After the recent turmoil in the banking sector, many of us are wondering where to hold our cash deposits. Depositors expect full liquidity, healthy interest rates, and minimized risk through FDIC insurance.

But what if you could achieve these goals while helping support economic development in low-income communities too?

As of March 2023, there were $17.6 trillion in deposits sitting in US banks.¹ However, less than 1% of deposits are housed at entities serving customers in low-and-middle income communities.^{2 3} The collapse of Silicon Valley Bank and Signature Bank is likely to further decrease the share of impact-oriented deposits, evidenced by Bank of America alone seeing an estimated $15 billion in new deposits as depositors seek the security of the largest balance sheets.⁴ The increased attention paid to the banking sector provides a good time to refocus on the opportunity to use cash to generate positive impact while maintaining daily liquidity and a fully insured risk profile.

Using cash as an impact vehicle means making deposits that support access to credit in financially underserved communities, promote homeownership, seek to improve health and education projects, and support the growth of small businesses. These types of deposits can be made in community banks, which currently manage over $222 billion in assets and have supported over 696,000 businesses and microenterprises, created or maintained 2.6 million jobs, and helped finance 2.3 million housing units.⁵

Here, we discuss three examples of ways to use cash as an impact vehicle: an FDIC-insured cash deposit account focused on underserved communities across the country, a credit union focused on strengthening communities, building assets, and improving lives in economically distressed areas of the Deep South, and a mutual bank using a cooperative governance model to improve the food and farm system in the Northeast.

• Fund Community Banks and Credit Unions while remaining fully insured: With recent turmoil in the banking industry, depositors have increasingly focused on FDIC or NCUA⁶ protection for their deposits. For businesses, high net worth individuals, and other institutional investors with more than $250K in cash, StoneCastle’s FICA Impact program targets up to $25M in fully insured deposits by spreading depositors cash in sub-$250K increments across a network of credit unions, minority depository institutions, community development financial institutions, and banks with high Community Reinvestment Act Ratings that foster local development.⁷ These deposits expand the operational capacity of the community banking system, deploying funds into local communities across the country that otherwise would not have access to a diverse and stable source of deposits.⁸ FICA Impact strives to promote financial inclusion in lower-middle income and underbanked populations and highlight community development through small-business lending and supporting large-scale community projects such as building schools, hospitals, recreation centers, and healthcare facilities.
• Support Access to Financial Services in Target Communities: Low Income Credit Unions provide financial services to populations underserved or unserved by traditional financial institutions.⁹ These credit unions, which have many beneficiaries who are low-income members, typically operate in specific regions, allowing depositors to have geographically focused impact. These impacts can include equitable access to financial services, including financing for small businesses, mission-aligned organizations, and infrastructure development projects. A strong presence in the communities where they operate also allows Low Income Credit Unions to provide financial literacy and assistance to their beneficiaries, such as first-time homebuyers, small business owners, community infrastructure projects, education initiatives, and low-income individuals. Low Income credit unions offer up to $250,000 of NCUA insurance per tax id.¹⁰
• Promote Sustainability and Environmental Impact: Supporting sustainable food and agriculture businesses is essential to drive positive environmental change and improve community health. Walden Mutual Bank, the first new mutual bank chartered in a generation, offers FDIC-insured savings accounts up to $250,000.00 to depositors across New England and New York while lending to the region’s sustainable food and farm businesses.¹¹ Walden Mutual assesses the carbon footprint of borrowers, tracks progress of their loans over time, and supports borrowers by connecting them to potential partners in their network. Walden’s mutual structure indicates the bank is owned by its depositors and governed by a board of Corporators tasked with stewarding the organization for the long term, providing a strategic alignment as a mission driven company.

As long as your cash is deposited, it is being used to have some impact, either positive or negative. These three cash options show how depositors can support financial inclusion in underserved communities, help bridge racial wealth gaps, and foster the development of a more sustainable local food system. Depositors can achieve these impact outcomes without sacrificing the liquidity or security of their cash deposits, begging the question: why not use cash as an impact vehicle?

¹Deposits, All Commercial Banks (DPSACBW027SBOG) | FRED | St. Louis Fed (stlouisfed.org)
²Such as Minority Depository Institutions, CDFIs-Community Development Finance Institutions, Mission-Driven Banks, Community Banks, and Commercial Banks
³Pathstone Impact’s Investing Cash for impact
⁴Seeking Alpha
⁵CDFI Impact Across America (ofn.org)
⁶Share Insurance Fund Overview | NCUA
⁷https://uploads-ssl.webflow.com/6025a9ecbf82f134d03c1039/6051279a3eeeec631c118028_FICA-For-Banks_Fact-Sheet_No-Rate_2021-1.pdf
⁸FICA Impact, StoneCastle
⁹https://mycreditunion.gov/about-credit-unions/low-income
¹⁰https://www.ecfr.gov/current/title-12/chapter-VII/subchapter-A/part-701/section-701.34
¹¹https://uploads-ssl.webflow.com/61b48000ef9d404a5b16cf3f/62867f0d0b2898587c1d5e4b_Walden%20Mutual%20Bank%20Intro%20May2022.pdf