Black-Owned Banks Struggle To Stay Out Of The Red
Trymaine Lee
After more than a century of delivering financial resources to underserved communities, black-owned banks are struggling to remain relevant -- and solvent -- in an economic environment full of pitfalls.
Their traditional customer base -- lower and middle class blacks, 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.
"This minority bank community is really catching hell," said Michael Grant, the president of the
National Banker's Association, an 84-year-old trade group that represents minority-owned banks. "They have survived everything, including world wars and Jim Crow, but this has been one of the most difficult periods of all."
Black banks have functioned mainly as "mission-based" institutions, born not long after slavery to help build black wealth. (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 blacks 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.
"If the community is struggling financially, with unemployment rates as high as 20 to 25 percent in some places, what does that do to its overall financial health?" Grant asked. "If people don't have work or they are underemployed, if they are losing their jobs, it affects how much they can put into their bills or into their church, and the churches have the big loans and it affects their payments."
READ MORE: http://www.huffingtonpost.com/2011/08/22/black-owned-banks-struggl_n_933216.html?ir=Business