Minority Depository Institutions (MDIs), as defined by the Federal Deposit Insurance Corporation (FDIC), are federal insured depository institutions either owned by minority individuals or have a majority minority board and serve primary minority communities. These institutions play a crucial role in fostering economic development and financial inclusion, particularly in underserved communities where traditional banking services may be scarce.
The Strength of MDIs During a Crisis: Economic Resilience
MDIs serve as financial lifelines in minority neighborhoods, contributing to the overall economic resilience of these communities.
During the COVID-19 crisis, MDIs served a critical role in providing emergency relief to small businesses in the underserved communities. These institutions provided Paycheck Protection Program (PPP) loans from the Small Business Administration to their communities. Piermont Bank, a multi-racial MDI, was less than a year old at the time, leveraged its digital capability and was able to provide PPP loans to small businesses even during the first round of PPP when access was limited.
Recognizing the importance of MDIs during the pandemic crisis, the Department of Treasury created the Emergency Capital Investment Program (ECIP), which designs to work through CDFIs and MDIs to deliver loans and other investments to LMI, minority and rural communities that were particularly impacted by the COVID-19 pandemic. In Q3 2023, the ECIP status reports show that in a little more than six months, ECIP participants (MDIs and CDFIs) originated a total of approximately $26 billion in loans of which approximately 75%, or $19.4 billion, went to LMI borrowers, borrowers in rural communities, and minority communities.
MDIs brought stability when it was most needed and to whom needed it most. Minority-owned small to medium businesses (SMBs) stayed open during COVID-19 thanks to the support of MDIs like Piermont. The message is clear: preserve MDIs to promote financial stability.
Why MDIs Are the best fit for the Banking Needs of Minority-Owned SMBs
Banking with an MDI allows entrepreneurs to align their financial practices with their values. By doing so, they actively support the ideals of economic equity and empowerment.
Piermont Bank has demonstrated a steadfast dedication to fostering growth for all. Since its inception in 2019, over 50% of its lending has gone to support low- and moderate-income areas, as well as women- and minority-owned businesses.
Building a banking relationship with an MDI goes beyond mere transactions; it fosters a sense of community and solidarity with marginalized groups.
MDIs in the 21st Century – Increasing Financial Access for Minorities with Digital Banking
As we look ahead, it’s imperative for policymakers, regulators, and stakeholders to recognize the invaluable role of MDIs.
One cannot overstate the importance of taking proactive measures to preserve and grow Minority Depository Institutions. They are beacons of opportunity to marginalized communities.
Historically, MDIs typically support a singular racial minority, such as African American, Hispanic, or Asian American. As we champion our society and economy to be more inclusive, it is more and more important for MDIs to be serving multi-racial communities. This is why Piermont Bank is proud to be the very first multi-racial MDI in the U.S., and we are pleased to see more multi-racial MDI designation in recent years.
Piermont Bank remains a diverse bank that commits and responds to the needs of SMBs. The bank is dedicated to meeting the demands of today’s world. By championing economic equity, we pave the way for a brighter future.
FAQ:
What is a Minority Depository Institution?
An MDI is a federally insured depository institution where most of the board members, community served, and voting stock are minority individuals.
What is the best bank for minority-owned businesses?
Minority Depository Institutions are a great fit for minority owned SMBs, as may be more inclined to help minority entrepreneurs access capital and other banking services when traditional lenders do not. In seeking to scale your business, it can help to have an MDI like Piermont Bank that promotes economic growth to underserved communities, reflects your values, and is dedicated to inclusive financial policies.
What is a Multi-Racial Minority Depository Institution?
Most MDIs have a board, management, and team that are primarily made up of one minority group. Multi-Racial MDIs, on the other hand, have a more diverse representation. Multi-Racial MDIs reflect the variety of minority groups that they serve.
Piermont Bank was the first bank designated by the FDIC as a Multi-Racial MDI. The designation as a Multi-Racial MDI is rare, only four exist nationwide as of the Third Quarter of 2023.