Ownership and Trust in Banks: Evidence from the First Bank in an American Indian Nation

摘要

Financial inclusion requires trust. Yet, both historically rooted and modern factors have limited the trust between American Indian nations and financial institutions (Community Development Financial Institutions Fund 2001).1 Compared to other Americans, Native Americans who apply for mainstream forms of credit experience higher denial rates, higher interest rates, and lower credit limits, even after conditioning on a rich set of observable factors (Wellhausen 2017, Cattaneo and Feir 2020, Dimitrova-Grajzl et al. 2015). American Indian Nation A ranks among the lowest-income American Indian nations in the United States and is plausibly a banking desert: the closest financial institution is about ten miles away on roads that are difficult to drive in the winter. Nation A's tribal government recently voted unanimously to approve the entry of Bank [X] into its reservation. Bank [X] is 100 percent owned by American Indian Nation B, and its CEO expects this to be a significant comparative advantage in its ability to both manage risks and earn the trust of Nation A's citizens.