By Zack Budryk
The relative rarity of banks in nonwhite neighborhoods is exacerbating the racial wealth gap by leaving African Americans more reliant on expensive financial services such as payday lending institutions, according to Reuters, citing research by McKinsey & Co.
The study found that majority-white counties have an average of 41 financial institutions per 100,000 people, compared to 27 in non-white majority neighborhoods.
It also found banks in majority-black neighborhoods tend to require a higher minimum account balance, with an average minimum of $871 in black neighborhoods compared to $626 in white neighborhoods.
“Black families are being underserved and overcharged by institutions that can provide the best channels for saving,” McKinsey partners Shelley Stewart and Jason Wright wrote in the report.
Racial wealth disparities have widened in recent decades, according to Reuters. In 2016, the average white family had a net worth of $171,000, more than 10 times the median net worth of $17,600 among black families.
Closing the gap would bring a spike in investments and consumption that could increase gross domestic product as much as 6 percent by 2028, according to McKinsey.
The wealth gap has become an issue in the presidential race as well, with Sen. Elizabeth Warren (D-Mass.) publishing a plan to give $7 billion to minority entrepreneurs and expand the Community Reinvestment Act.
“We must right the wrong and, after generations of discrimination, give black families a real shot at homeownership, historically one of the most powerful drivers of wealth,” Harris said at the Essence Festival in New Orleans.