Building inclusive economies – Brookings

Advancing Sustainable Development Goals through Support for Black Entrepreneurship

Analysis of Current Challenges in Relation to SDG 10 (Reduced Inequalities)

A significant disparity exists in the entrepreneurial landscape, hindering progress toward Sustainable Development Goal 10 (Reduced Inequalities). Black-owned businesses face systemic barriers that limit their contribution to inclusive economic growth.

• Underrepresentation: Black entrepreneurs are notably underrepresented in high-growth economic sectors.
• Capital Disparity: These businesses are consistently undercapitalized relative to their peers, creating a substantial obstacle to scaling and sustainability.
• Institutional Barriers: Traditional financial institutions frequently fail to serve Black entrepreneurs effectively due to:
  • Risk-averse lending practices that disproportionately affect minority owners.
  • Limited cultural competency in understanding diverse market needs.
  • A lack of relationship-based models essential for community trust and engagement.

The Role of Community Institutions in Promoting SDG 8 (Decent Work and Economic Growth)

Community Development Financial Institutions (CDFIs) have emerged as vital intermediaries in fostering economic environments aligned with SDG 8 (Decent Work and Economic Growth). By focusing on mission-driven objectives, these institutions can bridge the financial gap for underserved communities.

• Financial Intermediation: CDFIs provide critical capital access where traditional models have failed, directly supporting business creation and job growth.
• Impact Variability: Despite their potential, the reach, capacity, and overall impact of CDFIs vary widely, indicating a need for strategic enhancement to fully realize their contribution to the SDGs.

Strategic Dialogue to Foster Partnerships for the Goals (SDG 17)

In alignment with SDG 17 (Partnerships for the Goals), a strategic event will be convened to address these challenges and explore collaborative solutions.

1. Convening Body: The Brookings Institution.
2. Date of Event: November 12.
3. Core Objective: To analyze and discuss the role of community-based financial institutions in expanding Black business ownership.
4. Desired Outcomes: To identify pathways for driving greater economic security and well-being across diverse communities, directly contributing to SDG 1 (No Poverty), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).
5. Participation: The event will be accessible both in-person and online, with mechanisms for remote participation to ensure broad stakeholder engagement.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 8: Decent Work and Economic Growth

   The article directly addresses economic growth by focusing on “Black entrepreneurship” and “Black-owned businesses.” It discusses the challenges these businesses face in accessing capital, which is a critical component for business growth, job creation, and overall economic development. The mention of expanding business ownership to “drive greater economic security” is a core theme of SDG 8.

2. SDG 10: Reduced Inequalities

   This is a central theme of the article. The text explicitly highlights the disparities faced by Black entrepreneurs, stating that “Black-owned businesses remain underrepresented… and undercapitalized relative to their peers.” The discussion revolves around reducing economic inequalities based on race by improving access to financial services and promoting business ownership within the Black community.

3. SDG 1: No Poverty

   The article connects the expansion of Black business ownership to achieving “greater economic security and increased well-being.” By empowering entrepreneurs from underrepresented communities to build and grow businesses, the initiative aims to create wealth and reduce poverty, which aligns with the fundamental goal of SDG 1 to end poverty in all its forms.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. SDG 8: Decent Work and Economic Growth

   • Target 8.3: “Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.” The article’s entire focus on supporting “Black entrepreneurship” and overcoming the failure of “traditional financial institutions” to provide capital directly relates to this target. The role of CDFIs as intermediaries is a mechanism to improve access to financial services for these enterprises.
   • Target 8.10: “Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.” The article critiques “traditional financial institutions” for their “risk-averse lending practices” and highlights the potential of “community-based financial institutions” (CDFIs) to fill this gap, which speaks directly to strengthening and diversifying the financial sector to ensure inclusive access.

2. SDG 10: Reduced Inequalities

   • Target 10.2: “By 2030, empower and promote the social, economic and political inclusion of all, irrespective of… race, ethnicity…” The article’s goal of “expanding Black business ownership” to drive economic security “across geography and race” is a clear example of promoting the economic inclusion of a specific racial group that has been historically marginalized.
   • Target 10.3: “Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory… practices…” The article points to systemic barriers like “risk-averse lending practices” and “limited cultural competency” that lead to unequal outcomes for Black entrepreneurs. The discussion around CDFIs is a proposed action to counteract these practices and ensure more equal opportunities.

3. SDG 1: No Poverty

   • Target 1.4: “By 2030, ensure that all men and women, in particular the poor and the vulnerable, have equal rights to economic resources, as well as access to… financial services…” The article’s focus on the undercapitalization of Black-owned businesses and the need for better access to financial resources through institutions like CDFIs directly aligns with ensuring equal rights and access to economic resources for a group identified as vulnerable in this context.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

The article does not mention official SDG indicators, but it implies several metrics that could be used to measure progress:

1. Indicators for SDG 8 Targets

   • Proportion of Black-owned businesses: The goal of “expanding Black business ownership” implies tracking the overall number and proportion of businesses owned by Black individuals.
   • Access to capital for Black-owned businesses: The statement that these businesses are “undercapitalized relative to their peers” suggests an indicator measuring the volume of loans and investment capital flowing to Black entrepreneurs compared to other groups.
   • Representation in high-growth sectors: The observation that Black-owned businesses are “underrepresented in high-growth sectors” points to an indicator tracking the percentage of businesses in these key sectors that are Black-owned.

2. Indicators for SDG 10 Targets

   • Racial gap in business financing: Progress on reducing inequality could be measured by tracking the disparity in loan approval rates and funding amounts between Black entrepreneurs and their peers from traditional financial institutions.
   • Impact of CDFIs: The “reach, capacity, and impact” of CDFIs could be measured by the number of Black-owned businesses they serve and the amount of capital they deploy to these businesses.

3. Indicators for SDG 1 Target

   • Economic security and well-being metrics: The goal to “drive greater economic security and increased well-being” implies tracking indicators such as wealth accumulation, income levels, and job creation within the communities served by these businesses.

4. Summary Table of SDGs, Targets, and Indicators

Source: brookings.edu