Steps Toward Ending Grant Programs for Minority-Owned Businesses
Ongoing Backlash Against DEI and Work Capitalism
Major corporations that have supported businesses owned by people of color, including Black and Hispanic entrepreneurs, have recently been discontinuing programs or withdrawing grant funding.
According to the Wall Street Journal (WSJ) on the 9th (local time), the global investment bank UBS recently ended its program that provided grants worth $25,000 to companies led by women of color. PepsiCo, which had been offering $20,000 grants and six months of mentoring to Hispanic startups, removed the requirement that applicants must be Hispanic-owned. TikTok's grant program for Latinx businesses has also been on hold for a year.
WSJ explained, "Various DEI programs expanded following the death of George Floyd in 2020 are being discontinued or restructured," adding, "This suggests that companies are attempting concrete changes beyond merely reviewing their internal diversity policies."
DEI stands for Diversity, Equity, and Inclusion, a social principle that governments, universities, and corporations should pursue racial and gender diversity in hiring and compensation. However, after the U.S. Supreme Court ruled in June last year that affirmative action policies granting preferential treatment to minority races in university admissions and corporate hiring are unconstitutional, minority preference policies in American companies have also been disappearing.
Tynesia Boyea Robinson, founder of investment advisory firm CapEQ, pointed out, "Companies are changing their behavior out of fear of being sued," adding, "Now, anyone who starts a conversation based on race, gender, or gender identity is subject to attack."
If this trend continues, small and medium-sized enterprises (SMEs) facing financial difficulties are expected to be inevitably impacted. According to the SME support platform Skip, more than 40% of over 60 minority-preference SME grant programs were discontinued last year, and 27% no longer include race or ethnicity in their eligibility criteria. Ryder Pierce, CEO of Skip, explained, "About 30% still use race as a support criterion, but most of these are programs with small grant amounts."
Michael Bershaw, director at SME consulting firm Ascend Network, emphasized, "Even after controlling for founders' education level, business experience, and other factors, businesses run by people of color tend to be smaller than those run by white entrepreneurs," adding, "Grants are especially important for entrepreneurs of color." According to data from the Federal Reserve (Fed), only one-third of small businesses owned by Black or Hispanic individuals received the full amount of bank loans or other funding they applied for. More than half of white business owners received their full loan amounts. Additionally, this year, startups led by Black and Latinx founders received less than 1% of U.S. venture capital funding.
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