The history of Black banks starts with the Freedmen's Savings Bank, created in 1865 by the Lincoln administration to help the formerly enslaved transition into capitalism.
The bank wasn’t all that it was cracked up to be. It couldn’t give loans, the main way that banks create wealth, and was not backed by the federal government.
It failed in 1874 due to speculative investments and poor management. Even worse, most deposits were made by poor Black sharecroppers, who believed their money was protected – but only 40% of their deposits were recovered.
Although the failure of the Freedmen’s Savings Bank was a huge blow to the community, a number of Black-owned banks emerged in the following years.
“From 1888 to 1934, African Americans owned more than 130 banks in the U.S., and the number of Black-owned businesses rose from 4,000 to 50,000,” explains Alden McDonald, CEO of New Orleans-based Liberty Bank and Trust.
The first Black-owned bank in the U.S. was the Savings Bank of the Grand Fountain United Order of True Reformers, founded by Reverend William Washington Browne, who was formerly enslaved in Georgia.
The bank opened a year after its founding in 1888 and was the only bank in Richmond, Virginia to maintain full operations and survive the financial panic of 1893.
Currently, there are only about 40 Black-owned banks and credit unions in the United States offering services to their surrounding communities.
The history of Black banks should be a lesson that we need to keep investing in each other and support Black-owned economic endeavors.