08-04-2025
Why Buying Black Is Not Enough, The Importance Of Black-Owned Banks
A History of Black Banks is part of a series that first appeared in the online magazine Vanilla is Black. To support independent journalism or see more of my work: click here.
Photo illustration of the exterior of the Binga State Bank building on State Street in the ... More Bronzeville neighborhood of Chicago, Illinois, early 1920s. It was founded by Jesse Binga and was the first privately owned African American bank in Chicago. (Photo by)
I am writing this post from Dubb's Organic Coffee. The West Hollywood coffee shop is on a nondescript stretch of Fountain Avenue. Famously, Johnny Carson once asked Bette Davis if she had any advice for young actresses trying to get into Hollywood, Davis deadpanned: 'Take Fountain!'
Dubbs Organic Coffee isn't a chain. It's also not one of those fancy West Hollywood spots with hipster white baristas. It's a community coffee shop. It's comfortable and has a neighborhood vibe where customers bring their dogs, delivery workers stop by to use the restroom. The owner greets you and your dog by name.
Wali Muhammad, owner of Dubbs Organic Coffee in West Hollwyood
Wali Muhammad owns the shop. Part of what sustains the business is Wali's outgoing personality. It doesn't hurt that you'd cast Morris Chestnut to play him in the movie. Wali was born at Culver City Hospital. His parents had to drive past the legendary MGM Studios to get him home. All that is to say Muhammad is an Angeleno through and through. Born in Culver City and raised in Compton, the gray at his temples is the only indication that Muhammad is 48. 'People wish they looked this good at 48!' he proclaims. Black Banking history.
Muhammad grew up in the Nation of Islam, and hustle culture is in his bones. Over the years, he's started seven or eight businesses, including a successful food truck. I have to say, in my mental stereotype of a Black entrepreneur, it would be a Black man who got his start hustling bean pies.
'I haven't worked for someone else in over 20 years, and if it's up to me, I won't ever.'
Muhammad is often an accountability partner for his customers acting as a study hall manager keeping customers on task. 'I don't want pity dollars' Muhammad roars with laughter 'I want people to come because my coffee is the best coffee around.' Wali is all for buying Black. His problem isn't that Black consumers don't support him. One of the perils of being a Black entrepreneur is the lack of access to capital. When Muhammad started his business, 'I had a 780 credit score and they wouldn't give me anything.' He pulled out his phone to show me. He got his credit up to 806, and still, he says bankers gave him the side eye.
Wali's experience is not anecdotal. According to a study of small business credit by the regional Feds, white businesses are twice as likely to be approved for bank funding. According to the Small Business Administration: 'only 23 percent of their businesses (Black) received the full amount sought and only 60 percent received at least some of the financing sought. Hispanic-owned firms did slightly better at 28 percent and 66 percent, respectively.' So like many Black entrepreneurs, Muhammad self-funded: 'I believe in betting on me.' Even with good credit scores, businesses owned by Black people were less likely to have their financing needs met than white-owned firms.
Here's the key for Muhammad: Banks. Muhammad says he'd trade a thousand customers for three Black banks. When you take banking as a whole, you can see his point. Let's take mortgages, according to the Home Mortgage Disclosure Act (HMDA), Black applicants were denied mortgages at a rate of 84% higher than white applicants in 2020. The trend is getting WORSE, in 2023 27.2% of Black applicants were denied a mortgage, more than double the 13.4% of white borrowers. Then look at Venture capital, where the average tech bro gets his money, a mere 3% of funding goes to Black founders, and of that, less than 1% goes to Black female founders, .34% to be exact. .34% of all Venture capital goes to Black women. That's a stat that bears repeating.
At their peak in the 20th century, there were over 100 Black-owned banks. Now that number has fallen to 18. The need for Black people to have their own banks and access to capital was something leaders and policymakers understood since the earliest days of Reconstruction. The Freedman's Savings and Trust Company, or the Freedman's Bank as it was known, was established in 1865 by Congress. The bank aimed to help formerly enslaved people build wealth and establish a strong financial footing. The bank opened 37 branches across the South. In just five years the bank had nearly 70,000 depositors. The problem was, that the management of the bank was dominated by white bankers who engaged in widespread corruption, managing funds poorly and misappropriating money. By the Panic of 1873, the bank collapsed. This would be a pattern that would continue.
A view of the Department of Justice building (formerly the Freedman's Savings and Trust Company ... More Bank) on the left and the Riggs Bank building at right on Pennsylvania Avenue N.W. on November 14, 1888 in Washington DC. (photo by Frances Benjamin Johnson/Library)
The collapse of the Freedmen's Bank would lead to a generation of distrust in the banking system. The era of Black banks began in 1888 with the opening of Capital Savings Bank in Washington, D.C.. Banks with names such as Savings Bank of the Grand Fountain United Order of True Reformers in Virginia, or the Alabama Penny Savings Bank in Birmingham, Alabama would follow. Between 1888 and 1930, Black communities created and ran over 100 banks and other financial organizations. The banks were set apart from their white counterparts. They focused on serving their customers, supported entrepreneurs, protected Black businesses and individuals from white predatory practices and terrorism, and provided credit, loans, economic development, jobs, and training.
Tonya Mosley talked with Justene Hill Edwards about the rise and fall of the Freedmen's Bank on NPR's Fresh Air.
There isn't an organization in the Black community that was started after 1888 that wasn't affected by Black banking. This is how wealth was accumulated in churches, schools, homes, and most importantly LAND. By 1910, primarily Black Americans owned 16 million acres of land (compared to approximately 4 million today). According to The Color of Money: Black Banks and the Racial Wealth Gap:
'Wherever African American populations could be found, black banks flourished to meet both the opportunities and challenges of a segregated economy. Concentrated populations of black wage workers proved to be a bounty for the black banks. But that same concentration also created special vulnerabilities. These banks were created by the same forces that worked against them at every turn — a segregated economy held the seeds of its destruction. There would be many bank failures in due time, but not before some of these institutions had cemented their place in history as the pioneering giants of black finance. The 1920s roared for black banks too, but these machines were never able to perform the magic of banking that is the multiplication of capital through fractional reserve lending. As well, the bust following the boom would last much longer for black commercial institutions and their customers.'
What happened? Two words that explain a lot about the American economy: The Great Depression. The Great Depression devastated financial institutions of all kinds, especially Black banks. Black banks had operated in many ways outside of the larger system. Their holdings were based on Black assets that had lower values, and with limited resources and systemic discrimination, many Black banks could not survive.
Businessman sat at his desk going through his daily routine
In the post-war era, there were a slew of new Black banks. However, at the same time, those larger white-owned banks essentially discovered the Black consumer and Black banks saw their competition increase. According to a 2018 report by the Kansas City Fed, access to capital has been an ongoing issue for Black banks. They have historically struggled to obtain the same levels of investment as their white counterparts, limiting their growth and ability to compete. Most importantly, after every recession, and every financial crisis, Black banks never recovered their lost ground. For instance, according to the Chicago Fed, the 1980's Savings & Loan crisis saw 35(!) banks fail and never return. The 2008 financial crisis dealt the most lethal blow to banks. With each crisis, Black banks get hit harder and recover slower. Today, only a handful remain.
I often think of the movie Boogie Nights and a scene where Don Cheadle plays a porn actor who goes into a bank to get a loan.
BUCK: I have all the papers, all the things in order, yes? I mean, it's all—BANK WORKER: Yes. But we can't give you a loan. I'm No, no, no, please. This is . . . this is a new business for me, a real thing that I want to do and a real thing that—I can do, please, I mean -- this is not a joke --BANK WORKER: I'm sorry.
Every Black person reading this knows the pain that Don Cheadle felt. When people look back wistfully on segregation and talk about buying Black, here's what I know: It'd be a lot easier to buy Black and support Black businesses if Black entrepreneurs could get a loan or funding. You'd be reading the success stories of Black business owners a lot more.
Every Black person reading this knows the pain that Don Cheadle felt. When Black folks look back wistfully on the segregated past, and opine about buying Black. I do know one thing, it'd be a lot easier to buy Black and support Black businesses if Black entrepreneurs could get a loan or funding. You'd be reading the success stories of Black business owners a lot more.
Buying Black is vital, but it's not a cure-all, especially in a system where access to capital remains out of reach. From the Freedman's Bank to Dubbs Organic Coffee, the throughline is clear: without Black-owned banks, Black economic power is undermined at its root. If we truly care about building Black wealth, it's not enough to just spend at Black businesses. Black people must invest in Black financial institutions, demand equal access to credit, and support policies that address the racial wealth gap. Black banks are not just part of Black history—they are key to the future of Black people. To support Black entrepreneurship, we must support Black banks.
If you want to learn more about Black banking, I suggest buying a copy of Saving and Trust by University of Virginia Professor Justene Hill Edwards or The Color of Money: Black Banks and the Racial Wealth Gap, by UC Irvine professor Mehrsa Baradaran.
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