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

See all articles by Claire Celerier

Claire Celerier

University of Toronto - Rotman School of Management

Purnoor Tak

London Business School

Date Written: April 12, 2021

Abstract

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

Celerier, Claire and Tak, Purnoor, The Impact of Financial Inclusion on Minorities: Evidence from the Freedman's Savings Bank (April 12, 2021). Available at SSRN: https://ssrn.com/abstract=3825143 or http://dx.doi.org/10.2139/ssrn.3825143

Claire Celerier (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Purnoor Tak

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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