Analyzing the field of community development banking, Parzen and Kieschnick explain how financial institutions can serve the economic development needs of communities in which they operate without sacrificing prudent banking practices. Relying onMoreAnalyzing the field of community development banking, Parzen and Kieschnick explain how financial institutions can serve the economic development needs of communities in which they operate without sacrificing prudent banking practices.
Relying on firsthand knowledge, the authors show why development banks are worthy of the attention of community development activists, financial institutions that want to improve their performance, and policymakers trying to fix the financial system. Recent growth in private funding of community development has helped a new breed of financial institution to emerge.
The growth and proliferation of these development banks can be the catalyst for a new financial system that more actively promotes community economic development. The authors describe the successes of a number of community development banks, such as South Shore Bank in Chicago, Northern Community Investment Corporation in Vermont, and Self-Help Credit Union in North Carolina. After describing the role of capital in community development, Parzen and Kieschnick present evidence that interventions in financial markets are required to promote such development. They explore the factors that contribute to or limit development bank effectiveness.
Addressing the process by which those banks establish goals, the authors focus on how they come to terms with conflicts between serving their markets and surviving. Discussing various models adopted by development banks, they examine the feasibility of self-sufficiency and the management of risk, capital, and transaction costs, among other issues.
They conclude by offering a plan for achieving the full economic development potential of development banking, including specific steps for development bankers, mainstream financial institutions, government agencies, and foundations.