Philanthropy in Communities of Color
Illustration byLuisa Jung
In 2021, Black buying power is estimated at about $1.5 trillion which makes them the focal point for researchers, marketers, advertisers, and other campaigns designed to influence black spending patterns. This year alone, Thanksgiving Day saw about $5.1 billion in sales and Black Friday saw $9.6 billion, both of which saw The Black community play a very significant role. With such a sizable revenue base for corporations, one might ask, where would Americas economy be without the essential support from the Black community and other communities of color alike? This discourse should and must urge senior executives leaders to advocate in developing an intentional long term strategy now. Working in partnership with NGOs and local and federal leaders, corporations must be intentionally and create a long term strategy to steward more resources to disadvantaged communities of color. This is essential not because this is good PR or as type of corporate philanthropy, but because this drives the bottom line and creates an ecosystem of best business practices for entrepreneurs, small businesses, and the overall economy.
As a corollary, introducing financial literacy, and mentorship programs to underprivileged communities also serves to inculcate, inspire, and promote more economic prosperity and awareness. Financial literacy coupled with knowledge on racial equity investing- an investment strategy that seeks to advance racial equity while generating financial returns has a powerful catalytic potential to promote more entrepreneurship, business ownership, and ultimately helps to revitalize socioeconomically marginalized communities. Historical data has shown that if administered properly, the impact of these resources produce a multiplier effect and allow for more access to credit, create more inter-generational wealth, but more importantly, create a resilient ecosystem for small businesses to flourish in and support each other.
The Current State of the Socioeconomic Divide Using a Racial Lens
According to the Institute for Policy Studies,while households of color are projected to reach majority status by 2043, if the racial wealth divide is left unaddressed, median Black household wealth is on a path to hit zero by 2053 and median Latino household wealth is projected to hit zero twenty years later. In sharpcontrast, median White household wealth would climb to $137,000 by 2053. It is critically important to note that when corporations make pledges and dont follow through this destroys trust and credibility and there needs to be more accountability. In the wake of the unprecedented protests that took place following the death of George Floyd Americas 50 biggest publiccompanies and their foundations collectively committed at least $49.5 billion since May of 2020 to addressing racial inequality. However, a Washington Post analysis found, more than 90 percent of that amount $45.2 billion is allocated as loans or investments they could stand to profit from, more than half in the form of mortgages. Even more egregious is the fact that, while $4.2 billion of the total pledged is in the form of grants, of that, companies reported just a small fraction about $70 million wentto organizations focused specifically on criminal justicereform, the cause that sent millions into the streetsprotesting Floyds murderby a Minneapolis police officer.
FINRA Investor Education Foundation
A report of American financial literacy from Visual Capitalist
To properly educate and provide mentorship to communities, companies must establish a plan for which types of courses will be administered and which organizations would be best to lead them. There are various organizations such as Operation Hope, Money Think, The NFCC, and many more non-profit organizations that work every day to provide a better understanding of financial literacy to underprivileged communities. In addition, taking financial literacy to the next level includes investing in and supporting businesses of color. RythmCouture provides expertise in music licensing and musical solutions all multi-media platforms. As a Black owned business Co-Owners Kyle Hunter and Robert Ronci would love to reach a wider audience and with more support, financial literacy and mentorship from corporations, they could more effectively scale their current business model.
Financial Literacy courses coupled with racial equity investing and mentorship sustained over a long-term time horizon would greatly reduce debt and greatly increase the capacity of middle income families to save and accumulate wealth. Studies have shown that on average, households earning $5070K save only $1,000 per year. However, those earning $70 90K save almost 10 times more. Those earning $100150K save 20 times more. Only a sustainable long term strategy would ultimately begin to correct the inequitable wealth gap within underprivileged communities.
OECD3
Source: Reducing Income Inequality, While Boosting Economic Growth: Can it Be Done? OECD, 2012.
Not only would this spur greater entrepreneurial innovation within communities of color, but it would also create more conscious citizens that would have a better understanding of creating racial equity as well as ownership and thus be better economic stewards of their resources. Even though the U.S. is the worlds largest economy, the Standard & Poors Global Financial Literacy Survey ranks America No. 14 when measuring the number of adults in the country who are financially literate. In comparison: the U.S. adult financial literacy level, at 57%, is only slightly higher than that of Botswana, whose economy is 1,127 percent smaller. The report, estimated that only 4% of children from low-income families will break the cycle of poverty and break into the upper-middle class. Education and awareness are the best ways to combat the cycle of poverty along with assistance from fellow citizens. To improve this statistic, financial literacy is essential and needs to be administered through partnerships. Tafari Norton, a Sophomore at The Fox School of Business at Temple University note that, I was able to change my whole outlook on the economy once I became more financially literate, which also allowed me to improve my spending habits and overall lifestyle. Some analysts have argued that only 33% of the U.S.s overall population is financially literate leaving 67% of citizens without literacy. Imagine if as a nation we are able to change that, and fully realize the positive externalitiesthis would have on our economy as a whole.
Corporations and private equity firms alike should invest and support new initiatives such as Blacklinkedin which in less that a few months has over 2,000 members and created a powerful platform to better promote Black and Brown businesses. This type of connectivity is greatly needed now more than ever.
Picture4_ Students
Two students bonding over the knowledge they are being presented
To create more equity we need to develop consistent partnerships with corporations providing financial literacy, entrepreneurial know howand dispel the notion that only those who have significant wealth can benefit from financial literacy. McKinsey estimates that The right business ecosystems can mitigate or negate the effects of structural obstacles to business building for Black business owners- and add $290 billion in business equity.
By doubling down on better access to credit and leveraging power dynamics at institutions, communities of color, will see a significant redistribution of wealth over time. In addition, the financial well-being of citizens overall will also enable the US to better compete with other countries especially China who are making far more investment in financial literacy than the US. The thinking here is better access to the mentorship and resources for financial advancement will galvanize US citizens to garner better business practices which can lead to further advances in fin tech, AI (Artificial Information), which will enable us to compete on a better playing field with citizens around the world. Organizations and corporations alike must recognize that we need to get to a place where the word reparations is used synonymously with investments, support and financial literacy in underprivileged communities of color in order toredefine and reimagine an inequitable economic system, something that cannot be done without purpose, resources, and intentionality.
Special thanks to Tafari Norton whos editorial and research skills contributed greatly to this article.
About Earl Carr
Earl Carr is the Chief Global Strategist at Pivotal Advisors based in New York City. His responsibilities include working closely with the firms CEO and President to manage the Global Research Team and to develop and execute the firms global thought leadership, and cross-border business development mandate.
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