Netflix announced this week that it will start putting 2% of its cash holdings, initially up to $100 million, into financial institutions and organizations that directly support Black communities in the U.S.
"We believe bringing more capital to these communities can make a meaningful difference for the people and businesses in them, helping more families buy their first home or save for college, and more small businesses get started or grow," the video streaming service wrote in a blog post.
It was Aaron Mitchell, director of talent acquisition at Netflix and Harvard Business School alum, who proposed the idea to Netflix CEO Reed Hastings. He then teamed up with Netflix treasurer Shannon Alwyn to develop the program.
Mitchell was inspired by Mehrsa Baradaran's award-winning book, "The Color of Money: Black Banks and the Racial Wealth Gap," the blog post says.
Baradaran, a professor of law at UC Irvine Law, explores the persistent racial wealth gap by examining the history of Black banking, from when the Emancipation Proclamation was signed in 1863 to today. She reveals how housing segregation, racism and Jim Crow credit policies created "an inescapable economic trap for Black communities and their banks," and challenges the idea that Black banking and "community self-help" is the key to Black economic progress.
"The catch-22 of Black banking is that the very institutions needed to help communities escape the deep poverty inevitably become victims of that same poverty," Baradaran writes. "Blacks were poor and, due to segregated housing, their homes were worth less. What this meant for Black banks was that their deposits were costlier and their loans were less stable, which created a combustible situation over time."
Ultimately, these communities need capital to build more capital, she told the New York Times.
In committing $100 million to Black communities, Netflix is providing capital.
The company's first step in allocating that money is moving $35 million into two places: $25 million will go to a new fund called the Black Economic Development Initiative. It will invest in "Black financial institutions serving low and moderate-income communities and Black community development corporations in the U.S.," the company said in the blog post.
The other $10 million will go to Hope Credit Union "to fuel economic opportunity in underserved communities across the Deep South."
Netflix is hoping other big companies will follow its lead: "If every company in the S&P 500 allocated a modest amount of their cash holdings into efforts like the Black Economic Development Initiative, each 1% of their cash would represent $20 to $30 billion of new capital. And that would help build stronger communities, offering more Black families pathways to prosperity and a more equitable future."