Op-ed: Pacific Community Ventures President and CEO Bulbul Gupta explains how a new strategy that bases CDFI on experimentation and research can democratize funds and restore equity in our communities.
For many parents, child care has defined the last two years. Working parents have struggled to afford adequate care while daycare owners have struggled to stay open and daycare workers have pleaded for the pay they deserve. La Plazita Preschool in Oakland is a true Spanish immersion preschool where children learn or retain Spanish while preparing for kindergarten. In the years leading up to COVID-19, La Plazita’s first location quickly became a success, and owner Krystell Guzman was eager for guidance when it was time to expand to a second location with a focus. more direct community in Fruitvale. Pacific Community Ventures (PCV), the CDFI I run, provided advice through our Pro Bono Business Advising program, and Guzman eventually opened two more sites, employing 38 people. In keeping with our motto, “Good Jobs, Good Business,” Guzman provides health care and retirement benefits to all of its employees.
There are hundreds of stories like Guzman’s, and while banks often say “no”, at PCV we try to come from a place of “yes”. In November 2021, we launched our Oakland Restorative Loan Fund as part of our new capital decolonization strategy. We have allocated $2.5 million in no-cost, interest-free loans to BIPOC and AAPI-owned small business owners in specific Oakland neighborhoods. Krystell Guzman applied for a loan from the Oakland Restorative Loan Fund and received it in January. During a difficult 2020, in which many parents chose to keep their children at home, La Plazita had closed for two months and when it reopened, only five percent of children returned immediately. Guzman told us she intended to use her loan to stabilize her business.
Now that her preschools are filling up again, she is using the loan “to continue to expand the schools, maintain the jobs we have and provide better wages for our employees.” As a working mom myself, I support parents and staff who need preschools to succeed in their communities for their economic well-being, especially as the lack of affordable child care has led to a sharp decline in the number of women in the workplace during the pandemic.
We created this zero rate fund because small business owners in our community told us it was what they needed. However, when we launched it, we heard surprising reactions from some investors and community funders who accused us of distorting the market with this “free money”. To them, small business owners like Guzman represented “acceptable losses” in an economic downturn, unless they could afford capital “at market rates.” We refused to accept this loss.
CDFIs like us were created out of the civil rights movement with the goal of bringing capital to low-income and communities of color, and PCV was one of America’s first impact investors. Supporting Black, Indigenous, Latinx, and AAPI entrepreneurs is an integral part of PCV’s mission to create a just economy and good jobs with dignity. People of color start more businesses each year than anyone else, and in 2021 communities of color saw the biggest increase in new businesses in decades. Black and Latina women, in particular, have become the new face of entrepreneurship in the United States. Women of color make up 89% of new businesses opened every day, but nearly 75% of women of color say their biggest barrier to growth is a lack of capital. In 2021, only 13% of black business owners and 20% of Latinx business owners got the loans they applied for, and less than 1% of venture capital dollars went to black founders.
Two aspects differentiate impact investing from traditional investing: 1) Intent – Design your investment to have an impact on the social or environmental problem you seek to solve; and 2) Measure – Make sure your investment achieves this goal over time. PCV embraces these principles to decolonize, democratize, and restore access to equitable and affordable capital and mentorship.
In 2020 and again in 2021, we doubled the size of our small business loan portfolio. We have deployed more than 91% of our capital to entrepreneurs of color and women across the state of California, 88% of which has been invested in economically challenged communities. Assessing our loan portfolio in the first year of the COVID-19 crisis clarified that we had barely 1% write-offs (less than the average loan loss rate of 1.3% for banks US in 2020), further dismantling the perception of entrepreneurs of color, or low-income communities as “at risk” in the financial sector. We build community by dismantling the long-standing rules and constructs in the financial industry that keep too many people out, and design them by, with, and for the communities we serve.
While our small business lending and advisory programs will continue to connect entrepreneurs to expertise and restorative capital, the Good Jobs Innovation Lab will establish a regular process of research and experimentation to ensure our programs grow. with and actively impact the changing needs of our communities, empowering workers alongside business owners.
For CDFIs to manifest the stated intentions of civil rights leaders to serve both racial and economic justice, we cannot be separated from each other. We must work together to create lasting systemic change, impactful thought leadership and transformative policy. Decolonize Capital Works – and this is how we begin.
Bulbul Gupta is President and CEO of Pacific Community Ventures (PCV). She has worked on and off Capitol Hill, in the U.S. government, and in economic development, impact investing, entrepreneurship, and job creation for most of her career, as well as an advisor policy in the last two presidential campaigns on inclusive entrepreneurship and racial discrimination. equity. PCV is a California-based CDFI for small businesses and operates a nationwide pro bono mentoring platform called www.businessadvising.org for underinvested entrepreneurs, provided through a partnership with other CDFIs, as well an impact investment research and advisory practice that works with CDFIs across the country.