CDC Small Business Finance and Capital Impact
Partners have formed an alliance aimed at
bolstering economic empowerment and equitable wealth creation in communities of
color. The alliance has backing from JPMorgan Chase and the Heron
Foundation, both of which awarded multimillion-dollar grants to help build the
alliance.
“We're hoping to really provide disruptive innovation to the space,” Ellis
Carr, CEO of Capital Impact Partners, told Sustainable Brands™. “We’re
focused on solving two primary things: One is economic empowerment and equitable
wealth creation, and the second is connecting institutional capital to
communities.”
The problem the alliance seeks to address is a big one. Despite, until early
this year, nearly a decade of consistent economic growth and a rapidly rising
stock market, the racial wealth gap in the United States has only grown. Black
wages have been stagnant for a
decade,
and the situation for Latinx communities is only slightly
better.
This problem is only accentuated when you consider the longstanding wealth gap.
According to a report
from Prosperity Now, between 1983 and 2013, white households saw their
wealth increase by 14 percent. But during the same period, Black household
wealth declined 75 percent, and median Latinx household wealth declined 50
percent. This is important because access to wealth makes it not only easier to
start a business, but to access financial capital, as well.
“In order to help [minority]-owned small businesses start up, you also have to
address the equity gap,” says CDC CEO Kurt Chilcott. “They do not typically
have access to the same level of either personal wealth or equity in a home
ownership, or network of friends and family that have resources that can help to
start them up.”
The alliance seeks to change this. That means not just bringing capital to
underserved communities, but also building
capacity
— so that these communities can be more proactive at seeking investments. That’s
where their unique expertise comes in: While CDC is the nation’s leading
mission-based small business lender, Capital Impact Partners is a non-profit
Community Development Financial Institution (CDFI), building partnerships and
running capacity building programs across the country. Both organizations have
decades of experience.
“These concepts of racial inequality, justice and equity are not new concepts to
Capitol Impact and CDC,” Carr says. “[We have] an explicit focus on racial
equity, with an equity statement that frames our vision as an alliance that
really focuses on the development of intergenerational wealth in communities of
color.”
The alliance aims to take a more involved, collaborative approach to investment,
aiming to create scalable solutions that not only provide needed capital, but
also support communities to develop the skills and tools to generate wealth,
sustainably.
While the alliance itself has been a work in progress, planned for over a year,
the timing of the launch alongside a pandemic and widespread racial justice
protests, only emphasizes its importance.
“The COVID-19
pandemic, as well as
the civil unrest, has really just shined a light on the problem like never
before,” Chilcott says. It has also increased the urgency. “[The pandemic] has
exacerbated the problem clearly because we know that minority- and Black-owned
small
businesses
are being disproportionately affected.”
The pilot projects will focus on supporting relief, recovery efforts and key
social services in three regions where CDC and Capital Impact have pre-existing
relationships or programs — the Washington DC, Maryland and Virginia
area; and Detroit and Los Angeles. The idea, though, is to grow to other
regions where there is a need — and also, bring other partners and capital on
board. The lessons from the three pilot projects will inform efforts in other
parts of the country.
There’s also another hope: that this alliance spurs other innovations and
thinking across the philanthropy, impact investing and financing communities.
“We'd love for this to be replicated, because this problem is much larger than
we can ultimately solve,” Carr says.
Fixing decades of
under-investment
and limited access to capital will be tough; but by focusing on historically
under-served communities, CDC and Capital Impact Partners aim to start building
real, inter-generational wealth — and the hope for a more inclusive, equitable
and sustainable
future.
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Media, Campaign and Research Consultant
Nithin is a freelance writer who focuses on global economic, and environmental issues with an aim at building channels of communication and collaboration around common challenges.
Published Aug 6, 2020 8am EDT / 5am PDT / 1pm BST / 2pm CEST