Two longtime players in small-business lending and empowering low-income communities are joining forces to scale up equitable wealth creation in communities of color.
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.
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“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.