A novel program to ease unbanked Arkansans into the banking system turned five years old this fall and, statistically speaking, the state is making major progress. Leaders touted the success of the effort at an event held earlier this month at the Bank OZK headquarters in Little Rock.
Bank On Arkansas+ launched in 2018 with support from the Winthrop Rockefeller Foundation and Arkansas Asset Funders Network in a push to help low income Arkansans find banking options that limit overdraft fees and steer people away from predatory lending. The program also seeks to improve savings, build credit and reduce debt. Other supporters of the initiative include Entergy Arkansas, the Arkansas Community Foundation and the Federal Reserve Bank of St. Louis.
The coalition has grown to more than 50 members representing banks, credit unions and community partners operating in all 75 Arkansas counties.
Through Bank on Arkansas+, Arkansas is now a top 5 state in terms of banking access, but still at the bottom in terms of savings. Forbes magazine recently ranked Arkansas as the fourth best state in the nation for banking access, touting its noteworthy drop in unbanked households from 7.10% in 2019 to 3.40% in 2021.
Lorrie Trogden, President and CEO of the Arkansas Bankers Association, commended the collaborative effort behind Bank On Arkansas+.
“The banking industry in Arkansas is proud to have played a vital role in this initiative. The remarkable drop in Arkansas’ unbanked population since its creation is a testament to the transformative impact of the collective efforts of the Bank On Arkansas+ coalition,” she said.
Primary targets for help are ALICE families, which are defined as Asset Limited, Income Constrained, and Employed (ALICE). In Arkansas, more than 551,000 families meet that criteria where workers make less than $20 per hour. They are employed, but their budgets don’t allow for medical emergencies or significant savings to move up the income charts in the future. They can also get quickly buried in debt and struggle to find quality housing or child care.
Coming out of the COVID-19 pandemic, there has been a 6% rise in ALICE families in Arkansas.
“We have to begin to help families begin to save for emergencies. So we’re top five in banking access, top five in credit union access, top five in Bank On, but at the bottom in terms of saving for Alice families. So we got to help families begin to close that gap,” said Rev. Cory Anderson, Winthrop Rockefeller Foundation Chief Innovation Officer.
“Now with the Rockefeller Foundation’s perspective, obviously one of the ways that you do that is we begin to figure out how to raise wages. So the reason that we have ALICE families is because of the wages that these folks are making. They’re working hard every day, but they’re in these low wage jobs. Our economy is currently configured around low wage jobs, so we have to find a way to change that,” he added.
Anderson noted that living wages are becoming more commonplace in the workplace. He cited efforts from the City of Little Rock and Arkansas Children’s to raise their minimum wages to a livable wage. He’s hoping more businesses and entities will follow.
“We really need more institutions to begin making that decision. It’s about ‘dollars’ and ‘sense’ at the end of the day,” he said.
A new trend that offers challenges and opportunities is digital finance channels. There is a danger for predatory risk, but perhaps a larger road block involves lack of digital access for many in rural Arkansas.
Darrin Williams, CEO of Southern Bancorp said closing the digital divide through broadband can help lead to more capital access, particularly for women and minority-owned businesses.
“As a proud coalition member, we look forward to exploring new ways to help Arkansans save, build wealth, and secure their financial future in ways that make all our families and communities stronger. The future of Bank On Arkansas+ holds even greater promise for financial inclusion across our state,” he said.
At the five year anniversary celebration, Abby Hughes Holsclaw with Arkansas Asset Funders Network, made a surprise announcement that folds into part of this challenge. The group has launched an Arkansas Women’s Business Fund.
Women-owned businesses are on the rise since the pandemic, yet the average business loan for women business owners is 50% less than for a male counterpart. While not disclosing the dollar figure of the investment, Hughes Holsclaw said the new business fund aims to help improve credit scores, collateral coverage and capital access for women.
“We’re helping women get access to financing options that cater to the specific needs of their businesses,” she said.
“As the fund grows and people access the fund, we’ll see more and more private support to offer these guarantees, and we’re really excited that this is an on-ramp to mainstream financial institution loans in a way to demonstrate how deserving these businesses are and reduce the perceived risk of women business owners as potential clients.”