A Philadelphia city council member is working towards establishing a public bank in the city that could issue letters of credit (L/Cs) to guarantee loans for hard-to-lend-to businesses and organisations.

Derek Green has been working for more than four years on the bank that as well as helping disadvantaged businesses access credit would also manage the city's money with the public interest in mind.

L/C support

Under Green's plans, the city would first establish the Philadelphia Public Finance Authority (PPFA), a quasi-governmental entity controlled by the city that could issue L/Cs to guarantee loans to qualified businesses borrowing from private banks.

The goal of PPFA is not to compete against current businesses or organisations, or duplicate existing services, but to offer credit enhancement products, such as L/Cs, that will provide greater opportunities for co-operatives, entrepreneurs of colour, and other business organisations to access additional credit to help build cash flow and job growth.

Addressing financial exclusion

As a former banker and small business lender, Green has identified access to capital for entities that fall through the gaps of the current lending environment as an urgent issue that demands action from the largest city in the US state of Pennsylvania.

Currently, only six per cent of businesses with employees in Philadelphia are owned by African Americans, even though the city's population is 44 per cent African American.

Pennsylvanian law does not allow cities to create public banks, but it does permit related organisations such as the proposed PPFA to do so. Green is hoping that eventually the authority will be able to establish a public bank for the city.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.