“The problems of racial injustice and economic injustice cannot be solved without a radical redistribution of political and economic power.” ~ Dr. Martin Luther King, Jr.
The 2% Solution grew from the idea that lasting, generational change is possible only through a major investment by U.S. companies in economic justice and development for Black communities.
Inequitable access to capital has impeded the ability of Black entrepreneurs to maintain positive cash flow and cover operating costs in their businesses, explains Robert F. Smith, Founder, Chairman and CEO of Vista Equity Partners.
A key factor in this disparity is the lack of major financial institutions in Black communities.
“Only 53% of Black households are properly banked, compared to 80% of white households.”
As a result, Black business owners often rely on Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) for support. However, these institutions are also often underfunded and lack modernized and digital systems.
Supporting CDFIs and MDIs is one of the key pillars of the 2 Percent Solution. By investing capital in these institutions, we’re also investing in Black entrepreneurs and businesses.
The 2 Percent Solution asks U.S. companies to invest 2% of their annual profits over the next 10 years into communities where systematic inequities have hindered progress, says Smith. These investments aren’t acts of charity. They are reparative, enabling lasting generational change and bringing economic justice for Black communities.
“I think that [The 2% Solution] will show Americans there is hope, there is an opportunity for the American dream to now be revitalized. And frankly, to give us all confidence that we can actually make this a better country and a better place to live.” ~ Robert F. Smith, Forbes 400 Summit on Philanthropy
The 2% Solution has the ability to make lasting change in Black communities with a focus on four main pillars of action where an investment’s impact would be long-lasting and broadly felt within the Black community. These main pillars are:
- Supporting CDFIs & MDIs
- Healthcare
- Education
- Technology and the Digital Divide
The 2% Solution will benefit all Americans. A 2019 McKinsey Global Institute analysis found that eliminating the racial wealth gap would generate $1.5 trillion in GDP, and we can use The 2% Solution to help close the gap between Black and white households.
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