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By Linda Ezuka | June 08, 2021 | 3 Minute Read

How to Partner with Minority Depository Institutions (MDIs). Wait, what?

Minority depository financial institutions, or MDIs
You want me to place a deposit with a “competing” financial institution? No, we are not out of our minds here. Placing deposits, making an investment, or even providing a grant to a Minority Depository Institution (MDI) may count towards your CRA program
Well then, how does this work? Today I’ll share how partnering with an MDI can not only help you further support minority communities but may also help you uplevel your CRA performance and impact. 
Minority communities often have a higher percentage of unbanked households than other non-minority-centric communities. MDIs have a mission to serve a minority predominate community, to help families access the bank products and technical assistance services they need to become and remain financially healthy. All MDIs are run by minority individuals, either through ownership or board membership. This gives them a strong and unique relationship with the individuals and families they serve.  

Many MDIs are small banks with a need for access to capital and technical assistance to help them grow and expand their services to the communities they serve. Because of their size, MDIs can be as vulnerable as the populations they serve, according to the FDIC. 
“MDIs, particularly smaller MDIs, have significantly higher cost structures than larger institutions and non-MDI community banks. MDI and CDFI banks that serve financially challenged populations are often the first to experience the effects of economic downturns and among the last to recover.” 
Partnering with an MDI allows you to efficiently extend capital to minority communities while helping to make the MDI more stable, so it can continue improving lives in underserved markets. Your partnership could make all the difference to your community and your CRA performance. 

There are many ways you can partner with an MDI, from capacity-building grants to equity investment to technical support and other service opportunities. You may want to start small as you build your relationship with an MDI by simply building a depository relationship.
Like CDFIs, investments in MDIs can provide your financial institution a return while providing needed capital to a community that’s difficult for you to serve. Investment vehicles, such as equity investments and investment funds, along with deposits into an MDI, can have a positive impact on an MDI's ability to lend and provide an income-generating investment for your bank. Capacity-building grants can also help an MDI increase lending or improve its infrastructure so it can grow and improve its service in the community.   
Your financial institution can also earn CRA service credit by offering technical support. Organizations like yours have built positive relationships with MDIs by sharing technology solutions, such as technology to support loan origination and servicing. They’ve also collaborated with MDIs on customer-facing digital solutions, such as developing online banking tools.  
With the diverse needs of MDIs, your financial institution has the opportunity to earn investment, lending, and service credit. Look for ways to deepen your relationships with the MDIs in the communities you serve. Visit the FDIC’s MDI locator today to find MDIs near you! 
To learn more about CDFIs, download this high-level checklist that will help guide your approach to partnering with these institutions.

None of Kadince, Inc., its affiliates, or its respective employees, directors, officers, and agents (collectively, “Kadince”) are responsible or liable for any content or information incorporated herein. Read full disclosure.

Linda Ezuka | Owner, CRA Today

With over 29 years of community development experience, with an emphasis in CRA, compliance, training, community development lending, and CDFI initiatives, Linda works with financial institutions to provide comprehensive CRA training, up-to-date resources, and proven strategies to remain compliant. She helps CRA professionals master the art of the CRA and transform communities through the power of economic development. To learn more about Linda & CRA Today, visit her website.

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