The banks with the largest market share in California remain reluctant to contract with businesses owned by minorities and/or women. That’s the sober assessment from a new report issued by the Greenlining Institute, a Bay Area financial advocacy group focusing on eliminating economic barriers to minority-owned businesses.
In its report, “Supplier Diversity: Banks Still Struggle to Contract with Diverse Businesses,” the organization found that in 2014 the top banks did just 4.42 percent of their contracting with minority-owned businesses, and only 2.83 percent with businesses owned by women. They contrasted these findings with a number of California’s utilities and telecommunications companies who, on a regular basis, do in excess of one quarter of their contracting with minority business enterprises.
“While we applaud these banks for being willing to share their contracting data with us, it’s clear they have a long a way to go,” said Danielle Beavers, director of diversity and inclusion at Greenlining Institute. Beavers cited the “old boy’s network” among many financial institutions as rationale for such lack of faith in minority- and women-owned firms.
“We know from the experience of utility and telecom companies that qualified contractors are out there, but making use of them requires a conscious effort by the companies and a push from regulators,” Beavers said. “In banking, there are a combination of factors for such limited contracting with minority businesses. We still see the tradition of exclusion among this segment of business owners.”
Beavers explained that while supplier-diversity programs have been in place for many years, financial institutions must place a priority on implementing policies that will financially benefit minority businesses.
Key findings within the report indicate:
• Overall diverse contracting was low across all banks. East West Bank spent the most with minority and women business enterprises at 14.29 percent combined; Wells Fargo spent the least at 5.71 percent;
• Compared to national figures, procurement with California’s minority businesses reflected more with the state’s demographics but it remained low. African American business enterprises received 1.08 percent; Latino business enterprises secured 2.16 percent, and Native Indian businesses enterprises obtained 0.06 percent;
• Multi-year analysis revealed trends based on banks’ size and the ethnicity and gender of the diverse business owner. Small banks tended to increase supplier diversity, while larger financial institutions continued to struggle with minority lending;
• California’s largest financial institution, Bank of America, spent the most money with minority-owned business, accounting for nearly 40 percent of bank procurement with minority-owned firms. However, this figure accounted for only 4.46 percent of the bank’s total procurement spending.
This finding was similar to other large banks like Wells Fargo, JPMorgan Chase, and Citibank, whose national spending among minority- and women-owned businesses ranged from 3.32 percent to 5.32 percent.
“Diverse businesses serve as the economic engines of their communities,” Beavers continued, “and we know they can provide top-quality goods and services. Banks should recognize the value they miss when they fail to seek out diverse contractors, and regulators should look to replicate California’s success at promoting supplier diversity in the telecommunications and energy industries.”