Why #BankBlack Falls Short

The black community needs black-owned banks, but the current nationwide effort to move deposits from the big banks to black-owned institutions is sorely lacking.

This past summer, rapper Killer Mike and R&B singer Usher spurred a national movement that was accompanied with the hashtag #BankBlack. In the wake of multiple police shootings of African-American males, Killer Mike (Michael Render) gave a shout-out specifically to the black-owned Citizens Trust Bank in Atlanta, suggesting that it was time for black people to move their dollars away from the majority-controlled banking system institutions and into black-owned financial institutions.

Certain banks have emerged to lead the initiative, including OneUnited Bank in Boston, and some black-owned institutions have reported a boost to their deposit numbers since the #BankBlack effort launched. In July, OneUnited announced that it was "launching the national #BankBlack Challenge, designed to harness the economic power of the Black community focused on one clear financial message that #BlackMoneyMatters." The bank encouraged participants to first open a savings account online and then ask 20 friends to do so as well.

But this type of initiative is not new. The original "BankBlack" initiative was started by Martin Luther King Jr. in 1968. In his "I've Been to the Mountaintop" speech – his final address – King said, "We've got to strengthen black institutions. I call upon you to take your money out of the banks downtown and deposit your money in Tri-State Bank." (He was referring to a black-owned bank in Memphis.)

More to the point, urging customers to move their money is an insufficient step toward expanding the black-owned banking sector to the degree needed to harness the economic power of the African-American community. We need more and bigger black-owned financial institutions, not simply a surge of deposits for a few institutions, especially if those institutions have not proven that they adequately serve the black community.

The assumption is that a black-owned financial institution more closely represents the economic and cultural interests of black people. This is a sound theory. But black-operated banks currently do not have the size or scale necessary to meet that objective. For example, Carver Federal Savings Bank, a formerly black-owned bank in Harlem, was one of the few black-owned banks to even attempt to help subprime lending victims. But Carver was simply too small to have much of an impact.

And efforts like #BankBlack drives funds to institutions that do not necessarily have the best record at protecting the economic interests of black people.

OneUnited deserves particular scrutiny here. For example, the bank has sparked community protests over its effort to foreclose on the historic Charles Street AME Church in Boston. The church had struggled to repay a more than $3 million loan to rebuild a nearby community center. In November, a bankruptcy judge sided with the bank in the dispute.

Furthermore, even though OneUnited sought federal aid as a community "beacon", reports point to the bank having historically made few loans in urban areas. Meanwhile, ethical questions have surrounded OneUnited CEO Kevin Cohee. The bank, for example, reportedly financed luxury real estate he used and at one point paid for his Porsche.

Banks purporting to lead a movement focused on empowering economic leaders in the black community should be required to prove that they are, in fact, serving black and low- and moderate-income communities. Depositors should take a closer look at how a bank has impacted their community before deciding where to park their funds.

But solutions to expanding black-owned banks should also be thinking bigger. The issue is size and scale. Increasing deposits at black-owned banks is one thing, but fostering an environment where black business leaders can bring together capital to form new banks or foster the use of new small business financing vehicles (like crowdfunding) with a focused intent of serving the black community is another. The number of black-owned banks has fallen from 55 in 1994 to 23 in 2016.

Based on my research, if banking deposits were distributed in proportion to the population, blacks should be holding $1.8 trillion of the nation's total deposit base, which is over 15%. Black banking customers currently hold just $600 billion in deposits.

How we make up the difference should be at the center of this discussion.

William Michael Cunningham is the author of "The JOBS Act – Crowdfunding Guide to Small Businesses and Startups." He is the founder of Creative Investment Research, a Washington, D.C.-based firm specializing in community development and impact investing.