Posted on October 25, 2011

Should You Be Banking Black?

Naeesa Aziz, BET, October 21, 2011

If you haven’t noticed lately, the country’s financial system has come under intense scrutiny by those who say that greed and unfair practices are contributing to the country’s economic problems. But while corporate giants like Bank of America are posting record profits amid rising public discontent, Black-owned banks that have supported minority and low-income communities for years are struggling to stay afloat. So the question is: should African-Americans return to Black-owned banks?

{snip} In his famous “I’ve Been to the Mountaintop” speech [Martin Luther] King said, ” . . . we’ve got to strengthen Black institutions. I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank . . . Put your money there.”

Historically, Black-owned banks were important institutions in the African-American community that provided loans and services to Blacks when white institutions refused. Black banks allowed African-Americans to progress economically by allowing them to obtain loans to purchase homes and start businesses. Today, these banks remain relevant for many of the same reasons, but have been edged out by fierce competition from corporate rivals and economic losses brought on by the recession.

The push behind a Black-owned banking renaissance is a lot more than just a nod to yesteryear. According to the FDIC, Black households are 21.7 percent more likely than whites to be unbanked–meaning without a checking or savings account. Furthermore, nearly 32 percent of Black households more likely to be underbanked–meaning these households have a checking or savings account, but often rely on alternative financial services such as non-bank money orders, non-bank check-cashing services, payday loans, rent-to-own agreements, or pawn shops–services that drain the household and the community of wealth in the long run. Advocates say that a return to reliance upon Black banks can help reverse these figures.

{snip}