The Community Equity Fund solves a problem that Black familes live with that most white people don’t realize exists, but that is a a crucial element in why the racial wealth gap exists. That wealth gap means the average white family’s assets are 12 times greater that of the average Black family.
A key reason for the economic disparity is the friends and family gap; black business owners don’t have a rich aunt or uncle or alumni network member to help give their business the runway to grow. When a Black family owns a business, the racial wealth gap shrinks by 75%, to a still terrible three times higher for white people.
The hidden friends and family gap is why in many cities 90 % plus of African American owned businesses have fewer than two employees. Businesses that small aren’t elligible for the new loan funds that have cropped up in cities across the country to help minority businesses in response to last summers protests about racial inequality.
Ironically, because the people designing the loan funds have extensive networks of investors in their friends and family to call on as they build their funds, many don’t realize the “rich uncle” gap exists for Black and brown families. The CEF gives these micro businesses the philanthropically motivated capital they need to go full time, hire an operator and grow sales so they can take on loans to help them grow and become viable businesses.
Now we’ve constructed a way for individual faith-based congregations to be involved in solving the racial wealth gap through their contributions; money designated for their church or synagogues’ local mission outreach. Even more significant, we have devised a way for a church’s young people to become deeply engaged in solving systemic problems of racial equity and economic justice in response to the Gospel, while creating meaningful and practical relationships across race and class.
We are in talks to launch pilots with churches in Asheville, NC, Chicago, in a poor rural community on the Louisiana side of the Mississippi Delta and in South Bend, Indiana.
Here’s how it would work: members of a church would donate to the CEF through their church and get a standard tax deduction. When it’s done in a church we are calling the community equity fund the Perpetual Mission Fund. So the church would then pass on individual and church budgeted contributions to CEF, doing business as the Perpetual Mission Fund. The PMF would invest in the pre-vetted Black businesses to help them grow. The church would be paid back in five years when the businesses paid back the fund. But the church will continue to receive income from it’s initial donation for 25 years, every year, as succeeding businesses pay back the church’s contribution that was recycled into each new business every five years.
Here is where it gets interesting and young people can engage. We call the money that’s paid back the Harvest Premium, and we ask that it be designated for local mission; you can’t send it to Africa, but instead you have to give to or invest in something in your own home town. We recommend that the Harvest Premium’s local mission should reach across race, class and neighborhoods and that it be allocated in partnership with the people from community’s of color that the church is investing in, rather than having the church decide what’s needed.
Half of the Harvest Premium every year should be handed over to the control of the young people of the church. You give the young people a steady, reliable stream of capital and the responsibility to design the future.Those funds should be for investing in the future; things that take at least five years to come to pass.
We call the money set aside for young people to create their future the Future Resilience Bond. Since we can expect the Harvest Premium to come in for at least 25 years, we can afford to think long term, ask questions about systemic and structural problems that require patience to solve, from local climate change resilience in poor neighborhoods to deeper economic problems that may require changes in laws and regulations to solve..
The problems to be solved with capital with a long term horizon, the purview of the Resilient Future Bond, should not be decided by the young people of the church alone. We recommend that they reach out to the Black business owners the church has invested in to and get in touch with the youth groups in those predominantly Black churches to co design the future they will create together. It will take time to get to know the problems from each group’s viewpoint, and that’s fine. They will have five years before the first money starts to come in, and they can spend the time learning how to collaborate on solutions together.
The secret to this model is that the money from that first investment will continue to come in for 25 years. And if the Perpetual Mission Fund becomes a line item, regular expenditure for a portion of the congregation’s local mission fund every year, it can go on forever, creating intergenerational wealth in communities without a rich uncle, and helping young people solve long term problems across race, class and neighborhoods.
We will be presenting on the model Wednesday March 3 at 1130 at this Canadian conference.
Building an interdependent economy 