which were intended to preserve the number and character of MDIs, provide assistance to prevent bankruptcy, and encourage the creation of MDIs, among other roles. .
“Minority Depository Institutions are the lifeblood of their community,” Betty Rudolph, director of the FDIC’s Office of Minority Banking and Community Development, told The Balance by email. “These mission-driven banks provide needed financial and capital services to consumers, small businesses and others in minority or low-income communities where mainstream banking products and services may not exist.”
Minority depository institutions are considered “mission-driven” banks by the FDIC, along with Community Development Financial Institutions (CDFI) banks. Some financial institutions choose CDFI certification, even if they might also qualify as MDI. If certified as a CDFI, the agency is eligible to apply for grants and other financial assistance programs through the CDFI Fund.
Around 170 CDFI certified FDIC banks. For example, One United Bank is one of the largest black owned banks and CDFI. Most CDFIs are not FDIC-insured commercial banks, but non-profit lending and venture capital funds. Nationally, the 32 FDIC insured banks are MDI and CDFI.
In September 2021, the FDIC announced a Mission-Based Bank Fund with $120 million to support FDIC-insured MDIs and CDFIs.
The Mission Driven Fund will help mission-driven banks:
- Increase the capital needed to serve society effectively
- Weather economic downturn and speedy recovery
- Acquire, deploy, and maintain technology and expertise
- Build capacity and scale
As of December 2021, there were 143 FDIC-insured MDI banks nationwide with nearly 1,400 branches and total combined assets of nearly $326 billion. Some FDIC-insured MDI banks primarily cater to consumers, while others are commercial and small-medium sized businesses; others are commercial real estate lenders. Most of the MDI insured by the FDIC, as of the end of 2020, are classified by the agency as follows:
US Minority Depository Details
The largest MDI group is made up of non-profit credit unions, with 509 nationwide. An MDI credit union seeks to provide affordable financial products and services to underserved communities designated as “minorities.”
Some MDIs are “low-income designations,” meaning most credit union memberships meet the low-income threshold based on U.S. Census Bureau data. This designation can help credit unions in a number of ways, including access grants and low-interest loans, and the ability to offer member businesses higher loan amounts.
The NavyArmy Community Credit Union is the largest MDI credit union in the US, with nearly $4 billion in assets, 19 branches in South Texas, and 195,000 military and non-military members. The NCUA classifies the Naval Community Credit Union as Hispanic and low-income Americans. Among the smallest is a Black-American MDI credit union called Holy Trinity Baptist in Philadelphia, with about $21,000 in holdings and 103 members.
But credit unions can serve even smaller communities. For example, the Greater New Mt. Moriah in Detroit has just 14 members, according to the NCUA.
Among MDI banks, Bank of Hope is one of the largest Asian-American banks in the US, with 54 branches in nine states. The bank has served the Korean-American community for 40 years, in addition to its multiethnic customer base.
East-West Bank offers branches in the US and China, and telephone service in Cantonese, Mandarin, and Spanish. Liberty Bank & Trust Co. is one of the largest black-owned financial institutions in the US, with assets of $965 million. It has nine branches in the Southeast and Midwest states.
Should I Join a Minority Depository?
You may want to join an MDI bank or credit union for the following reasons:
- You prioritize savings, loans and people’s purchasing power
- Financial education and services designed for target communities
- Banking services and support available in world languages
- Financial services that are correlated with the religious value of interest
- Your personal values align with the bank’s values or mission statement
- Banks may be more familiar with and able to provide targeted loan programsuch as Indian Affairs Bureau business loans and Home Loans Section 184 Native American HUD
Alternative to MDI
If you consider mission-driven banking important, nonprofit credit unions also focus on a “people help people” mission.
And, as noted, not all minority-owned banks choose to be classified as MDI. For example, Native American Bank is a CDFI; shareholders include Arizona’s Navajo Nation, Idaho’s Shoshone-Bannock Tribes, and Wisconsin’s Oneida Tribe, among other Indigenous states and tribes.
How to Register With MDI
To find the headquarters and branches of an FDIC-insured MDI bank, use: FDIC interactive map—purple diamonds indicate MDI, while yellow push pins indicate MDI/CDFI banks.
To find MDI credit unions, use the NCUA website list, which can be sorted by state.
Anyone who meets the MDI bank or credit union requirements can join as a customer or member. If there is no nearby branch location, you can also search for an MDI bank online.
- Minority depository institutions provide financial services by and for underserved communities as determined by the federal government: African Americans, Asian Americans, Hispanic Americans, and Native Americans.
- Minority depository institutions may be banks, credit unions, or other financial institutions, with products and services for consumers or businesses.
- MDI can provide many benefits, including access to credit, value-based banking, international languages and locations, financial education, and community-specific services.
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