Lately, I’ve been on a mission to find resources to replenish LURN’s Semi’a Fund, a low interest loan fund that caters to street vendors and other low-income entrepreneurs who do not qualify for capital from nonprofit lenders or banks. It’s been a bit challenging and I’ve learned a lot about how capital flows (or doesn’t) in our communities.
The fund is an opportunity for us to help entrepreneurs in our community build wealth by investing in their businesses. The driving spirit behind this work and arguably our more innovative program, The (Re)store Fund, a micro-equity program, is a feeling of anger and dismay at how real income inequality is in our society.
I’ve been sharing with anyone that will listen an important fact that has stayed with me since I read it…the average white household in LA has a net worth of $355,000 while the average Mexican household has a net worth of $4,000. A Black household? $3,500.
Over 80% percent of small businesses are started with personal loans from friends and family. I’m sure you can imagine how tough it is for entrepreneurs to start their business when they themselves have minimal assets and their social networks have little to no capital too. How can they start or grow?
This inequality didn’t happen overnight. It wasn’t just Trump, Obama, or Bush, it’s been unrelenting and deliberate policies over the history of our country that has siphoned off capital for the few.
Prison Industrial Complex. (i.e. Slavery, again)
Corporate subsidies. (At all levels of government)
I often wonder how we’re (un)knowingly perpetuating this situation in the for-profit or non-profit space by just going about our work like usual. For me, its been difficult to even mobilize “impact” investors around the need for more generous loan products for those impacted by this terrible history. Ironically, I feel like we are still asking people to go through the very systems that have kept them from accessing capital in the first place.
At LURN, we do see value in trying to figure out solutions now; working within these systems to try to find some short-term respite for families that need support today. I do believe that the impact we are having is huge on a person-to-person level; when we’re able to get some capital to a street vendor in our communities so they can buy equipment or move into a restaurant, it changes their lives.
But I’m increasingly feeling like this is not enough if we’re trying to move the needle on wealth generation in low-income neighborhoods across LA and in our Country. I’m feeling disenchanted with our approaches to solving poverty and addressing income inequality. Are we doing enough? How will a series of financial education workshops stop the displacement of a business facing eviction in 30 days? (A real proposal I heard from a California elected official.) How will teaching people about LA County contracting opportunities help the quinceañera shop who has been in the community for years keep from being beat out by a big box store? (A real idea I recently heard from a public sector leader) How do we expect a street vendor who makes about $25,000 a year to purchase a certified food cart for $10,000 so they can legally vend IF the city legalizes street vending when many vendors can’t demonstrate their incomes in formal financial statements? (A real problem we’re grappling with!)
All of this could make you feel a bit inadequate, right? It’s worse when there seems to be little political will to take these issues seriously.
At LURN, we see this inequality acutely with the entrepreneurs we work with. They are on the bottom end of the income inequality spectrum I described earlier, struggling day to day to maintain their business…hoping to generate enough income to not only pay their business expenses, but also their household costs. Many of them would benefit tremendously from an infusion of working capital that can help “leap frog” them to a place closer to their white counterparts.
To truly change systems, we need to think bigger and bolder. The nonprofit sector can’t do it alone, it requires the private sector itself to confront capitalism and its shortcomings. It can’t relegate its community-serving initiatives to small experimental departments or their public relations arms who have limited budgets and donate a bit to organizations who overwork and underpay their staff as they try to take on massive issues like poverty, gentrification, and homelessness. The eradication of poverty and inequality must be a unifying front for everyone because it’s going to impact us all whether we like it or not. Addressing income inequality should not be a small department or a special interest, it should be an all encompassing rallying cry for everyone in whatever business you’re in.
When it’ll take 228 years for a Black family to amass the wealth of a white family, we should be angry and throw everything we have at the problem, right? I mean, if we really care about these issues, shouldn’t we invest like we do? Things are getting so bad, that we’re even spending more money on private security to protect the wealth of the few than we do on ending poverty.
Naturally, I believe our government has a central role to play in this. Ideally, the role of policymakers is to correct “market failures” and ensure that our socio-economic landscape isn’t further hurting people let alone leaving a majority of people to fend for themselves. The role of our elected officials is to ensure everyone has an opportunity to live their greatest potential. An equity lens should be applied in how we direct public investments while expecting that our corporate partners maintain a high level of integrity in all their dealings. After all, if our elected officials don’t step up for us and set the tone of how we want to build good communities, then who will?
Innovation is needed too. We have to be unafraid to think “outside of the box;” designing pioneering initiatives that can really put a dent into income inequality. I know some of us love “pilots” (including me), but maybe we’re fooling ourselves by simply dipping our toes into these issues as opposed to diving into the deep end with appropriate human and financial capital.
Instead of continuing to underfund community groups who provide asset-building programs, why not fund them heavily? Why not create substantial loan funds (i’m talking hundreds and hundreds of millions) that are designed for those entrepreneurs who want to buy their places of business and have demonstrated their grit, but have little assets or littl-to-no credit? Why not create large equity funds that invest in projects that are deemed “risky” but have a huge potential to create jobs in our communities? Why not invest big in businesses that are operated by people of color, especially youth from our communities? Why don’t we begin to redefine what it means to “do well by doing good.” (My pessimistic side feels that it’s going to be super difficult for us to figure out how to help the rich get richer by helping the poor.)
We can no longer make excuses for ourselves: “It’s never been done before,” “How will we know we’ll get our money back?” or the infamous, “It’s not time for that yet.”
All we have is today. No more traditional approaches.
(Cover photo by Mike Dennis)