l familiar with banks and banking. We know that when we bank our money, the bank mostly pays us a small amount of interest as well as charging various fees. They then lend our money to other people or banks and charge them a higher rate of interest. This is how they make their money. They use part of the money they make to pay their costs and staff and the rest they keep as profit for the company. It goes to head office. A community bank works in the same way, but with a community bank those end profits are not siphoned off to headquarters but are given back to the community as dividends. This is done through the local customers of the bank having a shareholding interest in it. In other words, setting up a branch of a community bank requires that members of the community hold shares in it. It is the community that is responsible for getting the premises, fittings and other things that are needed to run the bank. The bank itself is responsible for the banking licence that is needed to operate, product developments, the brand, operational support and other things associated with administration. Community banks started out operating in smaller communities which larger banks could not supply with banking services due to costs. In many cases, they operated where larger commercial banks had closed their branches and left people without the convenience of a local bank. Now they have become so popular that they are now finding a welcome foothold in urban communities also.
Mel writes about community banks among other finance related topics.
