—Michael Lyles, B1Daily

The racial wealth gap in America is not simply about how much money people earn. It is about who has access to the financial machinery that turns income into homes, businesses, investments and generational wealth. Black-owned banks can play an important role in changing that equation, but they cannot close the gap alone.

Black-owned financial institutions emerged partly because Black Americans were historically excluded from many mainstream banking and lending opportunities. That legacy has not completely disappeared. According to FDIC survey data cited in recent banking research, about 10.6% of Black households were unbanked in 2023, compared with only 1.9% of White households.

That is where Black-owned banks can punch above their weight.

Minority depository institutions often operate in communities that traditional financial institutions have underserved. The FDIC notes that these institutions frequently have a deeper understanding of the economic-development needs of those neighborhoods and can participate in lending and investments designed to serve them.

For Black families, greater access to mortgages could mean more homeowners building equity instead of remaining renters indefinitely. More small-business lending could mean Black entrepreneurs owning the buildings, equipment and companies that produce long-term wealth. Accessible checking and savings accounts can also reduce dependence on expensive alternative financial services.

The stakes are enormous. Black homeownership continues to trail White homeownership dramatically, with recent estimates putting the rates around 44% for Black households versus roughly 70% for White households. Homeownership remains one of America’s primary mechanisms for transferring wealth from one generation to another.

But Black-owned banks face their own structural problem: they need capital to lend capital.

A relatively small community bank cannot compete dollar-for-dollar with financial giants controlling hundreds of billions or trillions of dollars in assets. Deposits matter because banks use their financial base to support lending and investment. A stronger Black banking sector therefore requires more than simply encouraging people to open checking accounts. It requires deposits from consumers and businesses, institutional investment, government partnerships and access to capital that allows these banks to scale.

Federal regulators recognize the importance of these institutions. The FDIC maintains a Minority Depository Institutions program, while federal law establishes goals that include preserving existing MDIs, encouraging the creation of new ones and providing technical assistance.

Still, Black-owned banks should not be presented as a magic wand for centuries of accumulated inequality.

Banks cannot single-handedly eliminate disparities in wages, inherited wealth, home values, education, employment or property ownership. Nor can community banks compensate by themselves for generations in which many Black families were denied opportunities to accumulate appreciating assets.

What they can do is help build another financial highway into Black communities.

The long-term goal should be bigger than simply “banking Black.” It should be building Black assets. Deposits should become mortgages. Mortgages should become equity. Business loans should become companies and commercial property. Savings should become investments. Successful businesses should create jobs, and those assets should eventually pass to another generation.

Black-owned banks cannot close America’s racial wealth gap by themselves.

But if they are adequately capitalized and supported, they can become one of the tools that helps Black Americans turn income into something far more powerful: ownership.

—Michael Lyles, B1Daily