In the wake of the protests for social justice in the past years, a harsh light has illuminated many of the historic, systemic issues that have resulted in a lack of financial equity and inclusion in the United States. These issues are not unique to the U.S. and global poverty resulting from the unbanked and underbanked not having access to financial services has caused the World Bank to make Financial Inclusion a global priority for the financial services industry.
An example of systemic issues that have deeply affected generational wealth for Black Americans can be illustrated by the recent story in California that centers on Bruce’s Beach. A Black couple purchased the land and created a thriving resort in the Manhattan Beach area of Los Angeles County. The land was confiscated by the city by abuse of imminent domain laws. It has recently made national news because the California legislature voted unanimously to return the extremely valuable land, that has belonged to the city of Manhattan Beach for almost 100 years, to the descendants of the Bruce family.
The coverage of this story has helped expose how much land has been illegally confiscated from Black owners since the early 20th century. Cited in the NPR article linked above is Thomas W. Mitchell, a property law scholar at Texas A&M University. He is quoted in the article estimating “the total loss of generational wealth for Black Americans across the U.S. falls into the trillions.”
Add to that Redlining: “The practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity. It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location rather than on an individual’s qualifications and creditworthiness. Notably, the policy of redlining is felt most by residents of minority neighborhoods,” according to Investopedia.
As the Executive Director of the National Community Reinvestment Coalition (NCRC) Community Development Fund, Marisa Calderon is rectifying these inequities by bridging the nation’s racial wealth gap by expanding access to affordable homeownership for underserved populations. Because of her transformative work in this area, she was named one of Housing Wire’s 2021 Women of Influence.
Calderon runs the NCRC Community Development Fund, which is a U.S. Treasury-certified Community Development Financial Institutions Fund (CDFI), a subsidiary of the NCRC that was established 30 years ago. The CDFI was verified by the Treasury in 2012.
“Like many other CDFIs, we’re committed to helping underserved populations,” Ms. Calderon says. Ours is a bit distinct because we’re not bound by any geography and we can target distinct populations as allotted by the Treasury, throughout the U.S. and its territories. Our primary targets for assistance are Black and Hispanic populations.”
In addition to creating more affordable housing in the form of single-family properties with developer partners, CDFI is also a PPP lender with a growing small-business portfolio.
“We do loans that range from microloans all the way to half a million dollars to provide capital for small businesses and our borrowers are overwhelmingly Black and Hispanic,” Ms. Calderon says. “This can be a lifeline for those who otherwise have a very difficult time getting capital. The NCRC works with community leaders, policymakers, and financial institutions to champion fairness in banking, housing, and business.”
Formed in 1990 at the grassroots level, NCRC combines national, regional and local organizations to help channel the flow of private capital into underserved communities. The coalition now has more than 700 community-based organizations in 42 states.
“The challenges for the populations we work with have some commonalities but there are also challenges that are specific to the individual communities,” Calderon says. “For the Black community, systemic racism and things like redlining and the institutional framework that robbed African Americans of their inherited wealth – as well as preventing them from achieving inherited wealth – is part of how we got here today.”
For Latinos, she explains, the primary challenges are centered on how to navigate the system so there is often a greater educational emphasis.
“Latinos are a younger population and they don’t have a lot of inherited wealth either,” she says. “Much of the community, if not immigrant, is very close to the immigrant experience and the ability to build up wealth through things like homeownership, is an uphill climb. A lack of personal assets and capital deficits make it challenging to fund an entrepreneurial endeavor. There is no lack of enthusiasm or passion. There is a lack of proximity to capital so that makes it much harder for these communities to network and to understand how to access capital when they don’t have any of their own. And that’s a gap we try to fill. Not just from an educational perspective but to connect entrepreneurs of color to possible finance opportunities.” — Marisa Calderon
The fund works to engage previous successful borrowers and to get referrals for future prospects. Their cultural competencies are trust-based so a referral from a trusted entity, whether it’s a company or business acquaintance, carries more weight.
“Fifty-percent of our PPP portfolio came from borrower referrals and we work to meet those referrals where they are,” Ms. Calderon says. “Because we’re making these active investments in communities that have historically seen disinvestment, the majority, well over 80 to 90 percent of our borrowers, are people of color. We take a high-touch, high-tech approach. Though many of our borrowers are younger and tech savvy, they still want to have a real person who will walk them through the process. We are set up to do all of it and that’s what makes the difference compared to an entity that is strictly analog or strictly tech-focused.”
In addition to providing capital, the CFDI is creating an innovative program of technical business help. There is a range of options from developing a pre-revenue concept, to a microbusiness to a scaled business. The professionals at NCRC CDF help them throughout the entrepreneurial journey – with capital, educational and networking components and then they help solve for homeownership needs.
“We provide a lot of the economic levers people would need,” she says.
As the former executive director of the National Association of Hispanic Real Estate Professionals (NAHREP), Calderon understands the value of being involved with organizations that can help lenders and financial services companies of all size connect to the consumers they want to work with, in addition to building out internal diversity, equity and inclusion objectives.
“Businesses need to make a concerted effort to be involved with groups where you are going to connect the consumers they want to attract,” she says. “In general, well-networked businesses fare better than those who are not. You need to be involved in different trade associations, community organizations and the chamber in your area.”
Because of her extensive experience in the financial services industry, she has ideas for the ways in which companies can fully implement their DE&I objectives.
“A lot of companies have DE&I efforts that are only focused on the entry level,” she says. “For instance, recruiting people of color for entry-level bank jobs and, while that’s helpful, it’s not an end-all solution. What really helps is seeing people of color in authority positions with decision-making ability, from the highest C-suite through all levels of the organization. If you’re recruiting the best talent at every level, the communities you’re trying to attract will see that.”
The Urban Institute projected in its January 2021 report that “all net household growth will be from households of color. Between 2020 and 2040, there will be 16.1 million net new households. Hispanic households will grow by 8.6 million.”
That is where the customers for financial services, housing, lending and insurance will be so if the projection is correct, it makes sense at a community-development level to begin building inroads to these consumers now. And it makes sense at a business level, as this will be the largest pocket of consumers for the next two decades.
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