Morgan State Study Sheds Light on Life in Financial Deserts

WASHINGTON, D.C., February 28, 2017 – In partnership with the A. Philip Randolph Institute (APRI), the Morgan State University School of Community Health and Policy today released a study that found that “financial deserts” are defined less by a lack of access to services and more by a unique combination of physical access, perceptions and emotions.

In this increasingly digital age of electronic payment technology, physical proximity to traditional brick-and-mortar financial service institutions is less of a challenge than the levels of distrust and vulnerability, and lack of confidence individuals have when it comes to their finances and interactions with traditional financial institutions. The study identifies “financial deserts” as a new lens for understanding the challenges of individuals and communities who are underserved by traditional financial institutions, and the strategies that communities can employ to improve their financial health.

Conducted with support from Master Your Card (MYC), a community empowerment program sponsored by Mastercard®, the study views financial deserts as places where money is scarce and moves slowly and at great cost. While not a panacea for solving the myriad financial challenges confronting unbanked and underbanked communities, electronic payment technology can help them save money, increase convenience and gain powerful financial tools without being dependent on mainstream financial institutions that are often not present or trusted in communities.

“Through this study, we found that financial deserts are like traditional deserts. While they may appear barren and lifeless, a closer look reveals a viable ecosystem,” said Dr. Kim Dobson Sydnor, dean of the School of Community Health and Policy at Morgan State University, and an author of the study. “Communities within financial deserts can create their own solutions to meet their financial needs. Electronic payment technology can be a valuable tool that can help unbanked and underbanked communities move away from costly alternatives like check cashers and payday lenders, and gain the resources they need for greater financial security.”

The study noted the importance of communities developing their own path forward in order to promote conversation and confidence in a culture that often avoids discussions of financial management due to feelings of vulnerability and stress. Key findings from the study, Understanding Life in Financial Deserts, include:

  • Relationships with financial service providers are defined by their utility and predictability, not by their costs or physical proximity.
  • Cultural change is a greater barrier than product availability and access. Underserved communities lack trusted navigators in their journey toward financial stability and mobility.
  • Vulnerability is the prevailing emotion in financial deserts. This insight, rather than the presence or absence of financial institutions, is essential to meaningful solutions.
  • Conceptually, financial deserts are communities where money is scarce and moves slowly and at great cost.
  • Solutions lie in shifting the lens from institutions to the perspectives of people and how they live their lives in communities.
  • Electronic payment technology can help consumers and small businesses save money and keep more of it within the community.

“Those with the very least shouldn’t spend the most to access their money,” said Clayola Brown, APRI president and member of the MYC African American Advisory Board. “We want to help the financially underserved better manage the resources they have and keep more of their money in their pockets. With the right educational outreach and trusted community partners, electronic payment technology has the potential to thrive in financial deserts and ultimately help green them.”

The study notes that changing consumer attitudes requires outreach through trusted community partners, innovation to fit products and services to community culture, and education to empower individuals to make choices they feel best meet their needs. Further, financial deserts are not without their own oasis of commerce in the form of small businesses that, if provided with the resources to grow, could build wealth and well-being in the community.

Understanding Life in Financial Deserts is part of an MYC initiative to identify effective ways to empower financially underserved communities. Working with local and national organizations, MYC will lead a series of integrated, community-based efforts to green financial deserts in Baltimore and the Maryland Eastern Shore, the Bronx and Southeast Los Angeles.

For more information about MYC and to download a copy of the study, visit here.