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Racial Equity Knowledge Center

Raising awareness about funding for racial equity efforts.

The Racial Wealth Gap: Narrowing the Racial Wealth Gap Through Business Ownership

by Jenna Liang; Joyce Klein

Nov 2, 2015

The growing racial and ethnic wealth gap presents a challenge for funders striving to build assets and tackle inequality in the United States. One of the key reasons for the racial wealth gap is that African-American and Latino households hold lower levels of business and financial assets. This is one of the key reasons for the racial wealth gap, so it stands to reason that business ownership may be an important means to narrow the gap. However, people of color have historically been challenged to secure the resources -- such as capital, education, and experience, as well as access to markets -- needed to start and grow businesses. Micro- and small-business development strategies and programs have traditionally sought to engage underserved racial and ethnic groups as a means to opening opportunities for entrepreneurship. This paper examines the available research on business ownership, its connection to wealth creation for diverse populations, and identifies proven tools and strategies funders can employ to strengthen the access to and effectiveness of business ownership as a means to build wealth and reduce the racial and ethnic wealth gap.