Minority Business Development Agency

The Minority Business Development Agency (MBDA) leads the public sector in strengthening the U.S. economy through the economic expansion of minority-owned businesses with the creation of new jobs. As the United States moves closer toward a majority-minority population, its economy must include a strong minority-owned business sector. This agency operates through local Business Centers that are funded by the U.S. Department of Commerce. Local MBDA Business Centers develop alliances with local, state, and federal government agencies, major corporations, banks, financial resources, and the minority business community to create larger, more strategic minority entrepreneurs. They work as liaisons to financial institutions on behalf of Minority Business Enterprises (MBEs) seeking financial assistance, and they provide loan packaging and placement assistance for purchases, refinancing, lines of credit, factoring, and Small Business Administration lending.

MBDA conducts workshops for business owners who want to move to the next level. Networking opportunities are provided, and MBDA coordinates bids and outreach conferences for construction projects and organizes industry-specific roundtables to promote the MBE marketplace. Some of the economic and social benefits of MBEs include providing employment opportunities for people of all races, providing a way for ethnic minorities to integrate into the majority economy, and providing positive role models for entrepreneurs of color. Finally, they also establish the infrastructure necessary for community development. For example, research suggests that minority-owned businesses donate more money to charitable organizations than non-minority-owned firms.

In 1969, the Office of Minority Business Enterprise was established within the U.S. Department of Commerce with the mission of funding a wide variety of local programs for one-on-one and group assistance to minority businesspersons. The U.S. Small Business Administration (SBA) also targeted minority businesses with direct and guaranteed loan programs and federal contract set-aside programs around this same time. In recent years, these programs have been severely criticized and have also received some accolades. Although these programs created opportunities for minority businesses to create jobs, critics suggested that these programs were a form of reverse discrimination.

During the 1990s, minority businesses continued to grow in quantity but not in sales and receipts. Despite the U.S. economic boom of the 1990s, minority businesses lost economic ground. This effect was called “growth without growth” because although the number of firms increased, their share of total sales and receipts declined. This occurred because minority businesses are often concentrated in two industries: services and retail catering. Some suggest that efforts by federal, state, and local governments have had minimal impact on minority business development.

The formal definition of “minority ownership” has also been scrutinized. Historically, this was defined as a minimum of 51 percent direct ownership by members of a minority group (or a “socially disadvantaged” group.) Traditionally, these groups included African Americans, Hispanic Americans, Native Americans, and Asian Pacific Americans. The limitations of this definition are hotly debated by both proponents and critics, and a more flexible definition was recently proposed.

The growth and success of MBEs is inextricably linked to American social and economic policy. Research suggests that the number of MBEs is currently about 2 million—a number that has been growing at double the percentage rate of all firms. MBEs generate sales in excess of $500 billion, which constitutes an impressive chunk of the U.S. economy. Additionally, the health of the minority business sector is linked to the production of a variety of economic and social benefits such as employment, economic development, community development, and especially access to role models for people among entrepreneurs. MBEs generate $1 trillion in economic output to the U.S. economy and support 5.8 million jobs. However, parity for minority businesses has not been achieved. Parity is defined as reaching proportionality between the adult minority population and business development measures, such as numbers of firms, gross receipts, and employees of classifiable firms.

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