#BankBlack is a call to action that has
been floating around social media for years. The hashtag was started in the
aftermath of the death of Alton Sterling and Philando Castile. Rapper Killer Mike (Michael Render) proposed
that Black people deposit a portion of their income in Black-owned banks as a
form of protest and empowerment. The goal was to provide Black-owned
institutions with an influx of deposits that could be doled out for home loans
and small business loans in the communities they serve.
A Black Bank is an institution in which (1) 51
percent or more of the voting stock is owned by Black individuals; or (2) a
majority of the board of directors are Black, and the community that the
institution serves is predominantly Black. Until the 1970’s Black-owned banks were the most
reliable—if not the only—option for Black Americans looking to buy homes,
invest, or get business loans. They were the primary lenders for all kinds of
community fixtures, from churches to nursing homes. Once pillars of the
communities they served, Black banks have been on the decline. The Federal
Deposit Insurance Corporation (FDIC) reports that in 2001 there were 47 Black
banks nationwide, which fell to 19 in 2021.
This decline in Black-owned banks should be a cause for concern for everyone. Small banks and credit unions collectively make up almost half of all lending to small businesses. Furthermore, the National Bureau of Economic Research reported that the nation’s largest banks cut back their small business lending significantly during the 2008 recession and haven’t returned to their pre-crisis levels. Additionally, a 2019 study shows that big banks that acquire smaller competitors in the aftermath of crises are primarily interested in capturing their targets' deposits (i.e. the money in their customer’s accounts), not their loan portfolios (a combination of the money set aside for lending and the amount owed by customer’s). Hence, the availability of larger national banks doesn’t usually increase access to credit or directly benefit the neighborhoods they are situated in.
Conversely, Black-owned banks are usually smaller community-based institutions similar to credit unions. Their structure makes them a reliable source of financial services for minority-owned, female-owned, and rural businesses. While their proximity to the community allows them to place more emphasis on personal relationships, collecting what economists refer to as “soft information.” For instance, One Detroit Credit Union, a Detroit based low-income designated credit union, offers credit-building loans. The loan allows borrowers to use their savings as collateral to borrow money, at a low interest rate, no matter the borrower's credit score. This in turn provides an accessible way for borrowers to build up their credit scores or credit history.
The benefit of Black banks lies in the fact that the money put into them circulates in the community longer, providing capital for mortgages, college loans, small-business loans, and other financial needs. Moreover, Black banks regularly patronize local businesses and partner with community organizations or initiatives. For example, First Independence Bank directs people who don’t qualify for loans to nonprofits and resources that can help them improve their credit scores. A practice that sets them apart from traditional banks. Liberty Bank, the largest Black-owned bank in the country, is partnered with Autobook, a Detroit-based fintech company, to be the small business platform embedded in Liberty’s digital banking platform.
If you are looking for a Black bank to
deposit your money in Detroit, you have three options: First Independence Bank,
Liberty Bank, and One Detroit Credit Union.
First Independence Bank is a homegrown
institution. It was born out of the efforts of prominent African-American
business and community leaders to address the lack of opportunity and
frustration that spurred the 1967 Detroit riots. They remain one of two banks
headquartered in the City of Detroit, as well as the only Black-owned bank
headquartered in the State of Michigan.
One Detroit Credit Union is a minority-led
credit union initially formed to serve people who worked in the newspaper
industry. Today their mission has expanded to helping people in the community who the mainstream banking system
have overlooked by providing them with credible, fair, and reasonably priced
financial products and services.
Liberty
Bank is the largest Black-owned bank in the country. It opened in 1968 out of
the desperate need for a bank that would lend to Black homeowners and business
owners in Seattle’s Central District. Today, Liberty operates in 11
states and is one of only two African American-owned banks in the country that
is allowed to sign up customers online from more than one state. It is also the
only fully Black-run bank with more than $1 billion in assets.
The
goal of #BankBlack ultimately boils down to self-determination. Rapper Killer
Mike’s call to action is correct in pointing out that harnessing the economic
power of the Black community and protecting Black institutions goes a long way
toward empowering under-resourced communities. Unfortunately, Black banks
currently do not have the size or scale necessary to meet the objective of the
hashtag. Even with large companies pledging to deposit more capital in Black
banks, more work must be done to foster an environment free of the barriers of
systemic racism. In sum, we should all be Banking Black, but it must be coupled
with other efforts to address structural inequality.
By
Jacinta Onu