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3 Ways that Minority-owned Banks Can Make a Difference in America
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3 Ways Minority-owned banks make a difference in America
By Spencer Tierney Senior Writer | Certificates of Deposit ethics, ethical banking, bank deposit accounts Spencer Tierney is a consumer writer for banking at NerdWallet. He has written about the personal financial sector since with a focus on certificates of deposit as well as other banking-related issues. The work he has written for him was highlighted by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is based in Berkeley, California.
Updated Dec 11, 2020
Edited by Carolyn Kimball Assisting Editor - Banking Los Angeles Times, San Jose Mercury News Carolyn has worked in newsrooms around the country as a reporter and editor. Her passions are personal finances, science-fiction fiction novels and groovy Broadway musicals.
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A particular type of bank has an a significant role in generating greater economic opportunities for people of ethnicity.
From a Black leadership perspective A banks is not just "a space where you can drop off a deposit or obtain a loan," says Kevin Cohee, president and CEO of OneUnited Bank, one of the largest Black-owned banks across the U.S. "That's just the beginning."
OneUnited Bank's initial loan within the Paycheck Protection Program, part of the federal response to the COVID-19 disease, "was to a single mother of seven who drove for Uber," Cohee says.
Minority-owned banks, also known as government agencies call minority depository institutions, have to include the largest number of stockholders, or members of their board of directors comprise people of color. This differs from the predominantly white board of directors in the largest U.S. banks.
Minority-owned banks open doors to economic opportunity. Let's review of three ways that they can make an impact, and how is your role to help.
>> WHERE TO FIND ONE:
1. Closing the gap for those who aren't banked
Savings and checking accounts are two common entry points for building relationships with banks However, about 7 million Americans don't have them. There's also the trend of a decline across racial as well as ethnic lines.
About 16% from Native American households, 14 percent of Black households and 12% of white Hispanic households do not have bank accounts, compared to 2.5% for white families, according to the 2019 Federal Deposit Insurance Corp. study of those who aren't banked.
Minority banks can help bridge this gap by serving greater numbers of people with low- or moderate-income areas compared to other banks, according to the 2019 FDIC review of minority-owned depository institutions or MDIs. For example, most of the people that is served by a typical black-owned bank of 62% are African American, compared to 6% for metro-area banks that are not MDIs, according to the report.
Furthermore, banking deserts, or areas in the United States where you must go miles to find banks, have historically been a problem for certain racial and ethnic groups, like Native Americans living on reservations.
"We collaborate with those who are usually out of bank systems], and they are long-term customers" claims T.W. Shannon the director of Chickasaw Community Bank, one of 17 Native American-owned banks.
2. Boosting wealth with home loans
Homeownership is one of the biggest contributors to the wealth of many, but it's primarily for white Americans. Asian or Black borrowers made up about 6 and 7 percent from U.S. home purchases, as opposed to 60% of non-Hispanic white borrowers in a mortgage market report from the Consumer Finance Protection Bureau. Native Americans accounted for less than 0.8% of home purchases.
Minority-owned banks give larger home mortgages as well as small business loans to people of color than banks from other regions do, according to the FDIC report.
For Chickasaw Community Bank, that involves making home loans specifically for Native Americans. The bank has lease-to-own plans like lease-to-own, for instance, in where a tribe is the lender and borrows money from the bank while a tribal member follows an affordable payment plan and improves their credit. Eventually, the member owns their own home.
"For our own tribe that is the Chickasaw Nation, these are houses for people who faced credit issues in the past but now have a good stable income [yet still] might not qualify in various loan programmes," Shannon says. "That's an area that the too-big-to-fail [national] banks aren't spending too much time on."
3. Responding to business community needs during a time of crisis
Small-business loans are another priority for minority banks, and funding has gotten more dire in the course of the COVID-19 pandemic. Minority banks have made more than 123,000 Paycheck Protection Program loans for a total of $10.3 billion through August 2020, according to figures from the Small Business Administration.
"We took on the small, hard loans rather than the more straightforward loans (to large corporations), and we did it not to make money but to help the people," Cohee says.
Many minority banks are community banks, which is what FDIC defines as those that concentrate upon traditional loans and core bank accounts and have a limited geographical scope depending on the their location. Community banks have more than stepped up their weight this year. While they account for only 15% of all bank loans they outperformed other banks when it came to giving 30 percent of PPP loans according to a report from the 2020 FDIC quarterly report, which ended in June. And these loans aid in protecting jobs.
"We saved more than 1,000 Oklahoma jobs with this initiative," Shannon says of Chickasaw Community Bank. "One thousand jobs doesn't seem like much but in Oklahoma, that's a big deal."
He says, "We were oftentimes calling the borrower to verify that they knew these options for deferment assistance and programs were available. We were there for them, even though they weren't aware that we were."
What you can do to assist the banks of minorities
Minority-owned banks have a direct impact on the lives of many people in communities that aren't well-served, yet they are only 150, or about 3%, from the 5100 banking institutions in the U.S. Plus, they aren't enough to address the systemic problems within the U.S. such as the disparity in wealth between races that is where the average white family is eight times the wealth of the typical Black family, according to a 2019 Federal Reserve survey.
To support minority banks You can invest a portion of your savings in one. ( ) A key part of the business model of banks is to make use of money that sits in checking and savings accounts to make loans to small-scale businesses as well as homeowners. Certain companies, like Netflix for instance, have begun supporting Black banks.
Beyond banks, think about investing in companies focused on making a social impact and other .
In paraphrasing Eleanor Roosevelt, Cohee says, "We're all better off when we're all better off."
The author's bio: Spencer Tierney is a writer and NerdWallet's authority for certificates of deposit. The work of Spencer Tierney has been highlighted by USA Today and the Los Angeles Times.
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