How banks hurt Black clients (and what to do about it)

As small businesses grasp at straws and apply for every grant, loan and funding opportunity that exists to stay afloat, we are in real-time seeing the decimation of them in our communities.

The devastation is affecting Black and brown business owners in massive numbers, with 41% of Black businesses closing due to COVID-19, compared to 17% of white business owners, according to a study by the National Bureau of Economic Research.

When we think about the system that cause this disparity, we often blame the individual.

“They weren’t savvy enough to save their money.”

“Why don’t fund?”

“Why didn’t they get a loan?”

they have a

rainy day

All these things are tied to the economic stability of the individual and their ability to access capital, i.e. get a loan or investment. Well, the reality is, banks are racist.

“But, Jenny, how could they be racist? They’re just looking purely at the numbers. Numbers aren’t racist.”

Bankers aren’t racist. The banking system is. A bank’s main prerogative is to find the least risky idea to support because they are in the business of protecting their return.

If you get past a banker and any biases they have, then you are tested on your credit worthiness, financials and your ability to pay back a loan. They review your tax returns and how many assets you have gathered over your lifetime.

Those factors are usually not an issue when you come from generational wealth. But if you had to pay your way through college, take out student loan debt and thus don’t own anything, or you’re Black and brown, you’re seen as high risk.

You’ve already been deducted on these factors and big banks will have shooed you out the door. Yet this is the path of nearly every immigrant and person of color, and we wonder why access to capital for these communities is so disparate.

What has emerged is small local banks and Community Development Financial Institutions that review you differently. Some meet you, go visit your business and understand where you are and more importantly who you are. They then advocate for you. This is what makes local banking so important and is the beginning of a more equitable banking industry.

But it’s not happening fast enough. According to the Federal Deposit Insurance Corporation 2019 report, 91% of Arizona deposits, earned by hardworking, local residents, sit in nonlocal, out-ofstate banks that do not think about your business or community.

Banks can do wonderful things, as they have the power to propel businesses forward and create economies where none existed. Look at First Bank, which donates millions to nonprofits through AZ Gives Day, and BBVA, which consistently funds communities of color.

Local banks such as Alliance Bank and Commerce Bank of AZ were processing small business loans through the shutdown in a matter of days. Community Development Financial Institutions, including Chicanos Por La Causa, specifically funded hundreds of PPP loans for entrepreneurs of color.

Good banks care about more than their bottom line. Find them and bank with them because that is how we will reshape access to capital in Arizona.

From July 27 to 31, you can join the #MoveYourMoney campaign by Local First and move your money to a bank that values racial equity. Local First has aggregated an amazing list at banklocalaz.com.