Pictured: Ibrahim Hussein started the Somali American Cultural Society of Owatonna (SACSO) with a $5,000 grant from SMIF and the desire to help other refugees overcome cultural barriers within the educational system.
By: Kristina Busch
Statistics say that minorities will be the new majority in the next 30 years. In an ever-growing diverse nation, it’s important that we place attention on the growth and sustainability of a multiracial population, as they become the foundation of the American economy. Minority-owned businesses contribute $1.6 trillion in annual economic output. If these businesses are not able to grow and succeed, the U.S. economy and global economy will be negatively impacted.
Scott Vowels, PhD and Co-Founder of The Institute for Thought Diversity (ITD), led efforts on a study of procurement and supplier diversity experience. According to ITD, minority-owned businesses reinvigorated the stagnant economy, and they are continuing to create sustainable jobs, which positively contributes to the tax base.
Minorities may start their own businesses for many reasons. Due to lack of access to social capital, poor educational systems, broken transportation systems and/or systemic racism, they may not be able to access traditional jobs. Whether they are running their business full-time or part-time along with another job, they see their business as an opportunity to generate their own form of income.
Although it is evident that there is a rise in minority-owned businesses, there still are significant barriers when it comes to access to capital. This lack of access may relate to bank loans and lines of credit.
Melissa Bradley, Director of the Sustainable Entrepreneurship and Innovation Initiative, proposed the following potential solutions to some of these barriers:
- Create access to new social networks. Institutions need to invest in new social networks in order to meet the needs of diverse groups of people.
- Pursue alternative credit score models. To increase access to capital, it is important to help minority entrepreneurs establish and maintain credit.
- Reauthorize and scale existing policy levers. Currently historical policy decisions like the Community Reinvestment Act and more recently, New Market Tax Credits, have been instrumental in unlocking capital for marginalized communities, and in turn marginalized entrepreneurs. It will be important to make these legislative actions permanent and not be subject to reauthorization and the polarization of politics.
- Develop a pipeline for minorities to access professional education programs. As the cost of professional education continues to rise, it will be important to create more opportunities to support communities of color in accessing intellectual and social capital. This can be done by holding various workshops and conferences led by business professionals.
Being able to understand and support the needs of minority entrepreneurs is imperative, not only from a moral perspective, but also from an economic perspective. According to the U.S. Census Bureau, the minority population is expected to rise 56 percent of the total population in 2060, compared with 38 percent in 2015. Along with this, minority owned businesses have increased over 50 percent over the last decade. The future economic growth of our country will be continuing to include people of color, and business policies and investments will need to become more diverse in exchange for a global economy.