The Impact of Financial Inclusion on Minorities: Evidence from the Freedman's Savings Bank
80 Pages Posted: 13 Apr 2021 Last revised: 11 Nov 2021
Date Written: April 12, 2021
This paper investigates whether minorities always benefit from financial inclusion. We show that the Freedman's Savings Bank, established in 1865 after the Civil War, collected deposits from recently freed enslaved people through an intensive advertising campaign based on exhortations and false promises. The advertising intensified when the bank started offering fraudulent loans, leading to a transfer of funds from the freedmen to white populations. The failure of the Freedman's Savings Bank led to depositor losses that have rarely been matched in the banking history of the United States. Our findings suggest that financial inclusion can amplify discrimination in some contexts.
Keywords: Financial Inclusion, Household Finance, Discrimination, Banks
JEL Classification: D14, J15, G21, G51
Suggested Citation: Suggested Citation