Building a more inclusive post-COVID economy: A chat between Bill Clinton and Ajay Banga
October 21, 2020 | By Maggie Sieger
By now, it has become abundantly clear that the global coronavirus pandemic has exacerbated preexisting inequalities in society, and the economic and health consequences of COVID-19 are falling on individuals and communities least able to bear the burden. Black, Latino and Native American cases and deaths from COVID-19 are significantly higher than their share of the national population, and estimates show approximately 40% of the 1 million Black-owned businesses in America have closed, with more struggling to access needed credit.
“You can't build a truly inclusive democracy and society without an inclusive economy,” former President Bill Clinton said Tuesday during a virtual fireside chat with Mastercard CEO Ajay Banga. “America cannot succeed unless all our people have the same opportunities to do so.”
The conversation kicked off the Building an Inclusive Recovery four-part virtual series in partnership with The Mastercard Center for Inclusive Growth and the Clinton Foundation. The event, designed as an opportunity to shine a spotlight on the challenges and solutions being deployed to rebuild a more inclusive and sustainable economy, included a panel discussion with leaders committed to inclusive growth, such as Birmingham Mayor Randall Woodfin; Wole C. Coaxum, the founder and chief executive officer of Mobility Capital Finance; and Andrea Jung, the president and chief executive officer of Grameen America.
A key topic of discussion was the fact that Black and minority-owned businesses have faced disproportionate hardship during the pandemic. Not only are COVID-19 cases higher in predominantly Black and Latino areas, but minority business owners have had more trouble accessing capital — historically from commercial banks and now from the federal government’s Paycheck Protection Program — than white business owners. For example, the number of Black business owners dropped 41% from February to April 2020, while the number of white business owners fell by just 17%.
The extent to which these small businesses had been able to embrace the digital economy pre-COVID made all the difference. “When the crisis first hit, 60% of small businesses were not using electronic payments, meaning six out of 10 were basically closed in the March-April, period,” Banga said. “Estimates are somewhere about a quarter of [closed] businesses may not reopen at all. And the impact is much higher on businesses owned by women and minorities.”
Bringing small businesses into the digital economy will help them weather the economic uncertainty. “Relatively small investments on things like expanding access to basic affordable banking, the ability to finance home ownership, or the startup capital for small businesses can have an outsize impact on people's lives and on the economy as a whole,” Clinton said. “You can't build a truly inclusive democracy and society without an inclusive economy.”
Mastercard is leading the way on private sector efforts to rebuild a more inclusive and sustainable economy. Earlier this year, the company committed to connect one billion people and 50 million small and medium-sized businesses worldwide to the digital economy by 2025, with a direct focus on 25 million women entrepreneurs.
Economic inclusion also requires a rethink of what it means to be creditworthy so that minority-owned small businesses can more easily access capital, Banga said. “The vendor on our street in Manhattan,” he offered as an example, “probably has a $2,000-a-day revenue from selling hot dogs, but all in cash, nobody will give (the owner) a loan. But if you were able to underwrite that transaction flow, you'd be able to lend that person money to open a second stand, or maybe a third one, and employ more people.”
Getting micro and small businesses online requires specific tools and knowledge that many owners don’t have. “So, you've got to help them get the tools to be able to go online for their business, find a way to get paid and find a way to fight fraud,” Banga said. “And you've got to get them the advice to do all that.”
Having identified the challenges posed to an inclusive recovery, the most important thing now, Clinton argued, was to do something about it.
“None of what we discuss today will amount to a hill of beans, of course, if we don't back it up with action,” he said. “So, I hope everyone will think of specific ways you and your organizations can make a real difference and partner with others to increase your impact.”
Financial inclusion means digital inclusion
- Building a more inclusive post-COVID economy