Accountability: An Argument for Keeping Your Money Local

By Vale Jokisch at BALLE conference 2010

Last December, Arianna Huffington of The Huffington Post started a campaign to compel individuals to move their money to small community banks and credit unions, effectively boycotting the large banks at the center of the financial crisis.  The gist of the “Move Your Money” campaign was to create a grassroots movement that would repair the country’s financial system by moving dollars to banks that were “more closely connected to the people and businesses who live near them.”  By May of this year the campaign had grown so large that Huffington and others are now fundraising to create a nonprofit agency that will coordinate groups involved in the initiative and work to identify important policy initiatives towards this end.

Don Schaffer, CEO of RSF Social Finance, is motivated by this same logic – that putting your money in a local, community-owned financial institution gives you more control over what actually happens to the dollars you save and invest.  In his opening address at the 2010 Annual BALLE Business Conference in Charleston, Schaffer described the financial systems as a “root system” much like food and energy.  It is something that we must deal with every day and that touches most if not all of the activities in our daily lives.  Yet the structure of our current financial system, with large, multinational financial institutions at center stage, can create a lack of accountability for the impact of our money.  The majority of us deposit our money in the most conveniently located bank, usually without thinking about where that money will go, just like we might purchase a pineapple without thinking that it flew halfway across the world to reach our plate.

Michelle Long, BALLE executive director, echoes the notion that keeping savings and investing (and, of course, purchasing) local creates greater accountability.  BALLE’s core principles are based on the sense that there has been a “perilous disconnect” between the products and services we purchase and the impacts of those purchases.   Do you know how much carbon was emitted to get you your pineapple?  By the same token, do you know if your savings was used to purchase a derivative instrument of the failing mortgage of someone across the country?

I opened my first bank account as an adult at a local credit union mainly because it was connected to my college and had a branch conveniently located on campus.  I have kept this as my primary account throughout the years despite having moved out of reach of a branch because it offered better rates and lower fees than larger banks.  It wasn’t until I heard about “Move Your Money” that I started to look into my credit union’s practices and found that they invested heavily in the local community and were far more likely to fund local entrepreneurs than the large, multinational banks in the area.  In fact, according to the Independent Community Bankers of America, local banks made 67% of all loans to the nation’s small businesses.

Do you bank locally?  Did you choose your bank based on where and in what they invest?  If you are an entrepreneur, have you found it harder or easier to access capital from your local bank?

Vale Jokisch is a first year MBA student at Duke University’s Fuqua School of Business and is interested in how for-profit businesses are finding innovative ways to create social and environmental value.  Her specific interests are around community economic development, local economies, and impact investing.  Prior to enrolling at Fuqua she was the Deputy Director at Empowerment Group, a non-profit  microenterprise development organization based in Philadelphia.  Jokisch has a BA in Economics and  Political Science from Swarthmore College.

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