Giving Compass' Take:

• The Annie E. Casey Foundation is committed to investing in opportunities that will strengthen entrepreneurs of color and build community and family wealth. 

• There is a sizeable racial wealth divide present in our society and investing in entrepreneurship is one avenue to address this gap. What more can donors be doing for communities of color?

• Read about the lending practices that leave entrepreneurs of color on the starting block.

Poverty stands in the way of far too many children in the United States, particularly kids of color.

As part of the Annie E. Casey Foundation’s commitment to ensuring that all kids have the opportunity to succeed and thrive, we intentionally pursue strategies to address the racial inequities that continually undermine child and family well-being. This commitment extends to our social (or mission or impact) investing: We seek to leverage our endowment for larger-scale impact. We, like several contributors in this series, see the value of entrepreneurship as a path to economic opportunity and wealth for communities of color—particularly in the South, where kids and families consistently fare worse than in other regions.

Creating and owning a business is a well-established way to achieve financial stability. Enterprises with fewer than five employees represent more than 90 percent of businesses in the United States and drive about 30 percent of private-sector employment. Businesses are also an asset that can pass from one generation to another.

These facts become even more pertinent when we consider the nation’s persistent and gaping racial wealth divide. In 2013, the median net worth, or wealth, of white families was more than 10 times that of black or Hispanic families.

Research suggests that investing in entrepreneurship can help close these gaps. Black entrepreneurs have 12 times more net worth than their peers who work for an employer, and their donations of time, money, and services to their communities further strengthen their neighborhoods.

In all this work, we never lose sight of our goal: enabling families to support their kids and achieve financial stability. The stronger families are, the stronger their communities can and will be. Entrepreneurship can help build individual and community wealth, but only if we are intentional in our efforts.

Read the full article about creating opportunities for communities of color through entrepreneurship by Lisa M. Hamilton at Stanford Social Innovation Review.