A New Push for Minority Entrepreneurs
Civil rights activist and Baptist minister Rev. Jesse Jackson has long played a vocal role in American politics and social advocacy. In 1971, he founded the Rainbow/PUSH Coalition to fight for social change, and he was a candidate for the Democratic presidential nomination in 1984 and 1988.
Ten years ago, Jackson launched Rainbow/PUSH Wall Street to promote economic opportunity and growth among minority-owned businesses by urging more public and private corporations to increase the hiring and promotion of minorities, name more of them to corporate boards, and to push more investments toward minority-owned businesses.
Saying that America's minorities remain a hugely underserved and untapped market, Jackson in October announced another initiative, the Small Business Institute. Expected to launch in January in New York with satellites across the country to follow, Jackson's newest initiative will focus on giving entrepreneurial training to youth, immigrants, and minorities and help them access capital for their businesses. Recently, Jackson spoke with BusinessWeek.com staff writer Stacy Perman about the Small Business Institute and the challenges that still hinder growth and opportunity for minority entrepreneurs. Edited excerpts of their conversation follow.
What is behind the introduction of your Small Business Institute?
I hope to build upon the historical legacy of the beauty, barber, and nail shops, the dry cleaners, the service stations, and cabbies. These are all small businesses. When you add up all of the people employed in a given ghetto by the churches, the restaurants, and the bars, all combined, they equal more jobs than any single place in a given town.
But they can't grow. They don't have the access to capital or technology. Some of these restaurants could become chains if they had the knowledge and [capital]. [The Institute] will provide training and seek sourcing for capital. Many small businesses do not have bookkeeping skills, or they have low credit scores. Often they use their credit cards for financing. It is the economics of desperation.
We just had a Nobel Prize winner [Muhammad Yunus and Grameen Bank] who gives out microcredit (see BusinessWeek.com, 10/13/06, "What the Nobel Means for Microcredit"). I am trying to connect with him through our Wall Street project. Think about if we had microloans in urban areas. You know the clothing store FUBU? It started in the back of a car and it grew. They finally got access to a mentor and capital and now they are a several-million-dollar company.
Is that then the major challenge for minority-owned businesses—access to capital and financing?
In our situation it happens so often that because of a rap on our rap sheet, low credit scores, and lower education, it is difficult to borrow money through the front door of the bank, and so they have to go to the back door to the predator-exploiter that charges more for less. Development banks make low-interest loans, [but] there is no incentive [to do so] behind the red-line zones. You can't break the cycle on conventional loans because the risk is great.
At the same time, however, minority-owned businesses—African Americans, Latinos, Asian Americans, and women—are the fastest-growing segment of entrepreneurs in America. For instance, according to the latest U.S. Census Bureau data, nearly 1.6 million African American-owned businesses earned $89 billion in 2002, up 25%. Aren't we already seeing significant growth among minority-owned businesses and the fruits of more programs, training, and access to capital?
And they will continue to grow with more access to capital, technology, and better bookkeeping skills.
The [Small Business Administration] should embrace that wave, banks and insurance companies should embrace that wave, pension funds should embrace that wave. Small businesses matter. They employ at the neighborhood level, they reduce unemployment and crime.
I want kids in high school to take entrepreneurship classes and to learn about profit and loss. They should get a checkbook, not just a credit card. We train them to be consumers. Without entrepreneurship training, they are never going to survive their own neighborhoods.
For instance, [many minorities] often complain that other groups come in to their neighborhoods and set up a corner grocery store. They say they come here and take advantage of us, but the fact is that they sense there is an underserved market and seize it. I want people in the market to grow beyond that.
What about the government's role in supporting minority-owned small outfits?
The SBA is not very good on outreach. During the Bush administration, there has not been a lot of emphasis on the SBA or emphasis on [Equal Employment Opportunity Commission] contract compliance. There has been a short shrift to these areas, but they can be valuable. They all represent an opportunity for growth and training more people to access capital.
We need a domestic [program] to go behind undeveloped red-line zones and create incentives to invest there. If you live inside a red zone, there is more incentive to go outside and build a shopping center or get insurance. There must be more incentives to stay than to leave. Right now, all incentives flow outward.
I once spoke to some Americans who were going to Russia to teach capitalism. I said that it was strange that they had to pass through Harlem [or] Bedford-Stuyvesant to go in search of rubles. They weren't taking a bus ride to Bed-Stuy to teach capitalism at home. I call it cultural blinders.
Look at the amount of cash money in these ghettos—[here], there is capitalism. We know we have athletes and entertainers, but I am telling you there is an entrepreneurial market [in these neighborhoods] and it is big. We want to show the government that there is value here.
However, what about the recent approaches that have taken advantage of the growth and potential of minority-owned small businesses? For instance, 10 years ago Wells Fargo (WFC) recognized the growing financial needs of women entrepreneurs and set up its Women's Service Division, and has since given out $19 billion in loans. Last year, a group of Latino investors with $20 million capitalization announced a new California bank focusing on Latino family businesses that generate $1 million to $10 million in revenue.
Affirmative action has opened up the women's market. Women and people of color are a majority, not a minority. There are more skilled women [and] higher volumes [of them are] consumers. [But] many women were not on track for community loans—now Wells Fargo sensed that and invested in them and the Hispanic and African American market. We want the Small Business Institute to combine this research and together search for the best practices. We need not be original with the idea.