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California Banks Buy Little from Minority-Owned Businesses, New Study Finds

California’s largest banks buy few goods and services from minority-owned businesses, reports a new study from The Greenlining Institute, released this morning in San Francisco. In a state where people of color make up 60 percent of the population, banks obtained less than eight percent of the goods and services they procured in 2012 from businesses owned by African Americans, Latinos, Asians or Native Americans.

ESCAPING THE OLD BOY NETWORK: The Banking Industry and Supplier Diversity is the first study to ever examine in detail the degree to which banks with the largest California market share contract with diverse-owned businesses.  “Banks are a key engine of our economy, purchasing over $51 billion in goods and services in 2012,” said Greenlining Institute Economic Equity Director Sasha Werblin. “It should not be considered acceptable that their supplier networks so completely fail to reflect the diversity of California.”  Key findings of the report include:

  • Entrepreneurship is essential to the health of communities of color. Minority business enterprises (MBEs) outpaced the growth of their counterparts between 2002 and 2007. When MBEs do business with major institutions like banks, they generate wealth and create jobs in their communities, but these firms still face challenges breaking through “old boy networks” and obtaining contracts.
  • Banks are major purchasers of goods and services, and thus a huge potential engine of economic activity. In 2012, the participating banks in this report spent over $51.05 billion on goods and services.
  • Nationwide, contracting with minority business enterprises was nominal, with median spending at just 5.96 percent of total contract dollars and ranging from 3.46 percent to 8.37 percent. Bank of America was responsible for nearly half of all total dollars spent with MBEs.
  • California MBE contracting was only slightly better, and pales in comparison to the state’s diverse population. The banks’ 7.72 percent median spending with diverse businesses fails to represent a state that is 60 percent people of color. Only five banks currently track state-specific spending in substantial detail, and many with substantial California market share do not.
  • Currently, no uniform standard exists for how to measure banks’ investment in supplier diversity, making “apples to apples” comparisons impossible. The federal Offices of Minority and Women Inclusion should create standard reporting regulations to create transparency and assist the financial sector, advocates and small businesses as they work together to improve opportunities for minority business enterprises.

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