Billionaire Robert F. Smith is spearheading a proposal that would help foster equity and opportunities for financial growth in African American communities. Smith’s newly proposed “2% Solution” calls for large corporations to use 2 percent of their annual net income to empower minority communities over the next decade.
“Nowhere is structural racism more apparent than in corporate America,” Smith, who made headlines last year after paying off Morehouse College students’ debt, said during Forbes’ virtual Philanthropy Summit last week. “If you think about structural racism and access to capital, 70 percent of African American communities don’t even have a branch [or] bank of any type.”
Smith became extremely aware of this disproportion during the financial crisis brought on by COVID-19. According to Forbes, the mega-investor had attempted to help Black-owned businesses and banks that serve Black communities obtain Paycheck Protection Program Loans, but was met with numerous obstacles. As a result, Smith found that African American business owners were having trouble accessing the emergency funds that the federal government had made available.
“The deprivation of capital is one of the areas that creates a major problem to the enablement of the African American community,” he said during the summit. “The first thing to do is put capital into those branch banks to lend to these small businesses to actually create an opportunity set... drive it into these small businesses, which employs 60 percent-plus of African Americans.”
In the past weeks, Smith has been sharing his “2% Solution” with business leaders nationwide. In his talk on Monday (June 22), he also pointed out that the average American household already donates 2 percent of their income annually to charity, and he believes corporate America should follow suit.
According to Forbes, the net worth of the US’s largest companies over the last decade was $1.3 trillion, which — with Smith’s plan — would leave around $25 billion to be used for strengthening healthcare infrastructure in Black neighborhoods, funding STEM education at HBCUs and more. Over the next 10 years, Smith believes corporate spending could provide billions of dollars to Black-owned businesses, banks and community development efforts.
See more from Smith’s address at the Forbes Summit here.
This is how we turn outrage into action. Thank you @reedhastings & @Netflix. $100m into Black-owned banks is a giant step forward. If major U.S. companies invest 2% of profits in left behind communities, we can close the racial wealth gap in 10 years. https://t.co/EqwtkHx6UK— Robert F. Smith (@RFS_Vista) June 30, 2020