Black-owned banks and credit unions provide a real opportunity for the Black community to overcome the racial wealth gap, and BankBlackUSA is an organization that is helping to lead that charge.
In 2016, OneUnited Bank, the nation’s largest Black-owned bank and first Black internet bank, spearheaded the national #BankBlack Challenge. The ongoing campaign seeks to galvanize Black Americans and their allies to move their accounts to Black-owned financial institutions.
“The movement’s leaders were saying to divest from larger banks because they’re less likely to support people like us,” Dallas-based banking professional Stephone Coward II, 36, says. “So, my cofounders and I came together to research ways to support and uplift Black-owned banks and credit unions.”
Combining his industry expertise with a deep understanding of and connection to his African American heritage and community, Coward launched BankBlackUSA. He partnered with Atlanta entrepreneur, Robert Herring III, 38; Yale lecturer and entrepreneur, Justin Moore, 40, in New York City; and several others in Detroit to start the initiative in 2016.
“It was our response to Killer Mike’s call to action to join the #BankBlack Challenge,” explains Coward. Michael Render, the rapper and activist known as Killer Mike, began urging consumers to #BankBlack in July 2016, amid news accounts of Black men being shot and killed by police.
More Than a Black Bank and Credit Union Database
BankBlackUSA acts as a database of 40 Black-owned financial institutions and offers an app to help consumers find and compare Black-owned banks and credit unions. But the site and app also provide other resources that help consumers identify ways to establish financial health, develop economic stability and build wealth using Black-controlled financial institutions. This includes investment in Black-owned banks and company stocks, and access to Black-controlled investment platforms.
BankBlackUSA is focused on leveraging the economic strength of Blacks in America, who spend $1.3 trillion annually, as a tool for gaining social and racial justice.
“Our initiatives connect Black people and their allies to networks and activities nationwide related to financial empowerment like #BankBlack,” Coward says. “We also provide Black banking news, education and other resources to promote individual, collective and local action to accelerate cooperative economic growth within Black communities.”
Building on a Legacy of Black Economic Activism
Coward, having worked as an executive for Citibank and Capital One, not only recognizes the potential political and economic magnitude of this drive. He also sees its historical significance: “Our work builds on the long legacy of Black people who have connected economic power with improving the social and racial justice, and equity, in America.”
“They established the Black community’s ‘Black Wall Streets,’ the financial hubs they established across Black America,” Coward says. These wealthy Black communities not only included two in Oklahoma, but also existed in New York, Virginia, North Carolina, Florida, Georgia, Alabama and Texas. “There also were movements like Operation Breadbasket during the civil rights era, which dedicated itself to improving the economic conditions of Black communities,” he adds.
This history of Black economic power is what Coward and his partners remember as they push forward with their work. “We don’t want to exclude any initiatives by those who were doing meaningful work before we came along,” he says.
Addressing Challenges Black-Owned Financial Institutions Face Today
Coward believes Black-owned minority depository institutions (MDIs) play an integral role in closing the racial wealth gap and have since the end of enslavement. MDIs are institutions in which 51% or more of voting stock belongs to minority U.S. citizens or permanent residents. Their boards of directors are mostly minority and the communities they serve are minority. But, he says, unlike white-owned banks, “Black-owned MDIs are woefully undersupported and undercapitalized.”
“The largest white-owned banks have billions or trillions of dollars in assets,” he continues, citing JPMorgan Chase as one holding over $2 trillion in assets. “But not a single Black-owned financial institution has reached a billion dollars in assets, the closest being OneUnited Bank,” headquartered in Boston, with over $650 million in assets.
An impending merger, announced on Aug. 26, 2020, will come close to the $1 billion figure, when Los Angeles-based Broadway Financial and Washington, D.C.-based City First join in a merger of equals with over $850 million in depository assets.
On the credit union side, as of June 30, 2017, of 580 minority-owned credit unions, 50% were Black credit unions, but they only held 15% of all assets held in minority credit unions.
Lending is a major source of income for many banks. “Not only is it hard for Blacks to get mortgages through mainstream banks, government policy historically has made it hard to get insured loans at Black banks,” says Coward. “FHA and VA used structurally racist policies like redlining to deny Black-owned MDIs these funds to lend to people in Black communities,” he continues.
Coward’s assertions get support by the author of The Color of Law, Richard Rothstein. He notes in his book that these tactics were used to further racial segregation and decrease Black wealth.
Homeownership undergirds family wealth in America, contributing to the ability to fund college education, retirement and business endeavors. These homes and their equity can get passed down to future generations, building more wealth as the process repeats. Blacks have been prevented from creating intergenerational wealth by lack of access to capital to buy homes. Many also have less income, poorer credit and financial literacy challenges, all of which Black-owned MDIs remain committed to mitigating.
Changing Narratives and Offering Support
One argument Coward hears made about Black-owned MDIs is they can’t get government-insured loan funds the way white-owned banks can because they aren’t perceived as being able to manage that capital properly. “The truth is, because of undercapitalization, they don’t have the technical capacity to administer these government-backed loans programs,” says Coward.
“But, they’re not incapable of managing them,” he continues. “We need to change the negative narratives that identify Black people, as individuals, and MDI owners as inferior money managers.” He says giving Black banks the support they need to build capacity and compete as lenders is the answer, not abandoning them.
BankBlackUSA is committed to helping Black-owned MDIs develop the capabilities they need to attract the support they require for growth. This includes deposits from large white-owned businesses and other backing. Coward mentions the Netflix endeavor to shift $100 million to MDIs serving Black communities, like Hope Credit Union in Jackson, Mississippi. “Google is partnering with First Independence Bank in Detroit to build out its digital banking platform,” he says.
But Coward eyes these opportunities warily: “We’re for partnerships with white-owned banks and tech companies, for example, as long as their objective is to support—not absorb—the banks.” His concern is legitimate since there are 50% fewer Black-owned banks today than in 2001. So, he says, BankBlackUSA will continue to track them carefully.
Banking Deserts in Black Communities
One of the most disturbing trends Coward sees is the absence of banks in Black and Brown communities, creating what are known as banking deserts. “When I drive through Black and Brown neighborhoods in the Dallas area, I see a proliferation of predatory lenders and check-cashing places, but almost no banks,” he says. These include pawn shops, and payday and car title lenders, some of which charge 400% interest.
He notes that these “alternative financial service providers” prey on these communities when there are no other banking options available to them. BankBlackUSA worked with the University of Kansas on a project called “Mapping Opportunities” to do extensive work to map both Black banks and these predatory businesses across Black communities.
The mapping work showed these alternative lenders’ proliferation in communities of color. They locate there because they see opportunities for significant profits after banks—which lose money in lower-income communities—leave. These alternative providers offer costly services that deepen poverty, and lead to a greater likelihood that those who use them won’t qualify for mainstream banking services.
Coward believes that more Black banks are the answer. “Many consider them the lenders of last resort,” he says, “but Black-owned MDIs work with people with challenged credit, offer much fairer terms and work with borrowers to pay loans back,” he says.
“In fact, a study by the FDIC shows that Black banks often promote the economic viability of minority and underserved communities, populations abandoned by mainstream financial institutions,” Coward continues. “The maps we’ve developed show the necessity for and impact of Black banks.”
Black Banks and Credit Unions Offer Mainstream Services
Coward, who has become an expert on individual Black MDIs, says there’s also a perception that Black MDIs don’t offer the same services at the same level as mainstream banks. But he stresses their robustness and ability to innovate.
“Black MDIs show that, if supported with deposits from Black people and their allies, and by initiatives like those Google and Netflix launched, they’re as strong as mainstream banks,” he says. “But these institutions also are enterprising, offering the same high-quality services as mainstream banks,” he adds. These include financial literacy tools, mobile banking, secured and unsecured credit cards, IRAs and business banking.
Many Black MDIs develop programs unique to the needs of the Black community that may not be available at mainstream banks.
Liberty Bank, headquartered in New Orleans with nine other branches across eight states, offers its community members the Detroit Home Restoration and Acquisition Program (HRAP). According to Coward, this program is specific to Liberty Bank. It makes nontraditional mortgage loans to people who want to finance the acquisition and repairs or renovations to homes purchased in Detroit’s Hardest Hit Priority Neighborhoods.
Liberty Bank also has announced its New Orleans branch will partner with the City of New Orleans, Newcorp, Inc., the Kresge Foundation, JPMorgan Chase and Living Cities Catalyst Impact Fund to launch the BuildNOLA Mobilization Fund. It will provide Disadvantaged Business Enterprises (DBEs) up to $10 million in capital over the next six years to participate in work with the City of New Orleans’ Green Infrastructure rebuilding program. It launched a similar program in Detroit.
Durham, North Carolina-based M&F Bank offers a full-service wealth management program and also took part in the PPP program, supporting over 1,300 jobs. “Credit Union of Atlanta offers a suite of wealth management and financial literacy tools like the CU Succeed program that prepares you for adulthood,” says Coward. Andrews FCU, in Washington, D.C., serves military personnel and their families.
“We know that banking Black alone is not a panacea for closing the racial wealth gap or ending systemic racism, and more Black banks and credit unions may not be the sole answer,” Coward states. “But they can be a tool in a multipronged approach to improving the financial stability of Black communities,” he continues. “They’re a place to start.”
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