Recent data shared by the Harvard Business Review (HBR) reveals that Black women start more businesses than white men or any other group. Nevertheless, institutional inequities are holding them back from achieving long-term success.
The research data undeniably shows that Black women are a force in business. If entrepreneurs are thought to embody confidence in their own abilities to invest emotional and financial resources in exchange for an uncertain return, Black women have all that nailed down. But something is happening to disrupt their forward progress.
According to the Harvard Business Review (HBR), “In the United States, an astounding 17% of Black women are in the process of starting or running new businesses. That’s compared to just 10% of white women, and 15% of white men.”
The HBR article titled: “Black Women Are More Likely to Start a Business than White Men,” was published in May 2021, in conjunction with the release of the annual Global Entrepreneurship Monitor (GEM) report. The point in the piece that hits the hardest is the data showing that even though Black women entrepreneurs are breaking out, few succeed. “Only 3% of Black women are running mature businesses,” the HBR states. The piece delves into why this is happening and presents at least one solution.
How Inequity Stymies Black Women’s Entrepreneurship
The researchers from Harvard Business Review helped conduct the U.S. portion of the research that went into the GEM report. They found that Black women’s businesses run into trouble for two main reasons. First, their business ventures are typically small and self-funded. Second, they don’t have access to loans necessary for sustaining their fledgling business over the first two to three years. Those early years are typically the least profitable. It takes more than determination and savvy to make it through. Start-ups need resources, and Black women have more limited access to resources like loans and investors than white business owners. Here are some data points from the Harvard research:
- More Black women start businesses in health, education, government or social services sectors than their white counterparts.
- Data shows 61% of Black women entrepreneurs operate in this space, compared to 47% and 32% of white women and men, respectively.
- Black women carry more student loan debt and have less access to business loans and investors.
- The report found 61% of Black women fund their start-ups solo. Women, in general, are less able to count on banks than men. But Black women are further burdened by systemic racism.
Financial institutions do not treat all groups equally, as research from Northwestern University and more recently from the Associated Press both show disparities in how lending institutions treat people along ethnographic lines.
How The 2% Solution Can Help Black Women in Business
Something needs to be done to ensure access to opportunity in the United States is extended to all people regardless of sex, gender or ethnography. And that’s why Robert F. Smith advocates for The 2% Solution. Simply put, The 2% Solution asks major stakeholders, across all industries, to end historic injustices affecting the African American people which have persisted into the 21st Century.
Leaders in finance, banking, telecommunications, healthcare and other sectors can work each in their special sphere of influence to address student loan debt and racial disparities in lending, the boardroom and in their supply chains. Making small changes could end the opportunity gap for minorities in less than one generation.
Read more about The 2% Solution and how underserved groups can receive long-term help from annual investments.