Traditional Financial Institutions And Alternative Financial Services Essay

Traditional Financial Institutions And Alternative Financial Services Essay

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This paper will demonstrate the gap between traditional financial institutions and alternative financial services in vulnerable communities. In the past decade, low-income communities such as Baltimore City and the individuals who reside there have experienced limited access to financial services, affordable credit, and investment capital through traditional financial institutions. This is also known as “redlining” and today this limitation continues persistence of discriminatory lending practices in Baltimore city. Even so, this problem has multiple causes, including historical patterns of racial and ethnic discrimination, banks’ and thrifts concerns about profitability, suburbanization and the flight of capital out of the inner city, and the restructuring of the financial services industry.
According to the National Community Reinvestment Coalition, (NCRC) map, Alternative Financial Services (AFS) had dominated low-income vulnerable community such as Baltimore city. These communities refer to AFS as their community development financial institutions. Even though some may consider AFS centers as providing a convenience to its consumers, it may come at a huge price. These AFS they exploit the consumers they serve, while providing a facade of convenience. The most common argument against the use of AFS is the fees associated with them. Individuals who cashed checks at these centers can incur an average of 3-5% of the check amount in fees, regardless of the nature of the check. On average, the annual costs of using a financial service center for check cashing is greater than fees associated with using a checking account for similar needs. Aside from the convenience AFS centers may present, there is an automatic danger associated w...


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... and as individuals develop out of their poverty situations, so do communities, and the two become mutually reinforcing, creating a comprehensive and integrated model that addresses social and economic exclusion and social disintegration which is necessary for effective poverty eradication.
Finally, social work advocacy on a macro level to ensure equal access is critical. To increase opportunities to the low-income and most oppressed populations, we need to try to reduce the growing wage inequality by, joining political organizations that seek to limit the political power of wealth so as to facilitate the election of officials less indebted to economic elites and permitted to support measures to reduce inequality, lobby for direct job creation by the government. Moreover, engage in campaigns to raise the minimum wage such as Earned Income Tax Credit (Goldberg, 2012).

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