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3 Ways Minority-Owned Banks 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, ethical banking, banking deposits Spencer Tierney is a consumer banking writer at NerdWallet. He has covered personal finance since 2013, with a focus on certificates of deposit, as well as other banking subjects. The work he has written for him was highlighted on The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. The location of his work is Berkeley, California.
Updated Dec 11, 2020
Editor: Carolyn Kimball Assisting Editor - Banking Los Angeles Times, San Jose Mercury News Carolyn has been employed in newsrooms across the across the country as a reporter as well as an editor. Her interests are personal finances, science-fiction novels and groovy Broadway musicals.
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One type of bank plays a significant role in generating more opportunities for economic growth for those of people of color.
From an Black perspective of leadership, a banks is not just "a place where someone can deposit a check or take out a loan," says Kevin Cohee the Chairman and CEO of OneUnited Bank, one of the largest Black-owned bank within the U.S. "That's only the beginning."
OneUnited Bank's first loan under 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 what government agencies term depository institutions that are minority-owned, must include the largest number of stockholders, or members of their board of directors comprise individuals of people of color. This is in contrast to the predominantly white board of directors in the biggest U.S. banks.
Minority-owned banks provide economic opportunities. We'll review of three ways that they can make the difference, and how is your role to make a difference.
>> WHERE DO I FIND ONE:
1. The gap is closing for those who aren't banked
Checking and savings accounts are two common entry points for building a relationship with a bank, but about 7 million Americans do not have them, and there's a trend across racial and ethnic boundaries.
About 16% of Native American households, 14 percent of Black households, and 12 percent of non-white Hispanic households don't hold bank accounts as compared to 2.5% for white families, according to the 2019 Federal Deposit Insurance Corp. survey of the unbanked.
Minority banks can help bridge this gap by serving the majority of low and moderate-income regions than other banks, as per the 2019 FDIC report on minority depository institutions or MDIs. For instance, the majority of the people that banks that are owned by Blacks of 62% is African American, compared to the 6% of metropolitan banks that aren't MDIs, according to the report.
In addition, banking deserts or regions of the country where one has to travel miles to locate the nearest bank, have traditionally been a source of concern for certain races and ethnic groups, including Native Americans living on reservations.
"We collaborate with those who are typically out of the banking system], and they develop into long-term customers" claims T.W. Shannon, CEO of Chickasaw Community Bank, one of 17 Native American-owned banking institutions.
2. Enhancing your wealth by taking home loans
The home is among the biggest contributors to wealth for many, but it's primarily for white Americans. Asian and Black borrowers made about 6% and 7% in U.S. home purchases, as opposed to 60% by non-Hispanic white borrowers in a mortgage market report by 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 borrowers of color than other banks do, as per the FDIC report.
In the case of Chickasaw Community Bank, that is a means of tailoring home loans for Native Americans. The bank also offers lease-to-own options like lease-to-own, for instance, in which a tribe acts as the lender and borrows funds from the bank while a tribal member follows an affordable payment plan and builds their credit. Eventually, the member owns their own home.
"For our tribe, the Chickasaw Nation, these are homes for people who have had some credit issues in the past, but have a steady income but might not qualify in other loan programs," Shannon says. "That's a niche market that the big-to-fail national banks don't spend too much time on."
3. Responding to the needs of business communities in times of crisis
Small-business loans are another area of focus for minority banks, and their funding situation has become more difficult due to the COVID-19 epidemic. Minority banks have made over 123,000 Paycheck Protection Program loans for an aggregate of $10.3 billion through August 2020, as per data obtained from the Small Business Administration.
"We took on the small, hard loans, not the easy loans [to major corporations] We made it not for the money , but to aid the people in need," Cohee says.
Most minority banks are also community banks which the FDIC defines as banks that focus exclusively on conventional loans and core bank accounts and have a limited geographical scope based on location. Community banks surpassed their capacity this year. Despite accounting for just 15% of all bank loans they outperformed other banks in offering 30% of PPP loans in the context of the 2020 FDIC quarterly report ending in June. These loans help protect jobs.
"We have saved more than 1000 Oklahoma jobs with this programme," Shannon says of Chickasaw Community Bank. "One thousand jobs may not sound like a lot but in Oklahoma this is a huge deal."
He continues, "We were oftentimes calling the borrower to ensure that they knew about these options for deferment assistance and programs were available. We helped them, even though they weren't aware we could be."
What you can do to assist minority banks
Minority-owned banks impact the lives of a lot of people living in communities with limited access to banking services, but they are only 150, or around 3%, of the 5,100 banks that operate 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 which means that the typical white family has eight times the wealth of the typical Black family, according to an annual Federal Reserve survey.
To help minority banks, you can put some of your savings into one. ( ) Part of the business model of banks is to make use of money in checking and savings accounts to provide loans to small businesses and homeowners. Some companies, such as Netflix for instance has begun to support Black banks.
Beyond banking, consider investing in businesses that focus on making a social impact in addition to other .
The quote is from Eleanor Roosevelt, Cohee says, "We're all better off when we're all in better shape."
Author bio Spencer Tierney is a writer and NerdWallet's authority for certificates of deposit. He has had his work featured in USA Today and the Los Angeles Times.
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