Government (federal or state) in the United States, along with most venture capital firms, tend to favor the flow of investment funds to capital-intensive projects undertaken by large firms. Even the federal Small Business Administration (SBA) tends to target entrepreneur projects that, while they meet the official definition of ôsmall business,ö are far above the level of activity that the great majority of the residents of economically deprived communities could be expected to pursue. Thus, most would be entrepreneurs in economically deprived communities tend to be forced to seek credit from the informal financial markets, to rely on self-financing, or to seek financing from family and friends. As a consequence, most would-be entrepreneurs in economically deprived communities find themselves in a position wherein they realistically have no sources of capital.
Although studies have found that financial assistance to truly small businesses located in economically deprived communities yields highly positive results, the emphasis remains, for the most part, on larger enterprises. Further, most residents of economically deprived areas in the United States are members of ethnic and racial minority population groups.
The South Shore Bank located on ChicagoÆs south side serves a predominately African American clientele in a way that meets clientÆs needs and expectations while earning an acceptable return on investment for the bank. South Shore Bank is successful because it is a local bank that depends for its economic life on the economic health of the neighborhood that it serves. An organization such as the South Shore Bank does not need a CRA, and HMDA, or Civil Rights legislation to motivate it. Unfortunately, emulators of the South shore Bank in the United States are few and far between (Grzywinski, 1991).
A research project is proposed to determine the extent to which the failure of American society to adequately...