As a society, we need to solve the problem of economic under-inclusion. It is unacceptable and intolerable that for too long, too many people have had to confront unequal and unfair obstacles to their full participation in the economy. This disadvantages individuals, households and communities and constrains our country’s ability to achieve its full potential.
We regularly discuss this on our “Appetite for Disruption” podcast, perhaps because our brand of disruption is about shaking things up for the better. Our guests’ stories frequently demonstrate how innovation and technology can expand economic and financial opportunities for people to battle under-inclusion and make society more just. Indeed, founders of fintech companies have shared that they’re motivated to apply technology to broaden the availability of bank accounts, loans, investments, payments and other financial services to underserved populations. This is what financial inclusion is about.
The current painful state of things in the U.S. accentuates the longstanding need for durable solutions. Given what we’ve learned speaking with entrepreneurs and innovators, we have two concrete recommendations that can leverage and extend productive initiatives underway in the public, private and academic sectors. The first is to help small businesses get the capital they need to hire, innovate and grow. The second is to close the digital divide. Neither of these is a big new idea. But we believe that they would promote a kind of renewal and revitalization that can help drive the country to a brighter and more just future.
Because entrepreneurs and small businesses promote inclusion, we need to foster their success. At an individual level, the chance to start and own a small business allows people to fulfill their dreams and ambitions. In addition, startups and other small businesses are significant job creators and innovators of new goods and services. And whether you're the owner of a small business or work for one, there’s more occasion for you to save, invest and build wealth. One more thing: New and other small businesses add welcome diversity, voices and philanthropy to neighborhoods and communities.
Small business owners – and those who want to be small business owners – will tell you that capital is the lifeblood of any idea. Unfortunately, too often it is too difficult for small businesses to access capital. It can be especially challenging for people of color. Individuals who live outside specific urban hubs face their own hurdles.
Side-hustles, friends and family, credit cards and savings can only take you so far when you’re striving to give life to a vision and a business plan. Hard work and dedication need the support of meaningful funding.
Numerous options exist for increasing small business access to capital, such as making it easier for small businesses to issue securities, allowing innovative capital-raising techniques, expanding public and private loan and grant programs and establishing incubators and accelerators. In June, for example, the Securities and Exchange Commission’s Office of the Advocate for Small Business Capital Formation hosted an event in which participants proposed regulatory reforms to facilitate small business capital formation, with a focus on businesses owned by minorities, women and founders in rural areas. It’s also critical for investors and lenders to affirmatively seek to invest in and make loans to minority, women and rural entrepreneurs.
Using technology is a key part of connecting those who need capital with those who can provide it. However, lots of regulations were written for a different time and don’t adequately accommodate technological developments. Regulators have taken some commendable steps to address this, but more should be done to update regulatory requirements so that regulation does not unduly hinder the opportunity for technology to expand access to capital and promote financial inclusion.
Accordingly, ensuring access to capital for entrepreneurs and small businesses should be a top national commitment backed by concerted effort and persistent energy.
The digital divide is another source of under-inclusion to redress. The U.S. has been experiencing a digital revolution and an information age. The Fourth Industrial Revolution will usher in other profound technological changes that will shape, or even remake, our lives and the lives of generations to come.
These advances are cause for optimism, but something’s missing. Too many children, as well as adults, have inadequate (if any) access to the internet, so they can’t join in the digital world, which, as COVID-19 demonstrates, really matters. The digital world includes online schooling, telework, digital finance, telehealth, the internet of things and much more. The under-inclusion is especially acute for people of color and in rural America.
Solving the digital divide depends on ensuring that every child has a computer and a high-speed internet connection. Widespread public-private collaboration should build on important programs that provide computers and internet access at school and at home.
Furthermore, the digital world is based on cutting edge technology. Therefore, the U.S. needs to lead in 5G and ensure that the rest of our digital infrastructure is state of the art. We cannot allow our digital infrastructure to deteriorate as we’ve seen our physical infrastructure do. This means having the necessary coders, programmers, developers, engineers and cryptographers.
One step is to prioritize STEM education in communities of color and rural communities. This offers a tremendous one-two punch, expanding economic opportunities for these children and nourishing the talent, skills and interests we’ll need to maintain our country’s innovation lead.
Imagine if we had full digital participation in every corner of the U.S. We think it would result in more jobs, higher incomes, more wealth, more education and better health and wellness. We know it would empower people.
By combining forces, government and business can close the digital divide if it’s a societal goal to do so. We believe it must be.
Access is a cornerstone of inclusion. And inclusion is a first principle that should guide us as a society. We see hopeful signs of progress, but a great deal remains to be done.
Troy A. Paredes is a former commissioner of the U.S. Securities and Exchange Commission and the founder of Paredes Strategies LLC. Lee A. Schneider is general counsel of blockchain developer Block.one. They are co-hosts of the “Appetite for Disruption: The Business and Regulation of Fintech” podcast.