Jul 15, 2020, 4:06 PM ETFireside Chat, Interview

Equality and Equity: A Conversation with Vista Equity's Robert Smith

70% of African-American communities lack a physical branch bank, creating "banking deserts" that limit access to capital.
African-American-owned banks number only 21 out of approximately 5,000 U.S. banks.
Minority Depository Institutions (MDIs) and Community Development Financial Institutions (CDFIs) hold approximately $5 billion in assets, compared to the $20 trillion held by the broader 4,700-bank banking infrastructure.
41% of African-American businesses ceased operations during the pandemic shutdowns, significantly higher than the 22% national average.
Lack of established banking relationships prevented many small businesses from processing Paycheck Protection Program (PPP) loans through the CARES Act.

Robert Smith proposes a "2% Solution" requiring the top 10 U.S. banks to donate 2% of their earnings over the last decade (approx. $970 billion) to fund capital for minority financial institutions.
The initiative aims to drive $300 billion in capital into underserved communities over 10 years to generate an annual GDP uplift of $1 to $1.5 trillion.
Targeted infrastructure investment is projected to take 24 months to fully enable CDFIs and MDIs to process loans at scale.
Minority depository institutions have demonstrated lower default rates on loans compared to FDIC-insured businesses over the last decade.
The plan includes $20 billion in tier-one capital and lending capacity to be deployed over a 10-year period to revitalize these institutions.

A "lender in a box" solution is being developed to provide native cloud-based technology, customer engagement, and back-office capabilities to banks with assets ranging from $25 million to $1 billion.
Current technology gaps prevented smaller CDFIs from processing PPP loans; for example, a Philadelphia CDFI that processed $3 million in loans annually processed $100 million in PPP loans in one week after pairing with a technically enabled partner.
Of the 1,075 existing CDFIs/MDIs, approximately 90% rely on manual or outdated systems requiring modernization to handle high-volume loan processing.
Microsoft, Finastra, and other tech partners are collaborating to deploy these technical solutions to 1,075 institutions within a two-year timeframe.
The initiative advocates for broadband carriers to commit 2% of their $850 billion in recent revenue to eliminate "broadband deserts" in urban and rural areas.

The "InternX" platform currently connects 12,000 African-American, Latinx, and women STEM students with 170 business partners, including AIG, Cisco, and Dell.
640 learning management modules have been created to train both students and corporate mentors on managing virtual internships.
40% of students at Historically Black Colleges and Universities (HBCUs) are currently STEM majors; the 11 primary target HBCUs have a 68% STEM enrollment rate.
HBCUs produce more STEM graduates than all other U.S. colleges combined.
70% of African-American wealth is currently consumed by student debt, a primary driver cited for young people favoring socialist systems over free enterprise.
The upcoming "Student Freedom Initiative" will target HBCU debt relief to facilitate a massive wealth lift in the community.

Immediate actions requested of CEOs include doubling or tripling internship pipelines, hiring mentors for diverse candidates, and utilizing the existing InternX platform.
Failure to address these systemic inequities is projected to cost the free enterprise system significantly more in future instability compared to the current investment required.
The "restore, repair, and regenerate" strategy focuses on eliminating financial, food, and broadband deserts to reintegrate underserved populations into the economy.
Companies can immediately engage via internex.org or direct contact to access the platform's 640 training modules and partner network.