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3 Ways Minority-owned Banks Help Make a Difference in America
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3 Ways Minority-Owned Banks can make a difference in America
by Spencer Tierney Senior Writer | Certificates of deposit ethics, ethical banking, bank deposits Spencer Tierney is a consumer banking writer for NerdWallet. He has been writing about finances for individuals since the year 2013 with a focus on certificates of deposit and other banking-related subjects. The work he has written for him was featured by The Washington Post, USA Today, The Associated Press and the Los Angeles Times, among other publications. He is located in Berkeley, California.
Dec 11, 2020
Edited by Carolyn Kimball Assigning 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 passions include personal finance, sci-fi fiction novels and groovy Broadway musicals.
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A particular type of bank has an an outsized role in creating greater economic opportunities for people of ethnicity.
From a Black leadership view, a bank can be more than “a place where someone can deposit a check or obtain a loan,” says Kevin Cohee the Chairman and CEO of OneUnited Bank, one of the biggest Black-owned institutions across the U.S. “That’s just one of the first steps.”
OneUnited Bank’s first loan in the Paycheck Protection Program, part of the federal response to the COVID-19 epidemic, “was to a single mother of seven who drove for Uber,” Cohee says.
Minority-owned banks, also known as the ones that government agencies refer to as institutions that are depository for minorities, must be able to have the majority of stockholders or members of their board of directors comprise individuals of ethnicity. This differs from the majority of white board of directors in the biggest U.S. banks.
Minority-owned banks can open the doors to opportunities for economic growth. We’ll look at three ways they make an impact, and how is your role to help.
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1. Closing the gap for the unbanked
Savings and checking accounts are two common entry points for building relationships with banks However, about 7 million Americans do not have these accounts, and there’s an increase across racial and ethnic lines.
A little more than 16% in Native American households, 14 percent of Black households and 12% from non-white Hispanic households do not possess bank accounts as compared to 2.5% for white families, according to the 2019 Federal Deposit Insurance Corp. survey on the unbanked.
Minority banks can help fill the gap by serving greater numbers of people with low and moderate income regions than other banks, as per the 2019 FDIC review of minority-owned depository institutions or MDIs. For instance, the majority of the population that is served by a typical black-owned bank, 62%, comprises African American, compared to 6% for metropolitan-area banks that do not qualify as MDIs in the report.
Furthermore, banking deserts or regions in the United States where you must travel for miles to locate a bank, have historically been a source of concern for certain racial and ethnic groups, like Native Americans living on reservations.
“We collaborate with those who are typically out of banks] and they become regular customers” states T.W. Shannon the chief executive officer of Chickasaw Community Bank, one of the 17 Native American-owned banks.
2. Enhancing your wealth by taking home loans
Homeownership is among the biggest contributors to wealth for many, however it is mainly beneficial to white Americans. Asian and Black borrowers made about 6 and 7 percent of U.S. home purchases, in comparison to 60% by white non-Hispanic borrowers, according to a 2019 mortgage market report by the Consumer Finance Protection Bureau. Native Americans accounted for less than 0.8 percent of all home purchases.
Minority-owned banks offer more home mortgages and small business loans to people of color than other banks offer, according to an FDIC report.
In the case of Chickasaw Community Bank, that involves making home loans to Native Americans. The bank also offers lease-to-own options such as which the tribe acts as the lender, borrowing money taken from the institution, while a tribal member follows an affordable payment plan and improves their credit. In the end, the tribal member owns their home.
“For our own tribe which is that of the Chickasaw Nation, these are houses for those who experienced credit problems in the past, but who now have a steady income but might not qualify in other loan programs,” Shannon says. “That’s a niche market that the too-big-to-fail [national] banks don’t spend much time on.”
3. Responding to the business community’s needs during a time of crisis
Small business loans are another focus for minority banks, and their funding situation has become more difficult during the COVID-19 pandemic. Minority banks have granted more than 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 made the smaller, difficult loans, not the easy loans (to large corporations), and we did it not to earn cash, but to assist the people,” Cohee says.
Many minority banks are community banks that the FDIC defines as those that concentrate exclusively on conventional loans and bank accounts that are core and are not able to expand their geographic reach based on geographical location. Community banks surpassed their capacity this year. While they account for only 15% of bank loans they outperformed other banks when it came to providing 30% of PPP loans according to the 2021 FDIC quarterly report that ended in June. Additionally, these loans help protect jobs.
“We saved more than 1000 Oklahoma jobs through that programme,” Shannon says of Chickasaw Community Bank. “One thousand jobs might not seem like a lot, but in Oklahoma this is a huge deal.”
He says, “We were oftentimes calling the borrower to make sure that they knew about these programs and deferment assistance options were available. We helped them, even though they weren’t aware we could be.”
What you can do to assist the banks of minorities
Minority-owned banks impact the lives of many in communities that aren’t well-served, yet they account for less than 150, or around 3percent, from the 5100 bank institutions that operate in the U.S. Furthermore, they alone can’t address problems that are systemic within the U.S. such as the racial wealth gap, in which the typical white family is eight times the wealth of the typical Black family, according to the 2019 Federal Reserve survey.
To help minority banks, you can put some of your savings into one. ( ) One aspect of the business model of banks is to make use of funds in savings and checking accounts to provide loans to small businesses and homeowners. Certain companies, like Netflix, for example, have begun supporting Black banks.
Beyond banks, consider investing in companies focused on achieving social change 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 an expert on certificates of deposit at NerdWallet. He has had his work published by USA Today and the Los Angeles Times.
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