In 1865, Freedman’s Bank began the history of African-American banking in America and its principle of keeping money among its patrons continues to be relevant to financial health in the Black community today. Since their inception, Black banks have served as a symbol of hope to its customers. They have served as an opening to home ownership and business ownership, as well as to help build financially sustainable neighborhoods and cities.
Following is a brief history of Black banking in America, the significance of the Bank Black movement and six principles of financial health for families within the community.
When Congress made Freedman’s Savings and Trust Company a legal entity, the law stated that the bank’s purpose was to serve “persons heretofore held in slavery in the United States, or their descendants.” Eventually the bank opened 37 branches across the South with the bank in DC as headquarters, including a branch in Richmond created less than a year after the passage of the law. The bank ran into several problems including embezzlement by white members of the board and was eventually forced to shut down in 1874.
But Black banks continued to be important to the African-American community because White banks often refused to loan money to Blacks, or loaned money at high interest rates. With the rise of Black banks, African-Americans could secure loans to purchase homes and start businesses. After Freedman’s, African-Americans began to find success at owning their own banks.
Some of the notable ones include Mechanics and Farmers Bank in North Carolina and St. Luke Penny Savings in Virginia. From 1888 to 1934, African-Americans owned more than 130 banks in the U.S. The Great Depression hit Black Banks hard however, and by the early 1940s only 11 were opened in the country.
They began to rise again during the 1960s and ownership remained steady until the late 1980s. By then, problems had begun to arise in the banking industry in general.
“Today, Black banks are suffering like the rest of the banking industry due to huge losses suffered from securities related investments,” wrote blogger Calvin R. Evans in “Black Banks: Segregation’s Gift to the Black Community.”
“In addition, according to a March 2010 Federal Reserve Board report, there are only thirty Black-owned banks in the United States. Economic power is the root to gaining political power, and Black banks can help facilitate income growth and stability in the Black community by creating loans for businesses which would create jobs for residents.”
In fact, those are some of the reasons behind why the Bank Black Movement started in recent years.
“There is an awakening for the Black community to utilize our $1.2 trillion in annual spending power to create jobs and build wealth in our community,” said Teri Williams, president and COO of One United Bank, in an interview with CNBC.
Justin Moore, co-founder of Bank Black USA agrees. In a 2015 interview with CNBC, he told reporters that his organization provides customers with important information like ATM and online banking usability ratings and ratings for money management. Moore said that is important, so that people can see the real value of Black-owned banks in their communities.
“We’ve been seeing these institutions disappear from our communities and these are the institutions that understand Black communities and, equally, low income communities,” Moore said. “And banking is a relationship as much as it is a number. Deciding whether or not to lend you money for a house, there’s an equation for that but there’s also discretion to that. That there’s a human being somewhere… [making] a choice whether or not there’s gonna be that access of financial services to people. And that’s something that there’s a lot of importance in the role these institutions play.”
“Black-owned banks made about 67% of their mortgage loans to Black borrowers in 2011,” wrote Amy Fontinelle in “Top 5 Black Owned Banks in America,” “compared with fewer than 1% made by community banks not run by minorities. So, while there are only 30 Black-owned banks in the entire country, according to BankBlackUSA.org, they do make a difference.
“These banks represent about 16% of the country’s minority-owned depository institutions (MDIs). MDIs support minorities and populations that live in low-to-moderate income census tracts, people who are underserved by mainstream financial institutions. These banks largely rely on core deposits to fund real estate loans. Only 2.6% of the country’s 6,800 FDIC-insured banks are MDIs. Further, only 1.1% of FDIC-insured banks are community development financial institutions (CDFIs), which make banking services accessible to low-income customers and underserved communities.”
Meanwhile, financial advisor H. Cortez of financialhealthmentor.weebly.com has six principles of financial health for individuals and families. Financial health among individuals and families help to build community wealth and well-being. They are, Cortez says:
“ENTREPRENEURSHIP – America is business and if you don’t have a business in America you may as well be a foreigner in your own country. We teach the true power of entrepreneurship and why every wealth building portfolio should have a private equity business and in particular, a home-based business, especially in the early stages of one’s wealth building journey.
“TAX MINIMIZATION – If you’re like most Americans, you’re earning 100% of your income through labor and because of the way you choose to earn income, by default you’ve chosen to pay the most in taxes. We teach legal and ethical tax minimization strategies that anyone can apply to reduce their tax liability.
“DEBT ELIMINATION – It’s EXTREMELY difficult to build wealth when you’re drowning in debt. Most working Americans are living paycheck-to-paycheck and therefore only make enough money to service their debt, but never pay down the principle. Well, if you learn to reduce your tax liability, those savings can be used to apply to debt.
“CREDIT EDUCATION – You’ve probably heard it said that “Cash is King” and that is true, but CREDIT rules the kingdom. In the Black community, we only know to make money with labor so Uncle Sam gets 1/3 of our income. Because of bad credit the banks are getting another 1/3 or our income due to high interest rates. So we have to teach our people how to get good credit, maintain good credit and how to leverage credit to build wealth instead of leveraging it to but JUNK!
“ASSET ACCUMULATION – It’s widely known that Black people in America are among the world’s biggest consumers. We have the lowest median income and yet account for close to 10% of all retail spending. In other words we consume our wealth while making other nations wealthy. We have to teach the importance of asset accumulation and how to buy assets and pass them down to our children so that each generation is NOT starting from zero!
“LIFE INSURANCE – This one is touchy for many Black people. Traditionally we never want to talk about the thought of dying, let alone actually prepare for it. Life insurance not only creates a much-needed wealth transfer in the Black community but it’s much more than that. How about Accident and Disability insurance that protects ones income, whole life policies that build cash value that could be borrowed against if needed. If you don’t have life insurers to provide a financial safeguard for your family in the event of an untimely death, you my friend are selfish…”