Earlier this year, Robert F. Smith, Founder, Chairman and CEO of Vista Equity Partners championed the “2% Solution,” arguing that if private companies invested just 2% of their net income in Black communities and business, we could make tremendous progress in closing the racial wealth gap. The 2% Solution, sometimes referred to as the 2 Cent Solution noting that it only requires two cents from every dollar to help Black-owned businesses, has garnered great support after Smith announced the plan. Shortly after, in fact, Netflix announced it would dedicate 2% of its earnings to banks supporting Black communities.
And last week, Bill Bynum, CEO of HOPE (Hope Enterprise Corporation, Hope Credit Union and Hope Policy Institute) penned an op-ed in MarketWatch arguing that Smith’s call to action “offers a guide for moving forward.”
In particular, Bynum also reiterated a major call of Smith’s — that investments in Black-owned Community Financial Development Institutions (CDFIs) and Minority Depository Institutions (MDIs) can play a big role in closing the racial wealth gap.
To illustrate these institutions’ benefits, he explained the essential role that HOPE — a Black-owned CDFI in the Deep South — played for many Black-owned businesses and nonprofits during the pandemic.
“Many of HOPE’s PPP borrowers were small businesses and nonprofit organizations run by Black leaders who could not even get a return phone call from traditional lenders. One of those organizations included a small nonprofit serving youth in the Arkansas juvenile justice system. After reaching out to its bank, the nonprofit learned the financial institution would no longer accept PPP applications,” Bynum said. “The news was particularly devastating because, short on funds, the organization was experiencing an influx of teens in need of case management services. Youth formerly in the system were reaching out following their early release, a precautionary measure to prevent an outbreak of COVID-19. Before the organization had a chance to find another lender, the program’s first phase had ended. When the program restarted, HOPE made the loan.”
This is the perfect example of what can happen when we bolster CDFIs and MDIs, but we need to increase the investment in these institutions.
Smith called the op-ed “so important” and key for “keeping the spotlight on this critical need to bring permanent capital to underserved communities.