Carlton Jenkins and Paul Hudson are on the front lines of the battle to rebuild South Central Los Angeles.
In a community starved for investment capital, their roles have become increasingly important to entrepreneurs seeking loans to launch new businesses.
“South Central was hit pretty hard by the economy and by the riots,” said Jenkins, who is president and chief operating officer of Founders National Bank.
“We’ve been in this community a long time, and see the importance of helping out people when it comes to starting a business,” he said. “We have a personal stake in it because we’re located in this neighborhood.”
Founders National Bank was launched six years ago and has 20,000 customers. The bank has four offices three in South Central, one in Compton, and a supermarket branch in Lynwood.
It is one of three banks based in South Central. The others are Family Savings Bank and Broadway Federal Bank.
Hudson, who heads Broadway Federal, said that institutions based in South Central must help start new businesses or face extinction.
“The banks located in South Central need to help these people develop a good business plan so that they get a loan,” he said, adding that larger banks typically don’t have the resources to work with entrepreneurs.
“We can’t just reject them without giving them as much help as possible,” he said. “Raising capital will ultimately mean money invested into our bank, which helps us grow. That’s why we need to stick with this community.”
Broadway Federal was founded in 1947, and currently has 12,000 customers. It has three branches two in South Central and another in Inglewood.
The third institution, Family Savings, has been in business since 1948. It has four branches two in South Central, and one in Compton and Pasadena.
Jenkins said many major banks don’t have a large presence in South Central because of the low amount of business. Inner-city residents typically seek fewer loans than those in more-affluent areas and have less money to deposit.
In 1996, residents of inner-city L.A. neighborhoods had average household income of about $29,934, according to a report provided by RLA. The average household income in the rest of the county was at $52,440.
“The inner city is the last place major banks look to locate, and unfortunately one of the first places they leave,” said Jenkins, “Many major banks say they are revisiting the option of locating branches here, but they never do.”
But the need to raise capital in South Central is such that two public-private organizations have established lending services.
Given the lack of branches, Operation Hope a local non-profit community service organization established the Operation Hope Banking Center. Besides the services of a normal bank, Operation Hope offers economic education, tips for online banking, and credit consulting for individuals and businesses.
It is backed by a $13.5 million investment from 40 partners including such major institutions as Union Bank of California and Hawthorne Savings Bank.
Meanwhile, the federal government helped to set up the Los Angeles Community Development Bank in 1994. Funded with a $430 million grant, the bank which doesn’t service individual customers helps provide capital to new businesses.
But to date, the bank’s co-lending program has only made two loans totaling $2.7 million, with plans for another $21 million later this year.
In addition to meeting the needs of local businesses, banks in South Central face another major hurdle: They must compete with check cashing centers.
There are 17 check cashing centers for every bank branch in town which translates to one location every three blocks, according to Operation Hope founder John Bryant.
“They proliferate at the expense of the community, and at the expense of banks and savings and loans,” said Bryant. “They don’t provide the community with financial services you get in a bank. They don’t provide capital to new businesses or security for investors.”
Jenkins said not having a major presence by large banks is a mixed blessing. Not having much competition means the institutions located there are much healthier, he said.
But he also realizes that the community needs more branches, though he doesn’t expect this to happen anytime soon.
“First off, we don’t know how many branches will be left after the next round of bank mergers,” he said. “At the same time, many banks aren’t interested in opening up physical branches and instead are looking closely at supermarket branches.”