Business
African-American-owned banks struggling to remain solvent, and relevant
After more than a century of delivering financial resources to under-served communities, African-American-owned banks that once offered financial credit and stability to the African American community are struggling to remain relevant, and solvent in an economic environment full of pitfalls.
The number of African-American-owned banks across the United States has dwindled. In 1994, 54 such banks were identified by the Federal Deposit Insurance Corporation (FDIC); now there are just 28.
Their traditional customer base — lower and middle class African Americans, small business owners and churches — has been disproportionately affected by high unemployment, leaving customers with less money to deposit and, in turn, leaving many of these smaller financial institutions with less capital to reinvest in their communities. As customers have fallen on hard times or fallen behind in their loan repayments or mortgages, home foreclosures have become a nagging issue, hamstringing banks’ portfolios with toxic loans. Meanwhile, many customers with big savings and healthy checking accounts opt for the flexibility of larger banks, which offer more branches and a wider variety of services.
African-American-owned banks have functioned mainly as “mission-based” institutions, born not long after slavery to help build wealth in the black community. The first African-American-owned and -operated bank was Capital Savings Bank in Washington, D.C., established in 1888. It spurred a boom in black businesses and offered African-Americans a resource they had been previously denied. They are traditionally conservative, with close ties to local churches, families and businesses. When the community suffers, it’s felt more acutely, with little wiggle room for mistakes.
