Why black banks don’t lend to blacks

Mechanics & Farmers, Consolidated Bank & Trust, and Broadway Federal are among the black-owned commercial banking institutions, which span the nation from New York to California – several with assets upwards of $30 million dollars. So, why has lending between blacks fallen far shorter than that of traditional banks lending to whites?

m&f bank

It is no secret, in fact, well-known that whites fare much better than blacks when it comes to getting loans to start businesses, purchase homes, or attend college. Many in the black community have wondered what is actually behind this reverse institutionalized racism and why it continues to hinder the economic progress of millions of African Americans. Black people have always had to work harder than anyone else to improve their socioeconomic standing in America. Yet, it seems that black banks are contributing to the quandary of black inferiority by systemically denying loans to African Americans. Everywhere you turn, African Americans are giving their money away to support business owners who do not look like them. Whites own the overwhelming majority of businesses in the U.S., and are presumably not opening these businesses with the money from their savings account. On a recent visit to Atlanta, it was astounding to see the number of gas stations, hotels, and laundromats that are owned and operated by Hindu Indians. For more than 20 years, Asians have dominated the beauty supply market whose stores have become staples in black neighborhoods and boasts an exclusively black customer base.

One North Carolina-based bank is infamous for only lending to those who reside in a predominately black neighborhood, purposely shutting out applicants living in surrounding communities without a significant black presence. In other words, if these bank officials do not know you or your family, forget about getting a loan from them regardless of your credit score and collateral. This type of racism is beyond reprehensible and perpetuates the “crabs in the barrel” mentality that has pitted black folks against one another for decades. Classism is alive and well in the world of black lending, and if African Americans do not take a stand against this form of discrimination blacks will continue to lag behind whites and even other minorities when it comes to creating economic power.

Studies show that Blacks are losing the war on economic prosperity within their own communities to other ethnicities. A drive around any black neighborhood clearly reveals a plethora of Hispanic-owed supermarkets, check cashing services, and used tire shops. With the help of lending institutions such as Self Help in Durham, North Carolina and Nuestro Banco located in neighboring Raleigh, Hispanic-owned businesses have flourished while black businesses, unable to secure working capital to stay afloat, continue to fold in wake of the Great Recession. There are more than 50 Hispanic-chartered banks in the United States, and the list is growing. In fact, according to David Flores, president of Nuestro Banco, the driving force behind the spike in Hispanic lending institutions is imbalances in labor supply and demand. As more Hispanics immigrate to the U.S., the greater their need to have access to the cultural conveniences that their own supermarkets provide.

A 2012 Pew Research Center report found that “more Latinos express satisfaction with the direction of the country, report that their finances are in ‘excellent’ or ‘good’ shape and expect their family’s finances to improve in the next 12 months.” Conversely, the unemployment rate among African Americans in 2012 tipped more than 14 percent. To shed an even greater perspective on the impact that the lack of black lending inflicts on African Americans, Latinos in North Carolina contributed some 14.2 billion dollars to the state’s economy during 2010. Many believe that entrepreneurship and the self-reliance on goods and services offered by businesses which cater specifically to the Hispanic population explains this economic phenomenon.

Black bankers need to start caring about what is going on within their own communities. Double standards and an obsession with the haves and the have-nots should have no place in institutional lending.  The black bank holds the keys to the financial growth of the black family and community, yet refuses to step up to its responsibility and duty to ensure that African Americans get their fair share of the limitless wealth at their fingertips.


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