The Community Equity Fund (CEF) solves a problem that Black families live with (and most white people don’t realize exists), but is 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.
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 eligible 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 congregations to be involved in solving the racial wealth gap through their contributions, money designated for their 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 equality and economic justice, while creating meaningful and practical relationships across race and class.
We are in talks to launch pilots with churches in Asheville, NC, Chicago, IL, South Bend, IN, Minneapolis and on the Louisiana side of the Mississippi Delta.
Here’s how it would work: members of a church would donate to the CEF their church and get a standard tax deduction. In the church context, we are calling the fund the Thriving Communities Fund. Then the church would give to CEF. The CEF would invest in the Black businesses to help them grow, then 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 as an investment in them.
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.
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 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 live in. 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 Thriving Communities Fund becomes a line item, regular expenditure for a portion of the congregation’s local mission fund, 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.