Like other African-American financial institutions, Chicago’s only black-owned and operated community development credit union is trying to stay afloat by luring new investors.
Gregg H. Brown, CEO and president of South Side Community Federal Credit Union, said he is trying to increase assets to $9 million total – up from its current $4 million – to continue its mission of supporting economic revitalization in black communities. Brown also wants to raise $500,000 in charitable donations to strengthen the nonprofit credit union’s capital.
Founded in 2003, the credit union reinvests all of its deposits back into a designated area of the South Side. The credit union has made more than $5.5 million in low-interest rate loans, and through its housing counseling program, it has helped more than 800 people keep their homes from foreclosure through refinancing predatory loans or loan modifications.
Nationally, black-owned banks have been losing ground and customers to mainstream financial institutions for decades. The Community Reinvestment Act, which was enacted in 1977, required white-owned banks to lend in black communities, but some African-Americans argue that it had unintended consequences. Black financial institutions began to compete with white-owned banks for African-American customers, Brown said.
The lack of investment in black financial institutions has resulted in an “economic cardiac arrest” in the community, Brown said.
Since 2007, the number of black- and minority-owned banks has declined from 44 to 24, according to the Federal Deposit Insurance Corporation. In Chicago, Illinois Service Federal Savings and Loans, founded in 1934, recently received a $9 million investment from a Ghanaian family-owned company to keep it open. Chatham’s Seaway Bank and Trust is seeking capital investments, which some financial experts say could diminish its black-ownership.
“When you are serving a community that has marginal credit and that has been hardest hit by the economy, you are going to take some losses,” Brown said. “That’s why many of the financial institutions serving our community are in the position that they are in today …. It is an issue of capital.”
The Chicago Reporter talked to Brown about the challenges of African- American financial institutions and why they still matter.
Reinvesting in the black community
We’ve got to become wise enough and caring enough about our own communities to reinvest in them. When it comes time to borrow, look at your financial institution … and when you pay those loans back, it helps those institutions to grow and provide more services. Until you have a conversation about banking, borrowing and building, [African-Americans] are still locked in as consumers. I hear everybody on that ‘buy black’ bandwagon, but they haven’t quite gotten on the ‘save black’ bandwagon. The only way we are going to save black communities is to save in black communities, save in our own financial institutions.
Historical role of black-owned banks
Our communities typically don’t tie banking to our economic revitalization because we have the freedom of choice. But if you look at the early 1900s when blacks migrated north, this was the land of opportunity, particularly Chicago. We had Binga State Bank, Douglass National Bank, Illinois Service Federal. These institutions were established during the Great Migration when white banks didn’t want to do business with African-Americans. There was a lot of redlining and restrictive covenants that prevented blacks from obtaining home loans so they had no choice but to go to their local African-American-owned financial institution to realize the dream of home ownership. Over the years, that has been the case. But the more that we have gained freedom of choice, the role these institutions played and continue to play has been diminished. The financial institutions within our communities represent the financial heart of the community. But if we don’t value that then we’ve created what I would call an economic cardiac arrest in the community because these institutions represent access to capital.
The impact of the Community Reinvestment Act
The Community Reinvestment Act gives credit to big banks for establishing branches in underserved communities. With their billion-dollar budgets, they were able to set up brick and mortar next door to community-owned and operated financial institutions, creating a fierce climate of competition with more service and more marketing. The competition with local African-American owned institutions has also contributed to the erosion of their customer base. … So the perception of black banks over the years has been something that has been less than par. Some of us are under the delusion that [white] institutions’ money is a little greener than ours, that they are better than us. We got to figure out a way to dispel all of those notions and build the capacity of our institutions to be more responsive to our credit needs. We are only as strong as our dollars united, and where you save is who you save.