NCPA - National Center for Policy Analysis

Shoring Up Minority- and Women-Owned Businesses

April 14, 2003

The United States experienced unprecedented growth during the 1990s. Economic expansion, entrepreneurship and innovation underlay much of this growth, while technological innovations helped generate new products and processes, and financial innovations helped broaden access to capital among entrepreneurs.

Unfortunately smaller firms in urban areas, usually minority- and women-owned, did not have the same access to capital. Consequently, these businesses were unable to expand as fast as the rest of the economy.

According to the Milken Institute, resolving this capital gap is critical to the economic health of the nation. They recommend several models for overcoming this obstacle, including:

  • Creating a data network to supply lenders with information about small businesses.
  • Offering lenders a path to liquidity in order to reduce their risk in issuing credit and free them to extend additional loans.
  • Link institutions, investors, entrepreneurs, community development financing organizations and policymakers to work on issues such as financial innovation and community development finance.
  • Increase information sharing, leverage expertise, reduce risk and match funders and businesses more appropriately.

Source: Glenn Yago, Betsy Zeidman and Bill Schmidt, "Creating Capital, Jobs and Wealth in Emerging Domestic Markets: Financial Technology Transfer to Low-Income Communities," Research Report, January 2003, Milken Institute.

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