Who Keeps the Black Dollar Moving?
Black-owned banks are bridging financial gaps for the Black community. It’s no secret that the Black community is at a disadvantage when it comes to pay equity and generational wealth building in comparison to other demographics. According to a study from the Survey of Consumer Finance, the average white family makes 6.5 times more wealth […] The post Who Keeps the Black Dollar Moving? appeared first on Waymaker Journal.
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Black-owned banks are bridging financial gaps for the Black community.
It’s no secret that the Black community is at a disadvantage when it comes to pay equity and generational wealth building in comparison to other demographics. According to a study from the Survey of Consumer Finance, the average white family makes 6.5 times more wealth than the average Black family, equating to approximately 15 cents to every dollar made for the racial groups. This extensive income gap between the groups puts into question the underlying factors that contribute to the issue. Racial bias in hiring practices and institutional racism within banking are just a few examples of what contributes to many Black Americans being unable to build their savings or make enough money to make ends meet. This can grow even more difficult when factoring in a household with dependents such as elderly parents or children. Between redlining of minority communities and lack of financial education in said communities, many are facing a disadvantage before they fully get the opportunity to explore what financial decisions they want to make.
Black-owned banks began to grow in popularity during the 1800s well into the mid-1930s. At this point, African Americans were not only working to make a name for themselves in the economy beyond slavery but seeking to support one another in gaining financial support while other institutions turned them away. What started as more than 100 banks began to shrink over the course of economic shifts such as the Great Depression and the recession within the early 2000s. The Black-owned banks of today have been actively working to restore what those of the past have tried to implement in financial structuring for minority communities.
A 2023 study from the Federal Deposit Insurance Corporation (FDIC) revealed that 10.6% of Black American households are considered “unbanked” in comparison to 1.6% of white Americans, meaning they do not formally have a bank account and rely on other sources to keep track of their funds such as online payment services like Cash App and PayPal. Buy now, pay later services have also grown in popularity across racial groups. African Americans have a higher likelihood of being unbanked as a result of historic mistrust of financial institutions after being excluded from banking services from traditional banks. They also lack commercial bank access or closer distance to many African American communities, which can discourage some from creating accounts at larger banks.
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At traditional banks, African Americans and other minorities sometimes face racial bias and discrimination when seeking financial support. Thankfully, Black-owned banks have sat at the intersection of cultural empathy and strategic points of entry to ensure that those in the Black community, alongside other racial groups, are provided a fair advantage when it comes to wealth building and management. These institutions have been able to combat the unbanked rate among African Americans and support wealth building for minority families. To date, only 36 Black-owned and Black-led financial institutions currently exist within the United States. While they span over a blend of credit unions and banks, these financial institutions are letting their legacy speak for them in more ways than one.
Though less than 1% of banks are Black-owned in the United States, they make up for 7.5% of Black-owned credit unions, according to 2023 data published by Bankrate. Black-owned banks do not receive the same level of support from government institutions making their total assets smaller. Many Black-owned banks also shut down after the early 2000s financial crisis, which made it even more difficult to gain access to capital markets beyond lack of exposure to local residents.
To date, only two Black-owned banks have more than $1 billion in assets. Meanwhile, the largest banks in the country have more than $1.6 trillion in assets. While these financial institutions may be lower in assets, they’re making up for it through their impact. For example, OneUnited Bank’s affordable rental housing loan had more than 60% of its loan originations go to low to moderate income households, with more than 80% of those being serviced as minorities. City First Bank has also significantly contributed to minority communities with 80% of its lending and investing being toward majority minority communities. They’ve also financially supported organizations and institutions that cater to minority communities such as the U.S. Black Chambers Inc., MLK Community Healthcare, and Maya Angelou Public Charter School, as outlined in their 2021–2025 impact report. Continued investment in families and communities have been what’s allowed Black-owned banks to be a pillar beyond day-to-day bank activity and restore the trust of customers across the country.
The success rate among African Americans who decided to be customers at Black-owned banks can be found through their community impact and initiatives they have in place. If not for the efforts of Reverend William Washington Browne who spearheaded one of the first Black-owned banks in America during the late 1800s, institutions such as OneUnited Bank and City First Bank would not have a strong enough leg to stand on as they do today. Legacy and perpetuity are ingrained in the fabric of the Black American experience, and finances are treated no differently.
The post Who Keeps the Black Dollar Moving? appeared first on Waymaker Journal.
