In 2023, one hundred and twenty years after Maggie Walker became the first African American woman to charter a bank and serve as a bank president, sorority Alpha Kappa Alpha, the country’s oldest social organization dedicated to and operated by Black women, announced the formation of a Federal Credit Union. The new institution aims to build generational wealth for Black women, promote social justice and uplift communities.
The number of Black owned and operated financial institutions has fallen dramatically over the past thirty years, declining from 55 banks in 1994 to 18 (out of a total of 4,236) today. There are 33 Black owned and managed credit unions currently out of a total of 4,813. At 6 tenths of one percent of credit unions and 4 tenths of one percent of all banks, Black banks and credit unions are simply not a factor in the industry, and won’t be until their numbers increase significantly.
We have long suggested that a more deliberate effort is required to increase the relevance, number and impact of Black owned banks and credit unions. (See: ECONOMIST OFFERS $50 BILLION FEDERAL SOLUTION TO THE BLACK BANKING CRISIS. October 21, 2019. https://www.blackenterprise.com/black-banking-crisis-economist-offers-50-billion-solution/).
Even with this sobering assessment, AKA’s efforts are a significant development that will have a positive impact on the Black community.
Membership in a credit union is based on the common bond concept, that is, members must belong to a group in the credit union's "field of membership". The shared tie here: sorority membership. Relative to the overall Black community, this particular common bond is very attractive: the group has higher income, more stable employment and higher education, all desirable market characteristics in financial services. We expect the credit union to offer small business loans via the Small Business Administration (SBA), credit cards, financial literacy training and other services.
While attractive, these factors don’t necessarily mean the AKA credit union will be able to entice sorority members to become credit union customers. The biggest operating challenge will be getting qualified people to actually join and to deposit money. The credit union will also face a technical challenge in providing services across a broad geographic footprint, but we know that many fintech solutions exist (Venmo, PayPal, etc.) that deal with the geographic issue. We know that financial institutions don't have to be geographically centered anymore, so we are optimistic.
Also see: ALPHA KAPPA ALPHA SORORITY INC. ROLLS OUT DIGITAL CREDIT UNION FOR ITS MEMBERSHIP, AIMING TO HELP BUILD WEALTH. Jeffrey McKinney. February 18, 2023. https://www.blackenterprise.com/aka-sorority-rolls-out-digital-credit-union-for-its-membership-aiming-to-help-build-wealth/