Investors must make noise so BIPOC entrepreneurs don’t have to make do
This story is part of a partnership between ImpactAlpha and Mission Investors Exchange to bring you new ideas and perspectives in impact investing. It was originally published by ImpactAlpha on December 5, 2022. Read the original here.
In the spring of 2020, a few months into the Covid-19 pandemic, I got a call from Mayor Cedric Williams of Forrest City, Ark. This usually even tempered, cool, collected leader was not happy. He was mad, frustrated and disappointed.
“I do not know of any Black business owners in Forrest City or in the Arkansas Delta who received funds from the Paycheck Protection Program,” he said.
He was calling to ask what, if anything, the Winthrop Rockefeller Foundation could do to help the Black business owners in Forrest City and the region.
Forrest City in northeast Arkansas has a population of just over 14,000, 71% of which is Black. The town, which calls itself the “Jewel of the Delta,” relies on small, mostly Black-owned businesses to fuel its economy.
Mayor Williams is one of those business owners, as well as a State Farm Insurance Agent. He was concerned that the owners of restaurants, barbershops and beauty salons, retail shops, and auto shops, as well as artists, caterers and small manufacturers were going to lose their livelihoods. He was worried about the impact of mass closures and bankruptcy among Black business owners in Forrest City and throughout the Arkansas Delta.
His concerns weren’t wrong. During that first round of Paycheck Protection Program, or PPP, lending, close to 100% of the dollars went to white business owners in the region. Black and Brown businesses owners did not even hear about the PPP loans, and by the time they did, they did not have a chance to apply because the funds were gone.
The racial disparities of the pandemic’s impact on business owners tracked nationally too: between February and April of 2020, the number of Black business owners across the nation fell by 40%, while the number of white business owners only fell by 17%.
When I heard Mayor Williams share that the business owners of his city were being deprived of the support they needed – that even in a region where Black people make up the majority of the population, it was white business owners who came out ahead – that familiar “here we go again” feeling rose up in me.
Even before the pandemic, the banking industry favored white-owned businesses in Arkansas. Small businesses in Arkansas received nearly $1 billion in financing through the SBA 7(a) program between 2015 and 2019. Only 1.2%, or $12 million, of those investments supported Black-owned businesses and ust 1.8%, or $18 million, supported Hispanic-owned businesses.
Responding to need
As investors for impact and change, we have a choice. We can make do, or we can make noise.
The banking system is not an equitable system – white men have it on lock. To make it behave equitably, we have to disrupt it. If we don’t, BIPOC business owners and women will not get the resources they need to retain, build and grow their businesses.
Mayor Williams spoke up. After listening to his concerns, I shared his frustration that, yet again, Black and Brown folks were being left out. We had to do something.
Without even thinking about how we would find the budget, I blurted out, “Well, WRF can create a loan fund.” There was a need in the community; we had to figure out how to leverage our assets and connections to respond to that need.
We got to work. My outstanding team reached out to nonprofit leaders in the Delta who understood the urgency of the moment. These leaders organized and created Delta Owned, a loan fund that WRF supported with a $270,000 grant.
In less than three months, Delta Owned started making capital available to micro-businesses and sole proprietors in the Delta that had not been able to access federal or state relief dollars. It also provided individualized support and technical assistance, small reboot grants, and connections to local banks and community development financial institutions that could help business owners access additional capital.
WRF, along with the Walton Family Foundation and others, has since invested close to $1.3 million in Delta Owned. Delta Owned and the Arkansas Small Business Administration now work in partnership to connect businesses in the Delta to SBA loans and resources, which was not happening before. Together they also created On-Ramp, a guarantee fund that continues supporting small businesses with 100% guarantees and technical assistance in the Delta.
Naming the problem
This is what pursuing economic equity and systems disruption looks like for us. At WRF, we are providing grants and program-related investments to disruptors who are increasing access to capital for Black and Brown entrepreneurs that conventional lenders systematically ignore. We were early investors in the People Trust Loan Fund, which is the first founded and Black led community development financial institution in Arkansas.
WRF was also the founding-funder of Kiva Little Rock, an international crowdfunding platform that believes in character over credit and the power of community-based lending, providing BIPOC entrepreneurs with loans of up to $15,000 with 0% interest.
And WRF, in collaboration with other funders, is leading the Grow AR Own Initiative, where we are organizing our regional and statewide banking partners and securing commitments from them to do what is necessary to make sure BIPOC business-loan seekers are given fair consideration.
What should all funders and investors now be doing? The first step is to name the problem.
In the case of Delta Owned, the problem was that the historically disproportionate denial of Black and Brown business-loan seekers from conventional loans and public financing programs continued during the COVID pandemic.
Second, we can draw on our strength in numbers to organize and develop strategies for change along with our grantees and investees. We can provide more general operating support; fund grassroots organizations and those building movements for economic equity, innovation, and narrative change; and use our investment dollars to support the disruption of the inequitable banking system.
Imagine how powerful it would be for funders to engage public and private partners to build a movement for equity in the banking systems. We must make these investments to make noise and ensure that our BIPOC entrepreneurs don’t have to just make do.
Sherece West Scantlebury is the president and CEO of the Winthrop Rockefeller Foundation.