Banking

Social Equity: Banking on Black Communities

Read more at www.paladinoandco.com

At Paladino, we are proud of our purpose-driven culture. The light that has been shined on social equity and its link to environmental sustainability, thanks largely to protests, helped us better understand how our definition of culture can be improved by being more inclusive and diverse – and that we have much more to do as a company.

In this post, we will share Paladino’s process to invest $10,000 in a minority-owned bank that serves Black communities.

With all the varied options to contribute to Black communities and causes, how did Paladino decide on banking as a critical aspect of our strategy? CFO Paul Paladino introduced the idea to the executive committee. “Many companies have pledged financial support to BLM and allied organizations, and I was inspired by Netflix depositing $100 million in Black-owned banks,” he said, “The idea of empowerment really hit home with us. Donating to organizations is great, but as a small business, we can’t provide ongoing donations and financial support to an organization – a ‘one-and-done’” donation would be helpful, but we wanted to do more with what we’ve got.”

By putting money into a Black-owned bank, we can use the bank’s power to create wealth within the Black community. Black-owned banks are more likely to approve home loans for Black home buyers, and significantly more likely to provide a business loan to a Black entrepreneur. When we deposit $10,000 with a Black-owned bank, we can create recurring benefit for the Black community as the bank can make a loan with our deposit, get repaid, and make the loan again. A deposit like this is known as a Transformational Deposit because we don’t intend to withdraw the money, using it instead to make a long-term investment into the BIPOC-owned bank and the communities it serves.

BankBlackUSA, an independent grassroots organization formed out of the #bankblack movement, is on a mission to “connect individual and collective awareness, understanding, potential, and wealth toward the betterment and stability of black communities and the black experience in America.” BankBlackUSA promotes economic empowerment in Black communities and was a crucial resource in our investigations into the best way to invest in Black banks.

Choosing our bank:

There are 5177 banks in the United States, and just 23 of them are Black-owned (down from 41 Black-owned banks a decade ago). For Paladino to deposit with a bank, we needed to consider five criteria:

  1. Development Deposit Intensity (DDI) and Distressed Lending Intensity (DLI) ratings
  2. Do they make small business loans to minority communities?
  3. Do they have a Community Reinvestment Act (CRA) rating, which indicates their fair lending practices?
  4. What is their Bank Health rating, which rates the bank’s liquidity and capitalization?
  5. Can we open an account online? Since there are no Black-owned banks in Washington state where we are headquartered, we needed online banking to open an account.

That list of 23 Black-owned banks narrowed down to 5: Industrial Bank, GN Bank, OneUnited Bank, Citizens Trust Bank, and Beneficial State Bank.

Because our goal was a Transformational Deposit, we didn’t need to find a bank to meet all our banking needs. We still do most of our banking with a larger institution that offers a range of services and capabilities that meet every need that Paladino has as a small business.

Ultimately Beneficial State Bank was the right choice for Paladino’s $10,000 savings account. Beneficial State Bank is not Black-owned, but because of its history and practices, our goal of investing back into Black communities is still met with this choice. Beneficial State Bank has a solidarity pledge with Black Lives Matter, and the bank purchased struggling Black-owned Albina Community bank and retained its staff, and continued banking in Black communities throughout the Portland, Oregon area. Albina’s mission aligned with lending practices already upheld at Beneficial State Bank.

Beneficial State Bank is aligned with Paladino’s purpose as well. The bank’s diverse human capital statistics include a staff that is 54% BIPOC, 67% women, and achieves an overall 94% employee favorability rating. Further, Beneficial State Bank continually drives down and reports on its carbon emissions, purchases carbon offsets, and boasts several green business certifications. Beneficial State Bank is also a founding member of the Global Alliance for Banking on Values, which is a network of banks investing in sustainable development for underserved communities, among other things.

The $10,000 that we have put into a savings account with this bank will be used to contribute to their loans for economic, business, and job development; social justice; education and youth development; affordable mission housing; and environmental sustainability.

Beneficial State Bank also has a tool that helped us understand exactly how our $10,000 deposit could be applied to the mission-driven loan categories:

We plan to increase our investment in Beneficial State Bank and BIPOC-owned businesses based on triggers that we’ve identified within our business. Opening a savings account with a mission-aligned bank is one way that small businesses can influence the move toward social equity and justice, where people’s outcomes are not influenced by their race.

UPDATE: Since publishing this post, we have increased our investment in Beneficial State Bank from $10,000 to $20,000. Our increased deposits are triggered based on how quickly our clients pay us – by paying us quickly, we can have more cash on hand at any given point, allowing us to put more money into that Transformational Deposit! Thank you, clients! 

We have a three-part approach to improving our role in social equity and justice:

  1. Become aware. We’ve established an inclusive working group to explore and progress our understanding of this issue.
  2. Amplify black leadership.  There are leaders in the social equity space that are guiding the shift in thinking we must make. We are listening to and amplifying those leaders.
  3. Take action. We prioritize purchasing goods from BIPOC-owned businesses. When recruiting we are diversifying recruiting channels as we actively seek out diversity and bring it into our business

We hope you are inspired to find creative ways to support this important cause – and we want to learn from you – what is your business doing to advance social equity?

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