Citi devotes over $1 billion to close racial wealth gap
5th October 2020 · 0 Comments
By Fritz Esker
Contributing Writer
Last month, the Citi Foundation announced they would spend more than $1 billion in strategic initiatives to close the racial wealth gap and increase American economic mobility.
The multinational investment bank’s initiatives, titled “Action for Racial Equity,” aim to provide greater access to banking and credit in communities of color, increase investment in African American-owned businesses, expand homeownership among African Americans, and advance anti-racist practices in the financial services industry.
This announcement comes on the heels of Citi publishing a report, titled “Closing the Racial Inequality Gaps,” that stated if the United States closed key gaps for African Americans in wages, housing, education, and investment 20 years ago, $16 trillion could have been added to the U.S. economy by now. Eliminating those gaps now could add $5 trillion to the U.S. gross domestic product over the next five years.
“Addressing racism and closing the racial wealth gap is the most critical challenge we face in creating a fair and inclusive society and we know that more of the same won’t do,” said Citi CEO Michael Corbat in a press release. “This is a moment to stand up and be counted, and Citi is committed to leading the way and investing in communities of color to build wealth and strong financial futures.”
The Citi Foundation said they would commit $550 million to support homeownership for people of color and affordable housing by minority developers, as well as $350 million in procurement opportunities for African American-owned business suppliers. There would also be $50 million in additional impact investing capital for African-American entrepreneurs, $100 million to support Minority Depository Institutions’ (MDI) growth and revenue generation, and $100 million in Citi Foundation grants to support community change agents addressing racial equity.
On their website, Citi went into great detail about why these steps were important. They cited a 2017 study from the Federal Reserve stating that African-American business owners are the most likely to apply for bank financing, but get turned down at twice the rate of white business owners. A report from RateMyInvestor.com said African Americans only receive one percent of venture capital funding for startups.
To fight this, Citi will add $50 million to its Citi Impact Fund to support African-American-owned businesses. Citi launched the fund in January with $150 million in capital for businesses developing solutions to social and environmental challenges. Citi will also launch a new program called Citi Start CreditSM to assist underserved entrepreneurs in increasing their credit scores, and thus access more affordable lines of credit.
Homeownership is an important way to build wealth and equity. But according to a study by the Urban Institute, African-American home ownership is at its lowest level since the 1960s. Citi vowed to increase access to its mortgage products and services among minority borrowers in low and moderate income neighborhoods. Citi will also provide $200 million of equity and preferential financing through Citi Community Capital to affordable and workforce housing projects by minority developers.
Citi also plans to expand banking and access to credit in communities of color by providing MDIs with up to $50 million in growth capital to aid their capacity to serve racially diverse households and businesses. They will also provide pro-bono technical assistance and training to MDIs. In addition to this, they will create the Citi ATM Community Network to remove out-of-network fees at Citibank ATMs for customers of participating minority-owned banks and community development credit unions.
Lastly, Citi said they will strengthen their own policies and practices to become a more anti-racist institution. Steps they will take to ensure this include creating inclusive software design to eliminate bias and establishing guidelines that increase representation of people of color on Citi’s accounts and leadership teams.
“Citi is going beyond talking about discrimination by implementing concrete strategies to address longstanding inequities in communities of color,” said Kristen Clarke, president and executive director of the Lawyers’ Committee for Civil Rights Under Law. “Citi is charting a course that we hope will be replicated throughout the sector.”
Citi’s CFO, Mark Mason, is one of the industry’s most senior African-American executives. He echoed Clarke’s sentiments that the industry needs to move beyond simply talking about diversion and inclusivity.
“We are in the midst of a national reckoning on race, and words are not enough,” Mason said. “We need awareness, education, and action that drive results.”
This article originally published in the October 5, 2020 print edition of The Louisiana Weekly newspaper.
