MinorityBanks1

The lack of financial awards to Black-owned banks is impacting Black bankers and communities. (Courtesy photo)

Members of the National Bankers Association, including heads of several Black-owned banking institutions, recently alleged charges of racial discrimination against the Department of Treasury’s Community Development Financial Institutions Fund (CDFI Fund). The banks were overlooked for up to $3.5 billion in allocations in New Markets Tax Credits (NMTC) provided by the fund.

The NMTC program, designed to spur economic development in distressed communities across the U.S., recently awarded 76 community development institutions, but did not do the same for any of the nation’s minority banks, despite their reputations of deploying capital in the most underserved communities in the U.S.

“The absence of a single minority bank raises much concern,” said Michael Grant, president of the National Bankers Association stated in a press release on July 10. “In 2009, the General Accounting Office issued a report detailing the disparity in NMTC awards to minority entities. The numbers have actually gotten worse, not better.”

A 2009 study by the Government Accountability Office indicated that only about 9 percent of minority entities were successful when applying for NMTCs, while non-minority entities had three times the success rate, winning 27 percent of the time. According to the GAO, although the program is highly competitive, minority entities have less than a one in three chance of any other type of entity to receive an award.

“By our estimates, less than two percent of the $450 billion NMTCs issued over the past 12 years has gone to minority banks,” Doyle Mitchell, CEO of Industrial Bank of Washington, D.C. said.

According to the CDFI Fund records, only six awards (less than 8 percent) have gone to minority controlled entities of any kind, and those groups received only $165 million, under 5 percent of the total dollar amount of allocation.

“Some of our banks have been deploying capital in the poorest neighborhoods in America for over 100 years, and we think the CDFI Fund should review the program to ensure that applications by minority and other small CDFI banks are evaluated on criteria that reflects their position as regulated institutions operating in distressed areas,” he said.

Minority banks have had even lower success rates than minority entities overall. Of particular concern, as the nation continues to grapple with the after effects of the 2008 economic downturn, is the ability of Black communities to recover without the critical support of Black banks. Black-owned financial institutions have historically undergirded those businesses denied funding through traditional sources because of the neighborhoods in which they provide services.

“The NMTC Program has great potential to be part of a comprehensive economic solution in America’s inner-cities, most of which still have not recovered from the Great Recession,” said Preston Pinkett, CEO of City National Bank and chairman of the NBA. “But the groups best equipped to make those investments, minority banks, have largely been shut out of the NMTC program.”

The National Bankers Association was founded in 1927 and is a trade association for the nation’s 177 minority and women-owned banks (MWOBs). Its members include banks owned by African-Americans, Native-Americans, American¬ Indians, East-Indians, Hispanic-Americans, Asian-Americans and women.