Since the Great Recession more than 6,000 bank branches have closed across the country. And right now, 70 percent of African-American communities lack access to a bank branch, according to Robert F. Smith, Founder, Chairman and CEO of Vista Equity Partners.
This means that too often people in these communities struggle to access the capital necessary to start or grow a small business.
The dearth of banks in Black communities became magnified during the coronavirus pandemic, when mainstream banks became the main vehicle for small business owners to get relief funds offered by the Paycheck Protection Program (PPP). Without access to a bank branch in their community, too many Black business owners weren’t able to access these emergency funds PPP emergency funds. Smith worked with Congress and the White House to make changes to the PPP program to increase the relief funds allocated to Black small business owners.
Smith argues that increasing the number of financial institutions in African-American communities and expanding the “capillary banking network” — community financial development institutions (CDFIs) and minority depository institutions (MDIs) — can help bridge this gap and deploy much-needed capital in marginalized communities.
He also sees hope in the recent merger of CFBanc and Broadway Financial, which created the largest Black-led minority depository in the country.
“This is what progress looks like,” Smith said. “The largest Black-led Minority Depository Institution in America. Growing our nation’s ‘capillary banking system’ will unlock investment in communities that have been historically left behind.”
Read more about Smith’s efforts to increase financial institutions in African American communities in Reuters.