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Amy Brown headshot

To Drive Financial Inclusion, Businesses and Nonprofits Must Come Together, Says This Executive

The racial wealth gap has limited opportunities for generations. Bringing financial services to the underbanked and underserved can help turn the tide, this executive says.
By Amy Brown
Drive Financial Inclusion and Close the Racial Wealth Gap

For Theresa Bedeau, senior manager for community development banking at Capital One, the racial wealth gap is not some distant concept — it’s personal. 

“I grew up in New York City, in the Bronx, and I understood the impact of lack of financial inclusion in my own community,” she says. “My neighbors’ lack of economic mobility was not due to any individual shortcomings, but the reality in which we had to navigate our world, which had unequal access to opportunity.” Her firsthand knowledge of how financial barriers can limit people’s prospects has made Bedeau a champion of driving financial inclusion among communities that often go underserved. 

Indeed, the racial wealth gap has limited opportunities for people of color in the U.S. for generations — and it persists even as other socioeconomic gaps narrow. The wealth gap between black and white families grew from about $100,000 in 1992 to $154,000 in 2016 — and research indicates it could grow even wider in the wake of COVID-19. 

A May study from the International Monetary Fund examined how past pandemics, such as SARS, H1N1 and Ebola, affected wealth disparities. They found that these pandemics “raised income inequality” overall and hurt employment prospects for those without advanced degrees. This is consistent with recent findings from the National Bureau of Economic Research: Within the bottom fifth of U.S. income earners, who are more likely to be black or Hispanic, 35 percent lost their jobs during the first two months of the pandemic, compared to 9 percent in the top fifth of earners.

Along with holding communities of color back from opportunity, McKinsey estimates the racial wealth gap’s dampening effect on consumption and investment will cost the U.S. economy $1 trillion to $1.5 trillion between 2019 and 2028 — or 4 to 6 percent of the projected GDP by the end of this decade. 

“Those numbers are real,” Bedeau says. “By acknowledging that, we can see that we have a lot of work left to do. Conversations around racial equity can be hard to have, but they’re necessary.”

Tapping community partnerships to drive financial inclusion

Businesses, particularly those in the financial services sector, have a clear role to play in delivering financial inclusion and empowering more people economically, but they can’t go it alone. To drive maximum impact, companies must not only partner with nonprofit organizations and community groups, but also listen to them and value their guidance as experts in what their neighborhoods need, Bedeau says. 

“Financial inclusion is so much more than owning a bank account. It’s about being active participants in the wider financial community and how people want to manage their financial lives,” she explains. “Part of the way we build trust between a financial institution like ours and the community is to partner with community groups. We have a shared commitment, working with organizations that support entrepreneurship and business ownership. Financial inclusion also begins with savings and a journey toward financial independence and wealth generation for communities that are generally underserved.”

A 2017 survey from the FDIC (Federal Deposit Insurance Corp.) showed that 20 percent of households are underbanked or underserved, and 40 percent of Americans can’t cover a $400 emergency expense. As COVID-19 continues to disrupt lives and livelihoods, these issues are becoming even more pronounced. Nearly half of Americans are worried about the pandemic’s impact on the economy and their financial lives, and 53 percent of lower-income adults reported having trouble paying some of their bills in April. 

A wide variety of people might face barriers to financial empowerment — from students uncertain about how they will fit into the modern workforce, to seniors struggling to understand online and mobile banking, to aspiring entrepreneurs looking to bootstrap their businesses.

The focus of Capital One’s nonprofit partnerships is to reach all of these groups. “We have strong, deep relationships with community organizations,” Bedeau says. “What I love is that we work with these organizations in our daily work. Connecting with them helps ensure that our products and tools are meeting the needs of the community and addressing the challenges they face.”

Building greater capacity for financial inclusion is essentially about a commitment to economic justice, she continues. Take, for example, Capital One’s work with the Long Island Community Foundation to close the racial wealth gap in the borough, with the potential to add a $24 billion boost to the local economy.  The partnership is community-led so that it can be responsive to local needs. “That is really reflective of the way we approach our community partnerships,” Bedeau says. 

Coming together to empower women financially 

Founded in Queens, New York, in 2008, Grameen America builds on the legacy and proven model of Nobel Peace Prize Laureate Muhammad Yunus. His revolutionary but simple idea is that all people can lift themselves out of poverty through their own entrepreneurial spirit. 

Grameen America, a longtime Capital One partner, provides microloans starting at no more than $2,000, along with financial training and support, to its members. As part of the program, members open free savings accounts with commercial banks, including Capital One, and make weekly deposits. 

The target population is women who live below the federal poverty line, for whom the mainstream financial system is often out of reach. The women Grameen serves previously had few options for accessing capital, and most lacked bank accounts and had little to no credit history. 

Grameen America’s programming has expanded to 15 U.S. cities, disbursed $1.42 billion in loans and served 129,000 women. For more than a decade, Capital One has been supporting Grameen America’s microloan programs in New York City, Houston, Miami and New Jersey, along with technology and capacity-building initiatives to help scale and empower more low-income women entrepreneurs. And there’s a huge demand for that support, with an $87 billion gap in financing for small businesses.

The women in Grameen America’s program use their microloans to launch a wide range of small businesses — “everything from selling empanadas out of a shopping cart to a full-fledged restaurant and business storefront,” says Alethia Mendez, vice president of operations and program strategy for Grameen America.

Building a bond of accountability

A key part of Grameen’s approach is its peer-to-peer lending model. A cohort of five women, who are known to each other through friends and the community, make lending decisions collectively, forming a “trust network,” Mendez explains. This helps encourage responsible financial practices and repayment. 

The more than 99 percent repayment rate “is a testament to the power of the cohort and those individuals who society might not consider credit-worthy,” she says. “One of the biggest influencers is that they don’t want to let each other down. These are women who are friends, trusted individuals from their community, so in a sense they have created a bond of accountability.”

For Bedeau, what makes Grameen America so impactful is that “they listen to what people on the ground say they need.” 

“Their recipe is quite simple: Meet the women where they are [and] connect them with the right financial products and services,” she says. "At the core of what they do is understanding people’s needs and how they want to live their lives. For many of these women, it might be the first time they’ve opened a savings account. Working with Grameen America presents a great opportunity for us to build a relationship with these women and support them in their goals to build wealth for themselves, their families and their communities.”

There is a huge demand for more solutions like these. The number of women running businesses has doubled over the past two decades. But in the U.S., women are the recipients of only 4 percent of all small business loans, and the lending gap is even wider for women of color, as TriplePundit has previously reported.

“Fundamentally, we believe that both the private and public sectors have a responsibility to do more and to be intentional about this type of support,” Mendez says. “Capital One has been a strong partner and supporter, from a programmatic as well as a philanthropic and funding perspective. These partnerships advance financial inclusion for the women they serve and also build our own capacity as an organization, so we can be strong for the hundreds and thousands of women we work with.”

This article series is sponsored by Capital One and produced by the TriplePundit editorial team.

Image credit: Christina @ wocintechchat.com via Unsplash

Amy Brown headshot

Based in Florida, Amy has covered sustainability for over 25 years, including for TriplePundit, Reuters Sustainable Business and Ethical Corporation Magazine. She also writes sustainability reports and thought leadership for companies. She is the ghostwriter for Sustainability Leadership: A Swedish Approach to Transforming Your Company, Industry and the World. Connect with Amy on LinkedIn and her Substack newsletter focused on gray divorce, caregiving and other cultural topics.

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