How Goldman Sachs are Fighting against Systemic Barriers to Funding, and how this is Helping the UN’s SDGs

Early last month Goldman Sachs released a survey looking at the systematic barriers that small black business owners are facing across the US. This survey highlighted the unique challenges that black business owners face, detailing that 37% of black business owners find it difficult to access new capital or funding, in comparison to 23% of overall small business owners. They also noted that 45% of black small business owners have had to use their personal savings in the last 3 months to keep their business afloat, in contrast to 33% of overall small business owners (Goldman Sachs, 2023). It appears that the figures for all small business owners also includes black small business owners, it is likely that this has skewed the statistics and the gap between the two is actually much larger. This report was done in conjunction with Goldman Sachs 10,000 small business voices.

How is Goldman Sachs Breaking Systemic Barriers to Funding?

A report by Goldman Sachs (2022), discussed how “entrepreneurship equalizes”, but the road for entrepreneurship is far from equal. They noted that black women are 24 times less likely to own a business than their white male counterparts. Although, there is quite a high proportion of discrepancies between the income and educational backgrounds between black and white owned businesses, the lack of access to capital, personal finance and financial information is the most significant barrier for black female business owners (Goldman Sachs, 2022). This is particularly evident when you see that black start-ups are 20% less likely to receive bank business loans then their white counterparts and black women entrepreneurs receive less than 0.3% all of capital venture funding (Goldman Sachs, 2021). An empirical study in 2020 also noted that female entrepreneurs were often discriminated against by banks and stereotyped to be more risk-adverse while also suffering higher interest rates than their male counterparts. They also observed a distinct difference between the treatment of white and black entrepreneurs, stating that white entrepreneurs receive better treatment from banks (Giglio, 2020). 

Goldman Sachs launched a new philanthropic initiative, One Million Black Women in an attempt to bridge this gap. This is a free service which teaches black female business owners how to hire the right employees, price their products and services, and understand their finances among a host of other things (Goldman Sachs, 2022).

Goldman have also implanted investment strategy focusing on the following:

• Creating access to capital for black female entrepreneurs
• Financing workforce development to help with career development and in turn higher wages
• Financing both the conservation and creation of suitable affordable housing 
• Access to affordable, quality early childhood and secondary education
•  Financing Federally Qualified Healthcare Centres and hospitals 
•  Increasing the access to affordable internet
• Providing free financial education 

(Goldman Sachs, 2021)

What Effect Does This Have on the UN's SDGs?

An article published by The New York Times this week, noted that currently 10.5% of American are living in poverty a measly 2.1% decrease in 49 years, with black Americans facing the brunt of this epidemic (Desmond, 2023). To put this into perspective, in 2019 the UN stated that the global poverty rate was 8.3%, which was a 1.8% decrease in 3 years (United Nations, 2022) it is evident from these statistics alone that the US government are not putting the right policies in place to help end poverty in the US.

Income inequality is also still rife in the US, with a report by Goldman Sachs (2021), stating that black women earn 85c to the $1 in comparison to white women and 65c to the $1 in comparison to white men for the same job (Goldman Sachs, 2021). This is even starker when you compare it to income inequality in the UK where black women earn 98p to the pound on white women and 80p to the pound on white men (Office of National Statistics, 2019).

Reducing this wealth gap has the potential to increase jobs in the US by 1.2-1.7 million and increase GDP by $300-450 billion (Goldman Sachs, 2021). Unemployment is a core factor in influencing poverty levels, labour is quite often the only asset a person has to improve their wellbeing (United Nations, 2007). The creation of productive employment is key to the UN’s SDG of ending poverty everywhere. Furthering this in a study conducted by the World Bank (2003) stated that with each 10% increase in economic growth a country will have a 25.9% decrease in their population living in poverty (Adams, 2003).

It is clear that black people and black women in particular are the most effected by systemic barriers to education and wealth creation. While also facing repeated labour market discrimination, forcing them into less advantageous jobs, resulting in less job security, less wages and less retirement benefits (Hanks, et al., 2018). This programme by Goldman and Sachs is a great step in the right direction to help reduce these systemic barriers and I hope to see other investment banks following suit in the long walk to equality. 

Reference List

Adams, R., 2003. Publication: Economic Growth, Inequality, and Poverty : Findings from a New Data Set, s.l.: The World Bank.

Desmond, M., 2023. Why Poverty Persists in America. The New York Times , 9 March.

Goldman Sachs, 2020. Goldman Sachs Announces New Commitment to Support Small Business. [Online]
Available at: https://www.goldmansachs.com/media-relations/press-releases/current/announcement-15-dec-2020.html
[Accessed 10 March 2023].

Giglio, F., 2020. Access to Credit and Women Entrepreneurs: A Systematic Literature Review. European Research Studies Journal, 23(4), pp. 312-335.

Goldman Sachs, 2021. Black Womenomics: Investing in the Underinvested, New York: Goldman Sachs Research.

Goldman Sachs, 2022. Black Womenomics: Equalizing Entrepreneurship, New York: Goldman Sachs Research.

Goldman Sachs, 2022. Why One Million Black Women: Black in Business?. [Online]
Available at: https://www.goldmansachs.com/our-commitments/sustainability/one-million-black-women/black-in-business/
[Accessed 10 March 2023].

Goldman Sachs, 2023. Survey: Black Small Business Owners are Optimistic About Hiring and Profit Outlook in 2023 While Facing Continued Systemic Barriers to Capital and Financing. [Online]
Available at: https://www.goldmansachs.com/citizenship/10000-small-businesses/US/infographics/february-06-2023/index.html
[Accessed 10 March 2023].

Hanks, A., Solomon, D. & Weller, C. E., 2018. Systematic Inequality; How America's Structural Racism Helped Create the Black-White Wealth Gap, s.l.: Centre for American Progress .

Office of National Statistics, 2019. Ethnicity pay gaps in Great Britain: 2018. [Online]
Available at: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/ethnicitypaygapsingreatbritain/2018#quality-and-methodology
[Accessed 10 March 2023].

United Nations , 2007. Employment and Decent Work. [Online]
Available at: https://www.un.org/development/desa/socialperspectiveondevelopment/issues/employment-and-decent-work.html#:~:text=Unemployment%20and%20underemployment%20lies%20at,sustainable%20economic%20and%20social%20development.
[Accessed 10 March 2023].

United Nations, 2022. Goal 1: End poverty in all its forms everywhere. [Online]
Available at: https://www.un.org/sustainabledevelopment/poverty/
[Accessed 10 March 2023].