The Legacy of Black Collective Economic Development
December 22nd, 2021
By Kiyadh Burt, Senior Policy Analyst
Black co-operative efforts have undergirded the fight for freedom and economic stability over the course of American history. As Black Americans faced exclusion and segregation from institutions and the general consumer market, several co-operative models were created to provide services in need. Grocery stores, gas stations, health insurance, worker co-ops, affordable housing, collective farming, and credit associations are all common types of co-operatives that arose in response to the economic and social needs of the Black community. Today, Black-led financial institutions continue the legacy and essence of these efforts.
The legacy of Black financial institutions traces back to Reconstruction with the creation of the Freedman’s Savings Bank in 1865. The Freedman’s Savings Bank provided capital and financial services to formerly enslaved African Americans, African American veterans, and their families at the end of the Civil War. In addition to increasing access to capital, the bank also increased the resiliency of community institutions such as hospitals and schools. Credit associations, Black-owned banks, and mutual-aid societies also proliferated Black communities across the country as Black communities were systemically denied access to wealth and community building opportunities. St. Luke Penny Savings Bank, a notable example, served African Americans and children with checking and savings accounts in Richmond, VA at a time when many Blacks were barred from accessing services at white-led banks. Maggie Walker established the bank in 1903 and on the first day of opening the bank had 280 deposits and a balance of over $9,000 demonstrating that the demand for financial services in the Black community was high.  Black owned financial institutions were formed in the Deep South as well. For example, the Alabama Penny Savings Bank, founded in 1890, was one of the first Black-owned, Black-operated banks in the United States.
Like the institutions that came before it, HOPE, a Black – led loan fund, credit union, and policy institute in the Deep South, also finds its origin rooted in this co-operative history. Members of Anderson United Methodist Church founded HOPE in 1995 to provide financial services alongside their mutual aid efforts in Jackson, MS. At the time, it was the only church-based credit union in the state. Over the course of HOPE’s 27 year history, HOPE has increased financial inclusion among the region’s most underserved areas through community and economic development, advocacy and coalition building, and offering affordable financial products and services.
Today, HOPE is both a federally designated Community Development Financial Institution (CDFI), a designation created more than two decades ago to fuel financial institutions’ service to marginalized communities, as well as a Minority Depository Institution (MDI). HOPE has generated over $3.1 billion in community development financing that has benefitted nearly two million people. Over 80% of our branches are in counties where the majority of the people who live there are people of color.
Black-led financial institutions and other MDIs strive to increase financial inclusion among historically under-served populations because their leadership mirrors the communities they serve. They often serve Black or Brown communities and maintain close roots in these communities. For example, a 2019 FDIC study estimated that “six out of 10 people living in the service area of Black owned banks are Black, in contrast to six out of 100 for banks that are not Black-led. Moreover, Black owned financial institutions originate a substantially higher proportion of mortgages and small business loans to Black borrowers than other financial institutions.”
By leveraging close ties and relationships, MDIs are able to create programs and products that best meet the needs of their members and communities. Consider the African American Alliance of CDFI CEOs. The 45 member organization collectively provides $1.5 billion in loan capital to the communities they serve – mostly Black businesses and households. The African American Credit Union Coalition (AACUC) is another example. For over 20 years, AACUC has worked to strengthen the credit union community in serving Black communities. By offering professional development and advocacy, AACUC has positioned itself has a leader in increasing diversity and inclusion in the credit union industry for credit unions as well as regulators and consultants.
These relationships are vital not just to the creation of effective products and services but also in policy advocacy. Black-led banks and credit unions have been instrumental in ensuring federal and state programs are equitable and accessible for Black communities across the country. They have been vital to ensuring equity for Americans of color in the administration of state and federal programs like the Paycheck Protection Program and state level small business programs.
As we look toward the next decade in the fight to increase inclusion and economic stability, Black-led financial institutions will continue to play a pivotal role in creating stability for Black communities.
 Monique Nelson. (2-14). “The Freedman’s Savings Bank: A Historic Place in the Financial Empowerment of African Americans”. https://home.treasury.gov/the-freedmans-savings-bank-a-historic-place-in-the-financial-empowerment-of-african-americans
 Nembhard, J.G. (2014). “Collective Courage: A history of African American cooperative economic thought and practice”. Penn State Press.
 National Park Service. (2017). “The St. Luke Penny Savings Bank”. https://www.nps.gov/mawa/the-st-luke-penny-savings-bank.htm
 Ed Sivak. (2020). “Minority Depository Institutions in the Deep South”. HOPE Policy Institute. http://hopepolicy.org/blog/minority-depository-institutions-in-the-deep-south/
 African American Alliance of CDFI CEOs. (2020). “Impact of the Alliance”. aaacdfi.org/impact