Mobilising Impact Finance for BIPOC Entrepreneurs

Mobilising Impact Finance for BIPOC Entrepreneurs

Bold experimentation, active listening, and continual learning are key ingredients to achieving extraordinary outcomes; of equal importance is finding ways to sit comfortably with the tension between structure and emergence.

Nowhere has this been more pertinent than in our work with the Inclusive Capital Collective, a US network of BIPOC (Black, Indigenous and People of Colour) owned and led independent loan, equity and real estate funds, and entrepreneur support organisations that are collectively working to overcome systemic racism through equitable access to capital.

The Challenge

How do we create an ecosystem for mobilising impact finance towards underserved entrepreneurs?

The Outcome

(Ongoing) A novel, cooperatively owned and governed financial institution that stewards catalytic capital products, shifts the narrative to make finance truly inclusive, and advocates for the interests of its members.

The Story

The Inclusive Capital Collective was born out of a question:

“There is an abundance of people working to address racial inequity in US capital markets; what are their shared challenges, and how might they work better together to overcome them?’’

Those seeking to address these structural and systemic inequities are uncomfortably aware of the scope and the scale of the challenges. Yet while they are actively working to address them, they frequently lack the money and mandate to do much more than service the most urgent needs of their stakeholders. As a result of a clear commonality of experience, cross-sectoral connection is strong. It is, however, largely informal, and in the absence of resources and mechanisms to support formal cooperation, the intrinsic power of the collective cannot be actualised.

So when we brought together a diverse group in the fall of 2019 and asked this question, their answers highlighted 3 major challenges that were hindering progress:

  • Difficulty attracting capital to BIPOC owned and led investment funds, real estate projects and entrepreneur support organisations;

  • Absence of affordable legal, operational, and technical resources to streamline and scale their operations; and

  • Lack of shared infrastructure for educating investors, policy makers and entrepreneurs about the realities of the risks and rewards in mobilising more capital to underserved communities.

Out of that initial convening was born the idea for a national network by and for BIPOC capital entrepreneurs. The goal of this network was to collectively respond to the challenges mentioned above, using a pioneering infrastructure that would make deploying financial capital and support to and between BIPOC led funds and entrepreneur support organisations considerably faster and easier.

The journey

The journey of coming together, however, was not a simple one. The planning period for the ICC coincided with the emergence of the Black Lives Matter movement — a major racial reckoning in the USA after the murder of George Floyd — as well as with the outbreak of the global COVID-19 pandemic and the ensuing economic meltdown. Those forming the core of the Inclusive Capital Collective were amongst those most impacted by these events, and despite their long history of working on systemic issues, they effectively became frontline responders for their communities. This required us to balance a structured facilitation framework - working to a timeline and an agreed set of outcomes - with the need to provide space for participants who were now working from home, with their children off school, during a period of significant social upheaval.

Any systems change that is oriented towards social, environmental and economic justice, inevitably finds itself having to balance the at-times opposing forces of structure and emergence.

Our initial project completed with the development of an organisational strategy, and the instantiation of an advisory committee to shepherd the ICC towards becoming an independent, cooperatively owned and governed entity.

The work today

While racial economic inequity is not a new problem in the USA (nor anywhere else in the post-colonial world), America’s long-overdue racial reckoning was producing acute and immediate impacts in the communities ICC members were serving. Subsequently, in the brief window between when our initial work concluded, and Zebras Unite’s hiring of an ICC program manager , the advisory committee had disbanded, being called to address the most urgent needs of their individual constituents and communities.

Subsequently, the ICC was established as an incubated program of Zebras Unite, and our role transitioned from systems design to infrastructure design, with the needs of the ICC both informing and being informed by the infrastructure needs of its parent organisation (as well as those of our other partners).

This work is ongoing, with the ICC preparing to use this shared digital infrastructure, in combination with the development of a number of unique capital products and services, to provide community fund operators and entrepreneur support organisations with the following key benefits:

  • development of a shared loan loss reserve to de-risk funding of ICC members, thus increasing their available capital to deploy

  • shared (and possibly co-created) technical assistance products and services to increase the speed with entrepreneurs can submit viable loan applications

  • shared due diligence between ICC members, in order to accelerate loan approvals

  • adaptation of a character-based lending program that recognises that traditional loan-worthiness criteria such as credit scores and collateral, are inappropriate in a context where borrowers may be deficient in both, yet still have a strong business and capacity to meet loan payments

Additionally, there is emerging demand for Armillaria to lead the development of a deal standard (that would standardise the core data objects associated with a deal, regardless of whether its for a grant, loan or investment), that would dramatically increase the speed with which a deal could move from one organisation to another (in compliance with regulatory and privacy laws, of course!).

The Inclusive Capital Collective is where Armillaria developed and prototyped the Community Capital Collective process by which we engineer context or community-centric systemic interventions into impact finance.

Find out more about our approach to community capital here.

Thank you to the wonderful photographers who created the images on this page. In order of appearance from top to bottom: