This post was written by OFN Blog guest author Shelia Byrd, Vice President of Communications, HOPE.
Hope Enterprise Corporation/Hope Credit Union (HOPE), a community development financial institution (CDFI) based in Jackson, Mississippi, will use a $10 million investment from Netflix to import capital into Deep South communities where wealth has been extracted for decades. These places, which dot the landscape of the five-state region served by HOPE, are majority Black communities where, despite high poverty rates, community development opportunities are unlimited when capital is available and local people are resourced with the tools to succeed.
The Netflix investment will be in the form of a Transformational Deposit in Hope Credit Union. Transformational Deposits are simple low-cost (ten basis points) deposits in the form of savings accounts or certificates of deposit that put idle cash to work in underserved communities. Through the Transformational Deposit program, HOPE imports capital, and in turn, deploys it in places like Drew, Mississippi, a small, rural, majority-Black Mississippi Delta town, to advance the economic mobility of residents through mortgage and business loans and other financial services that otherwise would be out of reach.
Announced last week, the investment was one of the first made as part of Netflix’s $100 million initiative to build economic opportunity in Black communities. Expanding financial access in those communities is a critical strategy for narrowing the racial wealth gap. The action by the entertainment giant is a strong example for other corporations, banks, and holders of wealth in the U.S. to make similar investments in financial institutions serving communities of color.
The initiative was applauded by Robert Smith, the billionaire founder and CEO of Vista Equity Partners, who has championed a plan for corporations to direct two percent of their profits to CDFIs and minority-owned banks. Smith shared this bold call to action for corporations during Opportunity Finance Network’s Small Business Finance Forum in June.
The case for investing in minority-owned financial institutions is one backed by data. The FDIC released a report this year on the structure, performance, and social impact of Minority Depository Institutions (MDI). The report found that MDI banks owned and led by people of color originate mortgages and small business loans in low-income and minority communities at higher rates than institutions that are not owned or led by people of color. MDIs also locate branches in low-income and communities of color at much higher rates than majority-owned financial institutions.
The nation’s wealth gap is the direct result of its historic institutional racism. A look at a map of the U.S. where the slave concentration was the greatest during the Civil War shows considerable overlap of where persistent poverty is highest, educational and health outcomes are the lowest, and bank access is the least. For instance, fourteen percent of Black households had no bank accounts in 2019, according to the FDIC. That figure compared to only three percent of White households.
Across the country corporations and individuals are grappling with how best to meaningfully respond to structural inequity in the economy.
The Netflix partnership with HOPE illustrates how actors of influence in the private sector and CDFIs, particularly those owned and led by people of color, can work together to change the conditions that make the work of CDFIs so necessary in the first place.