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Netflix to shift $100 million of cash into Black-owned banks

Netflix to shift $100 million of cash into Black-owned banks
Business
Netflix Inc. will shift up to $100 million to lenders that serve the Black community, making it the largest company yet to pledge cash to historically underfunded financial institutions.

The online TV giant will start by shifting $25 million U.S. into the Black Economic Development Initiative, a new fund that will invest in Black-owned financial institutions serving low-income communities, and $10 million to Hope Credit Union. Going forward, the company will steer two per cent of its cash on hand, which currently amounts to about $5 billion, to financial organizations that directly support African-American communities.

News of Netflix’s commitment sent shares of Black-owned banks soaring Tuesday. Carver Bancorp Inc. jumped as much as 192 per cent in premarket trading and Broadway Financial Corp. gained as much as 96 per cent.

Large U.S. companies have rushed to show support for African Americans following the death of George Floyd , one of several Black people killed by police in the past few months. Many businesses and rich individuals have pledged money to civil rights causes, including Netflix chief executive officer Reed Hastings, who earmarked $120 million of his personal fortune to historically Black colleges and universities. But his company wanted to propose a solution that addresses more systemic causes of inequality.

Hope Credit Union serves more than 1.5 million people in states including Alabama and Louisiana, but it doesn’t have enough money to fully support the financial needs in its communities, according to its CEO, Bill Bynum.

“We are capital-starved, just like the people in the communities we serve,” Bynum said. “Having a global voice like Netflix say it’s important to invest in financial institutions like Hope is tremendously important, not just for the capital we will use to make mortgage loans and small business loans, but for what it says.”

One employee

Netflix executive Aaron Mitchell came up with the idea of shifting money into Black-owned banks following an April dinner with leaders from different under-represented groups. Netflix has been hosting these dinners since October in an effort to improve diversity at its highest levels and inform its top executives.

Mitchell pitched the idea to chief financial officer Spencer Neumann and began conducting research, reaching out to banks and reading “The Color of Money,” Mehrsa Baradaran’s book about the racial wealth gap. After Floyd’s death, he sent his proposal to Hastings, who expedited the project.

“I have talked to a lot of companies, but this is the first company that’s actually done something about it,” Baradaran said.
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