Thinking Forward: Bringing HBCUs and Community Financial Institutions Together

Among the most important institutions directly tackling these inequities are Historically Black Colleges and Universities (HBCUs) and the community financial institutions—many of them minority depository institutions (MDIs)—that serve the HBCU community.

In 2023, Filene and Visa brought together a group of leaders from community financial institutions and the HBCU ecosystem to identify opportunities for collaborative impact in the communities they serve. Visa—with its mission to connect the world and enable individuals, businesses, and economies to thrive—initiated this project to co-develop and support financial solutions aimed at HBCU-serving financial institutions and the expansive communities they serve. Grounded in the principles of co-creation and collaboration, and through authentic listening and community co-creation, this group embarked on designing solutions for their shared communities.

Over 7 months, participants in this HBCU Innovation Incubator learned innovation practices through a curriculum based on Filene’s Method of Innovation and augmented by new thinking on equity-centered design and participatory co-creation. They explored the diverse needs of members of the HBCU community: first-year students building financial capability and confidence, graduating seniors entering the workforce, alumni entrepreneurs looking to grow their business and give back, and more. What resulted is a proposal to build stronger relationships between HBCUs and community financial institutions that would help both sets of institutions grow capacity and meet the needs of these community members.

Among the participants in the HBCU Innovation Incubator were:

• Joseph Akintolayo, Deposits, Inc.
• Curtis Baylor, Omega Psi Phi Fraternity FCU
• Deborah Boglin, Councill FCU
• Betsy Burton-Strunk and LaShonda Hairston of the Thurgood Marshall College Fund
• Aydon Chavis, Carver State Bank and Georgia Southern University
• Randy Cooper, Richmond Heritage FCU
• Monica Copeland, Inclusiv
• William Foster, HBCU Money
• Katrina Hayes-Peerman, Virginia State University FCU
• Robin Hollis, Illinois Credit Union League
• Layal Issa, Optus Bank
• Felicia Lyles, Hope CU
• Jennifer Steele, Jackson State University
• Gary Perez, USC CU

Taylor Ellison, Community Engagement Strategist at Visa, served as co-facilitator, and she was joined by many innovation champions from Visa: Evan Combs, Shannon Flood, and Torrance Harris from the Community Accounts team, as well as Catherine Carle, Paola Hoffer, Marquan Luckey, Dee Miller, Mike Steel, Mikel Thomas, and Shelby Williams.

Incubator participants sought not only to identify product solutions that would meet the financial needs of HBCU students, alumni, and other community members. They also rallied around an expansive vision for organizational partnerships and systemic investment that could provide a foundation for continued co-creation, scale the impact of any single solution, ensure that impact is positive and equitable for the people using it, and ultimately address the needs, challenges, and opportunities of HBCUs and the communities they serve.

Black History Month originated as an educational endeavor, a coordinated effort led by Carter G. Woodson—a Black historian and HBCU faculty member at Howard University—to center the accomplishments of Black Americans and to turn that history into what he called “real education”: an education that furthers “real freedom” by “inspir[ing] people to live more abundantly, to learn to begin with life as they find it and make it better.”

This goal is echoed in the commitments and aspirations of the leaders who participated in the HBCU Innovation Incubator.

Why HBCUs, and why community financial institutions?

The needs of HBCUs as institutions, HBCU community members as individual consumers of financial services, and HBCU-serving financial institutions are very different. But they come together in their commitment to and investment in their shared communities. As Hope Credit Union—an HBCU-serving MDI credit union and a participant in the HBCU Innovation Incubator—has previously argued, high levels of economic insecurity, entrenched inequality, and limited access to safe, affordable financial services in the communities served by both HBCUs and community financial institutions presents an opportunity to align these institutions to serve as “critical anchors of development” in their communities.

Years of systematic exclusion and predation have resulted in profound disparities in Black communities.

• Over 11% of Black households are unbanked vs. only 2% for white households.
• Black households save $75 billion less annually than white households, primarily due to income disparities.
• Median Black family wealth ($23,000) is vastly lower than white family wealth ($184,000).
• Only 45% of Black households own a home vs. 75% for white households.
• Black would-be borrowers are more than twice as likely to be denied a mortgage as white borrowers.
• Houses in Black-majority neighborhoods are nearly twice as likely to be appraised below contract as houses in white-majority neighborhoods.

How might partnerships between HBCUs and HBCU-serving financial institutions help tackle these disparities?

The 1965 Higher Education Act defines an HBCU as any historically Black college or university established prior to 1964 “whose principal mission was, and is, the education of black Americans.” Today, there are 99 HBCUs in the U.S.—only about 3% of all colleges and universities in the U.S.—and persistent underfunding has left those schools with fewer resources. One report recently found that land-grant HBCUs have been publicly underfunded by almost $13 billion; another calculates that the endowments of the 10 wealthiest U.S. universities are nearly 95 times larger than the endowments of all HBCUs combined.

Yet HBCUs are consistent engines of economic and social mobility. Many HBCUs were founded specifically to counter and repair the lasting harms of slavery and chronic abuses of legally sanctioned discrimination under Jim Crow. Research by the Equal Opportunity Project shows that today, HBCUs do a better job than the average postsecondary institution of moving students from the lowest income brackets to the highest. HBCUs generate higher rates of mobility in large part by providing more inclusive access to education. 90% of all HBCU undergraduates receive some type of financial aid, and a higher percentage of HBCU students receive Pell Grants than their counterparts at primarily white institutions. And as of 2020, HBCUs were responsible for around 13% of all Black American Bachelor’s degrees and 23% of Black STEM graduates. A 2010 report from the U.S. Commission on Civil Rights finds that HBCU graduates include 12.5% of Black CEOs, 40% of all Black congresspeople, 50% of Black lawyers, and 80% of Black judges.

The impact of HBCUs reaches beyond education. UNCF estimates that as of 2014, HBCUs annually created more than 134,000 jobs and generated a direct economic impact worth $14.8 million. Much of this impact is located in communities where the need is highest. A study by the Atlanta Federal Reserve shows that HBCUs are typically located in neighborhoods with higher average poverty rates, lower incomes, and lower labor force participation rates; 81% percent of HBCUs are located in counties where the median wage is below the national average.

Similarly, community financial institutions—especially minority depository institutions (MDIs)—strengthen pathways to financial well-being in underserved communities. As Filene’s research through the Visa-supported Reaching Minority Households Incubator demonstrates, access to safe and affordable financial services can serve as an onramp to enhance financial stability, confidence, knowledge, and decision-making.

Financial institutions that serve Black and Brown communities have an especially outsized impact. There are almost 500 MDI credit unions in the U.S. (about 10% of all credit unions) with over 5 million members; 234 are Black MDIs and 116 are multiracial/multiethnic MDIs that serve Black Americans. There are also almost 150 MDI community banks—21 of which are designated at African American MDIs—that share some characteristics in purpose and focus with MDI credit unions.

Like HBCUs, MDI credit unions and community financial institutions operate with fewer resources and more limited capacity and scale. MDIs are overwhelmingly small, with fewer assets than most financial institutions, even those that are also focused on community development. There is a 6:1 asset gap between white-led vs. Black-led community development financial institutions, according to the African American Alliance of CDFI CEOs.

Yet MDIs are also more likely to operate in minority communities and low-to-moderate income (LMI) areas; they are more likely to approve and originate mortgages to minority and LMI borrowers; and they are more likely to lend to small businesses operating in minority and LMI communities. Filene’s own research has shown that MDI credit unions lend to consumers that have, on average, poorer credit. And despite higher delinquency and charge-off rates, MDI credit unions typically perform as well or better than the credit union industry as a whole, with higher average ROAs and net worth.

Looking at the landscape of HBCUs and community financial institutions, it’s clear that there are opportunities for collaboration—and opportunities to leverage that collaboration and the strengths of these two types of organization to increase economic security and mobility in their communities.

It’s this collaboration that became a focus for the HBCU Innovation Incubator.

Bringing HBCUs and Community Financial Institutions Together at the Celebration Bowl

At the end of months of weekly virtual meetings—and three in-person meetings in San Diego, CA (thanks to The Design Lab at UCSD!), Atlanta, GA (thanks to AACUC for hosting us!), and NYC—we gathered again in Atlanta to celebrate the end of the innovation program at the 2023 Celebration Bowl.

The Celebration Bowl is the football game played between the winners of two most prominent HBCU conferences. So the Celebration Bowl is the HBCU football season finale and de facto championship game—this year between the Howard University Bison and the Florida A&M Rattlers. But like Black History Month, the Celebration Bowl is also a celebration of HBCUs’ and Black America’s heritage, culture, and excellence.

Visa is a sponsor of the Celebration Bowl. During Bowl week Filene and Visa partnered together to host Visa’s award-winning financial education game: Financial Football. Financial Football is the centerpiece of a nationwide education initiative led by Visa. The offensive and defensive players of Howard and FAMU’s football teams each went head-to-head, putting their personal finance knowledge to the test in an innovative and interactive simulated football game. Financial Football is a part of Visa’s ongoing commitment to developing financial literacy programs that teach individuals how to spend, save, and budget responsibly and is available for free online and with any mobile device.

We also met with many of our financial institution partners to share key learnings from the HBCU Innovation Incubator. One significant opportunity the group surfaced was to connect HBCU-serving community financial institutions to share best practices and support one another’s HBCU partnerships. This is especially important because few members of the wider HBCU community even know about the financial institutions that are focused on serving (indeed, are often chartered to serve) their community. In a small survey, we found that less than 50% of HBCU community members were aware of the existence of local financial institutions that serve HBCU communities. But more than 80% reported that they would prefer to use one of those HBCU-serving financial institutions.

We will have much more to share soon about the Incubator’s outcomes and learnings, including more on the group’s two-part proposal: one, a social solution to repairing and re-establishing HBCU community relationships through a network of HBCU-serving community financial institutions, and second, a payments technology solution for community financial institutions to better support the HBCU consumer base.

For now, I’ll leave you with this call to action: Does your credit union or financial institution serve the HBCU community or have an existing partnership with an HBCU? We want to hear from you! Reach out directly at [email protected]. And stay tuned for more from Filene, Visa, and our many partners.

An abundance of thanks to the participants in the HBCU Innovation Incubator and especially to Visa for their support of this project. Special thanks to Celeste Schwitters and Emily Leach of Visa for championing the initiative and to my co-facilitators Taylor Ellison and Cortney Arnold.

— TN