The Vital Role of MDIs in Fostering Economic Inclusion

In 2024, the National Bankers Association (NBA) conducted groundbreaking research shedding light on the vital role Minority Depository Institutions (MDIs) play in fostering economic inclusion, advancing social impact, and supporting underserved communities. Our research has examined various critical topics, including MDI mortgage lending, which highlights MDIs' significant contributions to minority borrowers and communities, especially in the face of climate risks. Additionally, our exploration of DirectPay has opened new pathways for mission-driven lenders to finance clean energy projects, particularly solar and renewable energy. The latest State of MDI Report reveals the impressive growth of MDIs, with total assets increasing by 42.8% since 2019, and underscores the positive impact MDIs have on credit health in the communities they serve. This body of research not only showcases the resilience and growth of MDIs but also identifies actionable strategies for partnerships that can further amplify their impact, particularly in areas like capital deployment, consumer education, and climate-related projects. 

Below is a full roundup of our research this year. Congratulations to Anthony Barr and Elise Pietro, members of our Research & Impact team, on bringing such valuable insights to the MDI sector.  

MDI Mortgage Lending: The Social Impact of MDI Mortgage Lending | National Bankers

• 65 MDIs issued mortgages in the 2019-2022 pandemic period, representing lending from nearly half (43%) of all MDIs. 

• Collectively, MDIs originated 164,000 mortgages, for a total of nearly $58billion in originations. 

• MDIs originated a higher share of mortgages to minority borrowers and communities than non-MDI lenders. 

• MDIs have lower denial rates but higher interest rates than other financial institutions. 

• Communities receiving MDI mortgage lending face disproportionate climate risk relative to the nation. 

• A key takeaway from MDI interviews: MDIs create significant social impact through portfolio loans, which can have more flexible underwriting criteria around areas such as credit scores, income sources, and debt-to-income ratios compared to loans sold on the secondary market. If we create a market for those portfolio loans, we could help MDIs recycle that capital to deepen their impact. 

Leveraging DirectPay for Climate Finance: Leveraging Direct Pay to Advance Solar and Renewable Energy Finance | National Bankers 

Direct Pay is a financial mechanism designed to streamline investments in clean energy projects. It allows tax-exempt organizations—such as nonprofits, state/local/Tribal governments, homeowners associations, publicly owned utilities, and rural electric cooperatives—to get paid in cash for the value of clean energy tax credits when they buy qualified clean energy property (like solar or batteries) and place that equipment in service. 

 In collaboration with Rochdale Capital (a CDFI loan fund), we created a guide to DirectPay for mission-driven lenders.

In Part 1, we share insights from leading experts on what Direct Pay is, why it matters, and what is needed to fully realize its potential. Part 2 presents a turnkey financial model for financing community-focused solar. This section includes a hypothetical case study that digs into the details of funding sources, loan terms, financial projections, and more. We also include a detailed impact measurement matrix and an appendix with a glossary of key terms. 

State of MDI Report – 2024 The State of MDIs 2024 | National Bankers 

• There are currently 149 MDI banks, collectively holding more than $355 billion in assets, with the average MDI holding $475 million in assets as of Q2 2024.  

• Total MDI assets have increased 90% since 2014 (ten years ago), 42.8% since 2019 (pandemic era), and 1.7% since 2023. Similarly, MDI deposits have increased by 46.5% since 2019.  

• MDIs operate more than 1,500 branches across 43 states and territories. More than 58 million people live in zip codes with MDIs present, representing roughly 17% of the total U.S. population.  

• Communities with an MDI present have better credit health – as measured by factors like credit score, total credit available, and credit utilization rates – relative to demographically similar communities that do not have an MDI present.  

• A lending sample of 14 MDIs deployed $1.5 billion in loan originations, with more than 60% of loans going to majority-minority communities, and 54% of loans going to communities with a higher poverty rate than the national rate. 

• An MDI Survey of NBA Members finds that 89% of surveyed members are either very confident or somewhat confident about the economy, and 85.7% are very confident or somewhat confident about their bank's growth prospects. In addition, 96% of surveyed MDIs identified digital banking services as a key growth area, and 46% identified launching new products and services.