Banks are key to prosperity for minority communities | Editorials
Systemic racism, the public and private policies that create and reinforce advantages for some communities over others, are rampant in the United States. The financial sector, banking in particular, must mobilize to change the situation.
The federal government has injected more than $ 770 billion in payroll protection loans. Banks have been tasked with distributing these emergency funds in the event of a pandemic. But that plan, according to Reveal, the narrative arm of the Center for Investigative Reporting, failed the underserved communities that the PPP was supposed to prioritize.
An analysis of over 5 million loans found that majority white areas received a much higher percentage of loans than any predominantly Latino, black or Asian neighborhood.
No one should be surprised by the disparities. The PPP is a prime example of systemic racism. Assistance to minority communities was a specific priority of the PPP. However, the use of banks to distribute PPP finance simply channeled the money and strengthened the existing discriminatory system.
Banking hasn’t always been that way. In 1904, Amadeo Giannini founded what would become the Bank of America – currently the largest distributor of PPP loans – by providing small loans, often without paperwork, to immigrants and farmers deprived of services by the big banks.
Small businesses build the assets that create generational wealth. Poorer communities filled with such businesses have been cut off from funding for decades due to redline practices, location of bank branches and lack of banking relationships.
When the pandemic hit, banks were unable to meet PPP priorities. Some funds have gone through community development financial institutions, but not enough to meet the needs of struggling minority communities.
Giannini has proven that banking practices can be designed to correct loopholes that penalize underserved populations and that banks can make money doing so.
To repeat its success, banks today would have to set up branches in poor and immigrant neighborhoods with procedures designed for sole proprietors. They should build relationships with owners who hire family members as independent contractors. They should trust those who have been in business for decades. They should push for changes in banking regulations.
Underserved minority communities can be stable and prosperous. Banks just need to partner with the entrepreneurs who have always been there.
âOur Viewâ represents the opinion of the newspaper’s editorial board, which is made up of members of its board of directors. Comments can be sent to [email protected]