The Black Institute’s one percent solution for MWBEs
Herb Boyd | 4/14/2016, midnight
Although there has been an increase in the number of minority and women-owned businesses in New York, they remain vastly underfunded, according to a recent report by The Black Institute.
To remedy this situation the Institute proposed a “one percent solution.” “We are proposing a capital commitment of one percent of the assets of the New York City Employee Retirement Systems and one percent of the assets of the New York Common Retirement Fund towards ‘dollars-on-the-street’ investment in minority and women-owned businesses.”
This one percent commitment, the Institute added, would create $3.4 billion dollars of targeted capital investment in minority and women-owned businesses, “while creating and stimulating an American emerging market.”
In the report, the Institute commended State Comptroller Thomas DiNapoli and City Comptroller Scott Stringer in taking steps to improve internal diversity through their Emerging Manager Program and to incorporate diversity through their shareholder initiatives and efforts to diversify corporate boards, but the Institute insisted that the one percent solution could be the stimulus to a new era of growth.
According to the U.S. Survey of Business Owners in 2012, there were more than 1.1 million MWBE firms in the state with more than $185 billion of annual sales and receipts. This estimate of total businesses may be much lower, the Institute contended. Even so, they are fundamentally underfunded.
“A 2013 Small Business Administration study of the capital profiles of growing companies shows the deep gaps in capital access across demographic groups,” the Institute noted. “In the study, Black and Hispanic firms attract half as much outside equity investment as those owned by white men. Woman-owned companies attract only a quarter as much outside equity investment as their male-owned counterparts, and those firms are almost twice as reliant on debt backed by the personal assets of the business owner than the average firm. Across the board, women and minority-owned businesses are far more reliant on the personal resources of the business owner than non-minority male-owned companies.”
Evident from this disparity is the need to balance the capital and credit needs of the MWBEs while reducing their exposure to personal debt and establishing equity networks to support them.
There was no immediate response from Stringer’s office, but a visit to the website indicated that “diversity isn’t just a buzzword—it’s a foundational pillar of economic development.”