What Is a Minority Depository Institution?

A minority depository institution (MDI) is a bank or credit union made up primarily of minority-group members or board directors, one that actively serves a minority community, or both. According to federal law, Black Americans, Asian Americans, Hispanic Americans, and Native Americans are designated as minority groups relative to these institutions.

Is a minority depository institution suitable for your deposits, savings, borrowing, and business needs?  Find out more about these financial institutions, how they work, and if one might be a good fit for you.

Definition and Example of Minority Depository Institutions

There are many types of minority depository institutions, depending on the entity overseeing the bank. The Federal Deposit Insurance Corp. (FDIC) directly supervises two-thirds of all FDIC-insured MDIs, and uses these definitions for them:

• At least 51% of the voting stock is owned by minority individuals (who must be U.S. citizens or permanent legal U.S. residents), or 
• The majority of the board of directors are minority individuals and the community that the institution serves is predominantly minority.

The definition is similar where credit unions are concerned. According to the National Credit Union Administration (NCUA), MDI credit unions are federally insured credit unions in which more than 50% of its current or eligible members or its board of directors and the community it serves are one of the federally defined minorities.

Women-owned banks can be considered MDIs by one supervising entity: the Office of the Comptroller of the Currency (OCC).

How Minority Depository Institutions Work

Minority-owned financial institutions have long provided financial services that traditional banks didn’t make or haven't made available to non-Whites, such as access to credit. The first Black savings bank opened in 1865, named the Freedman’s Bank. After the Civil War, Black-owned banks thrived in Southern U.S. states between 1888 and 1934. Asian, Hispanic, and Native American-owned banks also began opening.

The U.S. federal government noted the important role MDIs provided in serving underserved communities, community development, and economic revitalization. Several initiatives—starting in 1970—encouraged government involvement and support. In 1989, the Financial Institutions Reform, Recovery, and Enforcement Act included the new Minority Depository Institution (MDI) category, which intended to preserve the number and character of MDIs, provide assistance to prevent insolvency, and encourage the creation of MDIs, among other roles.

“Minority Depository Institutions are the lifeblood of their communities,” Betty Rudolph, director of the FDIC’s Office of Minority and Community Development Banking, told The Balance via email. “These mission-driven banks provide needed financial services and capital to consumers, small businesses, and others in minority or low-income communities where mainstream banking products and services may not otherwise be present.”

Minority depository institutions are considered “mission-driven” banks by the FDIC, along with Community Development Financial Institution (CDFI) banks. Some financial institutions choose CDFI certification, even if they might also qualify as MDIs. If certified as CDFIs, the institutions are eligible to apply for grants and other financial assistance programs through the CDFI Fund.

About 170 FDIC banks are CDFI-certified. For example, One United Bank is one of the nation’s largest Black-owned banks and a CDFI. Most CDFIs are not FDIC-insured commercial banks, but rather non-profit loan and venture capital funds. Nationwide, 32 FDIC-insured banks are both MDIs and CDFIs.

The Mission-Driven Fund will help mission-driven banks:

• Raise capital necessary to effectively serve communities
• Weather economic downturns and quickly recover
• Acquire, deploy, and maintain technology and expertise
• Build capacity and scale

Banks

As of December 2021, there were 143 FDIC-insured MDI banks nationwide with nearly 1,400 branches and combined total assets of almost $326 billion. Some FDIC-insured MDI banks primarily serve consumers, while others are commercial and small-to-midsize businesses; others are commercial real estate lenders. Most FDIC-insured MDIs, at the end of 2020, were classified by the agency as follows:

Credit Unions

The largest group of MDIs comprises nonprofit credit unions, with 509 nationwide. An MDI credit union strives to provide affordable financial products and services to underserved communities designated as “minority.”

Some MDIs are “low-income designation,” which means most of the credit union’s membership meets low-income thresholds based on U.S. Census Bureau data. This designation can help the credit union in a variety of ways, including access grants and low-interest loans, and the ability to offer higher lending amounts to member businesses.

Types of MDIs

The NavyArmy Community Credit Union is the largest MDI credit union in the U.S., with almost $4 billion in assets, 19 branches in South Texas, and 195,000 military and non-military members. The NCUA classifies NavyArmy Community Credit Union as Hispanic American and low income. Among the smallest is a Black-American MDI credit union called Holy Trinity Baptist in Philadelphia, with around $21,000 in holdings and 103 members. 

But credit unions can serve even smaller communities. For example, Greater New Mt. Moriah Baptist Church in Detroit has just 14 members, according to the NCUA.

Among MDI banks, Bank of Hope is one of the larger Asian-American banks in the U.S., with 54 branches across nine states. The bank has served the Korean-American community for 40 years, in addition to a multiethnic customer base.

East-West Bank offers branches in the U.S. and China, and phone service in Cantonese, Mandarin, and Spanish. Liberty Bank & Trust Co. is one of the largest Black-owned financial institutions in the U.S., with $965 million in assets. It has nine branches in Southeast and Midwest states.

Should I Join a Minority Depository Institution?

You may want to join an MDI bank or credit union for the following reasons:

• You prioritize community savings, lending, and spending power
• Financial education and services designed for target communities
• Banking service and support available in world languages
• Financial services that correlate with religious values about interest
• Your personal values align with the bank’s values or mission statement
• The bank may be more familiar with and able to provide appropriate targeted loan programs, such as Bureau of Indian Affairs business loans and Native American HUD Section 184 Home Loans

Alternatives to MDIs

If you consider mission-driven banking essential, nonprofit credit unions also focus on a “people helping people” mission.

And, as noted, not all minority-owned banks choose to be classified as MDIs. For example, the Native American Bank is a CDFI; shareholders include Arizona’s Navajo Nation, Idaho’s Shoshone-Bannock Tribes, and Wisconsin’s Oneida Tribe, among other Indigenous nations and tribes.

How To Sign Up With an MDI

To find FDIC-insured MDI bank headquarters and branches, use the FDIC’s interactive map—purple diamonds indicate MDIs, while yellow push pins show MDI/CDFI banks.

Anyone who meets the MDI bank or credit union requirements can join as a customer or member, respectively. If no branch locations are nearby, you also can seek out an online MDI bank.

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