Information and communications technologies could prove to be “game-changers” in transforming the level of financial literacy and personal savings in the African-African community, according to the National Urban League president.
Marc Morial, who heads the 102-year-old civil rights organization, offered this view as part of a wide-ranging talk at a luncheon in New York City on Tuesday hosted by Prudential Financial. Moderated by Maria de la Soledad Teresa O’Brien, a former CNN anchor and special correspondent, the luncheon presentation explored the economic opportunities and challenges facing African-Americans and other minorities, particularly those in underserved communities.
Morial said that greater use of advertising and educational outreach through television, the Internet and social media are needed to raise financial awareness and preparedness within these communities. IT solutions at the point of sale in retail outlets can also be used to promote long-term savings.
Just as, he noted, Walgreen’s debit/credit card terminals now prompt users to donate to the American Cancer Society when making a purchase, the devices might also avail them of the opportunity to contribute to a retirement savings account or annuity before concluding a transaction.
“We have to use the tools of today to communicate [financial-oriented] messages in a clever, exciting and fun way,” he said. “If this subject is truly important, then it will require greater product development, marketing, advertising, social media, education and behavioral modification.”
The need for boosting financial literacy has grown more urgent. Citing the National Urban League’s Equality Index (which compares conditions between whites and blacks in America using multiple variables) Morial said the economic gap has widened since the Great Recession of 2008. He noted the differences are “significant” in terms of unemployment (higher among African-Americans than among whites), income (lower) and net worth (far lower).
“The National Urban League is dedicated to closing these gaps—between African-Americans and whites and between all communities of color,” he said. “The recession increased these economic gaps, not only between blacks and whites, but between all Americans who are at the lower half of the economic spectrum and those at the top 15 to 20 percent.”
The long-term health of the U.S. economic and America’s competitiveness globally, he added, hinges in part on narrowing the economic divide among ethnic groups. One reason: The U.S. will soon no longer have a white majority, as people of color—most notably the Latino population—account for the fastest-growing segments of the population.
Morial said that public and corporate policies are needed to reduce economic inequality, among them initiatives like those of the National Urban League. Some 2.8 million people annually benefit from the organization’s services, including job training, job placement, education and support for small businesses.
This month, he noted, the Urban League launched the first subsidiary in its 103-year history, the Urban Empowerment Fund, a Community Development Financial Institution and small business loan fund. Created to fill a credit shortfall that has disproportionately impacted minority-owned small businesses and those operating in underserved communities since the recession, UEF will provide financing and technical assistance to help small business owners create sustainable companies. Turning to higher education, Morial urged adoption of programs that might lesson the financial burden on students pursuing a university degree. Among them: initiatives to reduce interest rates on student loans or restructure debt obligations.
When questioned about what can be done to promote African-American-owned small businesses that are starved for capital—many minority-run community banks that serve small business have closed or restricted lending since the recession—Morial said that capital reserve requirements imposed on large financial institutions should not be applied to community banks.
He added, however, that community banks cannot stay small if they’re to remain economically sustainable. He pointed to one New Orleans-based African-American bank that now operates successfully with 18 branches in 6 states, having acquired a number of smaller banks in the last decade.
“You have to grow or perish,” he said. “Fortune 500 companies can help community banks realize expansion goals by establishing both depository and co-investing relationships with them. There is a lot that can be done to strengthen small lending institutions that are necessary for the health of the economy.”
Morial added that minority-owned businesses need not depend on banks alone for access to credit. Private equity firms and angel investors also have a role to play in aiding start-ups, particularly those companies with a technology focus.
“Private equity—the community that finances so many small businesses in this country—are missing an emerging market right under their noses,” he said. “Many minority-small businesses are growing faster than Fortune 1000 companies and represent incredible opportunities for private equity firms.”
Morial added that African-American churches, faith-based organizations and non-profits also have a part to play in supporting small businesses and financial literacy initiatives within their communities. The National Urban League has contributed to this effort, though on a smaller scale since the recession, he noted, due to reduced funding from philanthropic organizations.