There is an association between a Detroit neighborhoods’ racial makeup and the type of financial institutions established in that area, according to a recent study led by the University of Michigan, in partnership with the University of Kansas.
Through examining data from the U.S. Census Bureau, the study found that as a neighborhood’s Black population increased following the Great Recession, the area was more likely to experience an increase of high-cost alternative financial services, such as check cashiers or payday lenders, and a decrease in low-cost services, such as traditional banks or credit unions. Inversely, communities with increasing White populations experienced fewer alternative financial services and more traditional services.
The authors argue their findings challenge prior misconceptions about the demand for alternative services and highlight the significant role financial institutions play in creating racialized markets.
