Description

​

Minority Depository Institutions (MDIs) are mission-driven community banks that typically locate in and serve minority and low-to-moderate income communities. MDIs operate more than 1500 branches in nearly all 50 states, serving urban, rural, and suburban communities. 

 

In previous analysis of TransUnion credit data, we found that communities with at least one MDI branch present have better credit health – as measured by factors like credit score, total credit available, credit utilization, and delinquency rates – relative to demographically similar communities that do not have an MDI branch. 

 

This report extends our TransUnion partnership to examine both mainstream and alternative credit use. We compare outcomes in communities both with and without MDIs, and provide a detailed profile of the typical alternative credit user in MDI communities.

 

Alternative credit is a high-cost and suboptimal replacement for mainstream credit. There is a long academic literature arguing that alternative financial services disproportionately target low-income and minority communities, draining limited resources and trapping the vulnerable in cycles of poverty and debt. Proponents counter that alternative products offer credit access to those who otherwise have no viable substitute. 

 

While recognizing the value of choice, it is important to note that mainstream bank products offer critical consumer protections and a pathway to better financial health. MDIs in particular serve as community anchors, recirculating funds and investing in human capital to spark local development. Our research explores the potential impact of MDIs on limiting alternative credit use. 

​

Download  the 2025 Credit in Context: Profiling Alternative Lending Use in MDI Communities

​

Published August 27, 2025