Minority-owned firms far surpassed the growth of all U.S. businesses, increasing 17 percent annually in the decade 1987 to 1997. This is six times faster than the annual growth rate of 3 percent for all businesses during that same decade, up from double the rate of all firms as of 1992 as noted in last year’s report2 (see Figure 1). Asian-owned firms increased in number by 18 percent per year. Latino-owned firms increased 23 percent per year, and black-owned firms increased 11 percent per year.
If viewed from the vantage point of sales, the results are similar. Sales across all firms rose 13 percent per year while they rose 34 percent for minority-owned firms during the same time period – more than twice the national average. For Asian-owned firms, sales rose 42 percent per year and for Latino-owned firms, sales rose 46 percent per year. For black-owned firms, sales rose 11 percent per year.
Despite this burgeoning growth, minority business owners are still underrepresented when compared to all businesses. While minority businesses are growing faster than majority firms in number and revenue, they remain severely constrained by a lack of access to capital. The largest disparity occurs in the African A m e r i c a n population. Blacks comprise 12.5 percent of the U.S. population, but own just 3.6 percent of all businesses. The Latino ownership is similar, comprising almost 11 percent of the population, but owning just 4.5 percent of all businesses.
Federal Reserve Board of Governors Chairman Alan Greenspan says, “I have no illusions that the task of breaking down barriers that have produced disparities in income and wealth will be simple. It remains an important goal because societies cannot thrive if significant segments perceive their functioning as unjust.” California State Treasurer Philip Angelides concurs, saying that “the very essence of the American and California dreams has been and remains equality of opportunity.” It has become increasingly evident that this is not simply a minority issue but an american issue. Absent broad-based, institutional investor participation in the minority and immigrant business communities – soon to be the new majority of businesses continued growth in the American economy is impossible, affecting not just minority businesses, but putting the nation’s macroeconomy as a whole at risk. Likewise, necessary yields will not be sustainable to support future pension, health and other liabilities if asset managers fail to invest in this new asset class.
The difficulty is augmented by federal policy that expects banks to lend widely while imposing rules that restrict lending to e n t re p reneurs. Federal subsidies focus on location rather than business owners. $9 billion per year is targeted at inner-cities, but only 9 percent of that is directed to capital structure development.
Clearly work remains to be done in order to create an environment that promotes economic equality for business ownership in this country. In our last report, we recommended a strategy for increasing economic participation in business ownership by increasing the total amount of credit available to minority businesses and increasing equity investments for early-stage financing.8 We continue to support these goals and expand them by calling for: 1) re s e a rch and modifications of financial technologies that will increase liquidity and access to capital, and 2) advocacy of private-public venture s stimulating increased investment in these emerging domestic markets.
