Leveraging the Black Dollar to Create Social Impact 

By: Clinton W. Mitchell

Black business owners have been disproportionately affected by the economic downturn spurred by the COVID-19 pandemic. This is due, in part, to the fact that they were more likely to have already been in a precarious financial position. In fact, about 58% of Black-owned businesses were at risk of financial distress before the pandemic, compared with about 27% of white-owned businesses. The pandemic contributed to tipping 41% of Black-owned US businesses into closure from February to April 2020. However, this sad reality hasn’t stopped Black households from spending money. 

Combined spending by Black households has increased 5% annually over the past two decades, noticeably outpacing the growth rate of combined spending by white households (3%). Global management consulting firm, McKinsey & Company, estimates the value of “The Black Dollar” at $300 billion annually, which should be fertile ground for Black-owned small businesses. Small businesses are the lifelines of communities, so empowering them naturally empowers the people within the communities they serve and enhances the social impact in Black communities.

Social impact is a significant, positive change that addresses a pressing social challenge. Creating social impact results from a deliberate set of activities with a goal to improve the conditions and current situation through structural movement of the status quo. One way we can do so is by empowering Black small businesses and harnessing the power of the Black Dollar through investment. 

The Metaverse, But Cool

Black households are 50% more likely than white households to live in areas with limited broadband service. Yet, this lack of access has not prevented Black consumers from being more likely to participate in e-commerce. Black consumers have compensated for broadband gaps by becoming more “mobile-first” than the rest of the population. Black consumers account for 23% of US cellphone sales, own smartphones at a slightly higher rate than the overall population, and are more likely than the average consumer to use digital apps for e-commerce and financial transactions.

How can we account for and close the digital divide and leverage the opportunity? To better serve Black consumers, companies should ensure that seamless digital encounters are included in the consumer experience. Brands should focus on creating a “One-Hand Frictionless Experience” so that whether their customer is on a plane, train, or automobile, in a Zoom meeting, at tee ball practice or putting the baby to sleep, if they have a hand free they can access their products, services or content. 

Money Trees

From 2012 to 2017, there was a 7% decline in the total number of physical banks, thereby increasing the number of “banking deserts” (census tracts with no bank branches within ten miles of the center). According to FDIC data, Black Americans are disproportionately affected by these banking deserts, as nearly half of all Black households were unbanked or underbanked in 2017, compared with just 20% of white households. Closures of local bank branches place an outsize constraint on small businesses, which drives residents to turn to alternatives such as payday lenders. The average interest for a payday loan is 392%, compared to the average credit card interest rate of 19%.

So, what’s the fix? Contact your state, local, and federal representatives about implementing caps on payday loans in the over 30 states that do not have strong rate caps. Another potential solution is to invest in Black FinTech. FinTech is shorthand for financial technology that aims to compete with traditional financial methods (banks/credit unions) in the delivery of financial services. In the past decade, we’ve seen a proliferation of companies that have revolutionized the FinTech space, such as Zelle, CashApp, Venmo, Affirm & AfterPay. However, very few have been Black-owned or have specifically targeted the Black community. As a result, there is a great opportunity for creative entrepreneurs who know how to both tap into this market and provide the resources needed that traditional funding sources don’t provide.

A Sears is [not] a Home 

While the pandemic is waning, and there have been cries for employees to move from couches to cubicles, employees seem to be ignoring the cues. Take New York, for example. According to the WSJ, Manhattan office availability hit a record high of 17.4% in February. Downtowns are more than just a collection of skyscrapers, hotdog carts, and confusing parking signs. They are ecosystems that heavily rely on foot traffic, and when these numbers drop, retail is negatively affected. Retail vacancy around Grand Central Station has doubled to 20% in the last three years. Moreover, NYC unemployment was 7.6% in January 2022, nearly double the national rate of 4%. If you zoom out even further, you also see that the pandemic induced shortages in labor and lumber have exacerbated the need for housing and innovation.

No one reasonably expects downtown areas in major cities to regain their pre-pandemic form. For starters, the last two years have shown us that those of us who can work from home do so very well. But what about the people and businesses that rely on that traffic? What about the millions of people searching for homes but don’t qualify to borrow an average of nearly $480,000, which is the amount homebuyers expended in Q4 2021?

Until we find a quicker way to grow lumber (we won’t) or the price of shipping containers goes down again (no time soon), we’ll have to repurpose, reconfigure and reimagine unused commercial space to suit our residential needs. Think flipping the former Sears in your aging hometown mall and turning it into a multi-family housing unit, with office space (when you get tired of your partner walking naked in your blurred background), restaurants, a play space for kids, and patios, so you remember what the sun feels like.

Creating social impact is more than just joining Teach for America, AmeriCorps, and teaching your aging parents how to Zoom church. Just because you fancy yourself a titan of industry doesn’t mean you can’t do impactful community work as well. Social impact is about creating, developing, exposing, and strengthening the communities we live in, even with a focus on the dual bottom line of profit and purpose.

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