As the country begins to consider what life after the coronavirus will look like, it’s well documented that many Black, Hispanic-Latino and other vulnerable communities are experiencing a slower economic recovery. This is particularly true for small businesses and minority entrepreneurs. For example, according to a Brief by the U.S. Small Business Administration Office of Advocacy, the total number of Blacks and Asian Americans either self-employed or working declined more than 37% between April 2019 and April 2020, compared with a decline of 17% for Whites. While there are positive signals that small businesses are beginning to rebound overall, in vulnerable communities that regeneration is happening at a much slower pace.
Public programs, including the recent Paycheck Protection Program (PPP), seek to relieve some of that distress by providing cash to businesses to cover payroll and other expenses. Additionally, nonprofit organizations have been offering economic and professional assistance to struggling business owners. However, this support is short term and longer term solutions are needed. Through a variety of means, the private sector can help to provide dependable, sustainable capital to community businesses in need.
A network of support
Bank of America has long focused on supporting the needs of under-represented small business owners and entrepreneurs, working with an established network of community partners such as – Community Development Financial Institutions (CDFIs), and most recently with Minority Depository Institutions (MDIs), as well as minority focused funds that support entrepreneurs.
- CDFIs are typically non-profit loan funds that provide capital, mentoring and financial advice supporting small businesses, affordable housing, fresh food supermarkets, healthcare centers and nonprofit organizations operating in lower income communities which do not qualify through traditional lenders. CDFI banks operate in a similar manner to CDFIs, but take deposits.
- MDIs are typically depository institutions with either (i) more than 50% minority ownership or (ii) a majority of the board of directors is minority and the community that the institution serves is predominantly minority.
- Minority focused funds provide capital to Black, Hispanic-Latino, Asian, Native American, women and other minority entrepreneurs.
The bank doubled down on this support in 2020 with its $1.25 billion racial equality and economic opportunity commitment, dedicating $200 million in investments to minority-focused funds and $50 million to MDIs and CDFI banks. In less than a year, Bank of America surpassed the $200 million goal, committing more than $250 million to 90 investment funds across the U.S. to date and subsequently increased its commitment to minority focused funds to $350 million. This is in addition to closing investment in 17 MDIs and CDFI banks to date.
These equity investments are in addition to approximately $100 million in deposits from Bank of America in MDIs. The company is also the largest private investor in CDFIs in the United States, currently with more than $1.8 billion in loans and investments in over 256 CDFIs in all 50 states.
Where support is needed
One such MDI and CDFI bank that Bank of America supports is Ponce Bank. Founded in early 1960, Ponce Bank was started by community leaders in the South Bronx looking to provide financial services to the area’s mostly Puerto Rican population – an immigrant community largely underserved by mainstream banks. 61 years later, the institution has grown to 13 branches and 6 mortgage offices still serving prominently immigrant neighborhoods. As systemic inequities and biases continue to affect the communities they serve – particularly during the pandemic – Ponce has worked to be an engine for economic empowerment, helping to reduce the health and wealth gap that exists in the communities they serve.
“MDIs are critical for communities of color who historically have been – and continue to be –underserved by larger, more mainstream banks,” said Carlos Naudon, President of Ponce Bank. “The confluence of events over the past year have highlighted the importance of institutions such as ours. Over this year we have supported everyone from the restaurant owner down the street to one of the largest builders of affordable housing in NYC. We are committed to continue to grow and support the needs of the communities we serve because those needs continue to exist, and we understand that because we live it.”
Bank of America’s $1.25 billion racial equality and economic opportunity commitment is focused on areas where systemic, long-term gaps have existed, including housing, workforce development, healthcare and small business assistance.
Learn how a mix of philanthropic and business opportunities, with the majority of funds being delivered at the local level, is helping to address systemic barriers where they exist, drive more opportunity and sustain progress.