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3 Ways Minority-owned Banks Help 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 deposits Spencer Tierney is a consumer banking writer for NerdWallet. He has written about personal finance since 2013 with a particular emphasis on certificates of deposit and other banking-related subjects. The work he has written for him was highlighted in 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
Editor: Carolyn Kimball Assigning Editor – Banking | Los Angeles Times, San Jose Mercury News Carolyn has been employed in newsrooms across the country as a reporter and editor. Her passions encompass personal finance, Sci-Fi novels and groovy Broadway musicals.
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A particular type of bank has an a significant role in generating more economic opportunity for people of people of color.
From a Black leadership viewpoint, a bank is more than “a location where one can drop off a deposit or obtain a loan,” says Kevin Cohee who is the Chairman and CEO of OneUnited Bank, one of the largest Black-owned institutions within the U.S. “That’s just one of the first steps.”
OneUnited Bank’s very 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 Uber,” Cohee says.
Minority-owned banks, also known as those that are classified by government agencies as depository institutions of minorities, have to include the largest number of stockholders, or the members of their boards of directors comprise persons of color. This is in contrast to the majority of white board of directors of the largest U.S. banks.
Minority-owned banks provide opportunities in the economy. We’ll look at three ways that they make the difference, and how could you do assist.
>> WHERE CAN I FIND ONE:
1. The gap is closing for the unbanked
Checking and savings accounts are the two most common ways to establish an association with a bank, but about 7 million Americans lack them. There’s also an increase across racial and ethnic boundaries.
A little more than 16 percent from Native American households, 14 percent of Black households and 12% of non-white Hispanic households don’t possess bank accounts as compared to 2.5 percent for white families, according to an annual 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 and moderate income areas than other banks, according to an annual FDIC report on minority depository institutions, or MDIs. For example, most of the population that banks that are owned by Blacks of 62% comprises African American, compared to the 6% of metropolitan-area banks that do not qualify as MDIs in the report.
In addition, banking deserts, or areas of the country where one must travel for miles to locate banks, have historically been a source of concern for certain races and ethnic groups, like Native Americans living on reservations.
“We collaborate with those who are often out [of the banking system], and they develop into loyal customers,” says T.W. Shannon who is the CEO of Chickasaw Community Bank, one of 17 Native American-owned banks.
2. Boosting wealth with home loans
The home is among the most significant sources of wealth for many, but it’s mainly for white Americans. Asian and Black borrowers made up about 6 and 7 percent from U.S. home purchases, respectively, compared to the 60% made by white non-Hispanic 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 more home mortgages and small business loans to borrowers of color than other banks do, as per the FDIC report.
For Chickasaw Community Bank, that means tailoring home loans for Native Americans. The bank offers lease-to-own programs such as which the tribe acts as the lender, borrowing money taken from the institution, while a tribal member is on a payment plan and improves their credit. In the end, the tribal member owns their own home.
“For our tribe which is the Chickasaw Nation, these are homes for people who have experienced credit problems in the past, but who now have a good stable income but might not be eligible for various loan program,” Shannon says. “That’s an extremely niche market that the too-big-to-fail [national] banks aren’t spending much time on.”
3. Responding to the needs of business communities in times of crisis
Small business loans are another focus for banks of minority status, and their funding situation has become more difficult due to the COVID-19 epidemic. Minority banks have made over 13,000 Paycheck Protection Program loans for a total of $10.3 billion through August 2020, according to data obtained from the Small Business Administration.
“We made the smaller, difficult loans and not the simple loans to big corporations We didn’t did it for money , but to aid the people in need,” Cohee says.
Many minority banks are community banks, which is what FDIC defines as banks that focus exclusively on conventional loans and bank accounts that are core and are not able to expand their geographic reach according to location. Community banks have more than stepped up their weight this year. Despite accounting for just 15% of all bank loans they outperformed other banks in giving 30 percent of PPP loans, based on the report from the 2020 FDIC quarterly report that ended in June. And these loans aid in protecting jobs.
“We have saved more than a thousand Oklahoma jobs with this initiative,” Shannon says of Chickasaw Community Bank. “One thousand jobs might not sound like a lot, but in Oklahoma, that’s a big deal.”
He continues, “We were oftentimes calling the borrower to ensure that they knew about these programs and options for deferment assistance were available. We were there for them even if they didn’t realize they could count on us.”
What you can do to help banks that are minority
Minority-owned banks impact the lives of many people in underserved communities, but they account for less than 150, or around three percent from the 5100 bank institutions that operate in the U.S. Additionally, they alone can’t address fundamental issues in the U.S. like the gap in wealth between races in which the typical white family has 8 times the wealth of a typical Black family, as per the 2019 Federal Reserve survey.
In order to help support banks that are minority You can invest a portion of your savings into a. ( ) One aspect of the business model of banks is to use money that sits in checking and savings accounts to provide loans to small companies and homeowners. Some companies, such as Netflix for instance has begun to support Black banks.
Beyond banks, consider investing in businesses that focus on achieving social change, along with 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 highlighted on USA Today and the Los Angeles Times.
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