By Sabrina Lynch
- Netflix moves 2% of its cash to African-American Lenders
- There are only 21 Black-owned banks in the U.S.
Netflix (NFLX +0.99%) is now the largest company on record to significantly support African American economic development by diverting $100 million into Black-owned banks to help close the racial wealth gap. This wave of support should be a game-changer for this demographic both commercially and personally, as 19% of Black families have either negative wealth or no assets at all. The streaming giant’s initial investment will help cover bridge loans, participation loans and bank deposits available to African-American borrowers across the country.
Why This Matters: African Americans hold only 2.6% of the nation’s wealth although making up 13% of the population. The U.S. is home to approximately 2.5 million Black-owned businesses and if companies invested at least 1% of their profits in underserved communities, amounting to more than $20 billion in cash, the racial wealth gap could close within a decade. The first financial institution to benefit from Netflix’s mission for fiscal equality is Hope Credit Union and the Local Initiatives Support Corporation, a nonprofit that develops underinvested neighborhoods.
If companies invested at least 1% of their profits in underserved communities, amounting to more than $20 billion in cash, the racial wealth gap could close within a decade
Since Netflix’s announced its injection of cash, shares in Carver Bancorp (CARV -4.53%) increased by 173% in New York trading and Broadway Financial’s stock (BYFC -11.25%) gained 83%. This is a much needed boost for the Black economy as these banks typically do not have the amount of deposits that other banks do, thus limiting the amount of lending activity and community investment they can do. Additionally, most Black-owned businesses are usually sole proprietorships earning less than $1 million annual revenue, which means they are not prioritized by large commercial banks such as JPMorgan Chase (JPM -2.17%) or Wells Fargo (WFC -2.08%).
Situational Awareness: This should offer more families a path to an equitable future. If, and when, U.S. companies follow Netflix’s lead, Black communities would be financially empowered to lift themselves out of poverty. Moving forward, the company reiterated a further commitment to steer approximately $5 billion towards underfunded financial organizations that serve Black communities.
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