The reason most often cited for the small percentage of African-American-owned businesses in the United States is the lack of access to capital. Historically, when faced with limited access to institutional financing, most oppressed ethnic groups, including African-Americans, have devised ways to finance their projects from within their own groups. Often, small groups organize and pool their money. In China these groups are called “hui,” the Koreans call them “kye,” the Japanese “tanomoshi,” and in parts of West Africa and the Caribbean they are called “susu.” In the United States, Black immigrants from the Caribbean have enjoyed one of the highest economic growth rates using a form of the susu and leveraging this practice to establish successful credit unions.
As early as the mid-1700s, African-Americans began to form self-help or “mutual aid” societies. In his book Entrepreneurship and Self-Help Among Black Americans (SUNY Press, 1991), John Sibley Butler notes that in 1778, Absalom Jones and Richard Allen, who later founded the A.M.E. Church, organized one of the first mutual aid societies, The Free African Society, in Philadelphia. Over the next 30 years, it became the prototype for hundreds of self-help and benevolent organizations.
Several secret self-help societies also came into being during this period, the largest and most prestigious being the Prince Hall Masons. Other prominent secret societies were The Grand United Order of Old Fellows, The Knights of Pythias, and the Grand United Order of True Reformers, whose primary mission was the establishment of Black insurance companies. Marcus Garvey’s United Negro Improvement Association was also an outgrowth of this self-help movement.
The first African-American insurance company was founded in 1810. In 1947, there were 211 Black-owned insurance companies. By 1937, more than 9,000 persons were employed by insurance companies run by women of African-American descent. There were 81 dressmakers, four dyers and scourers, two fullers and two glass or papermakers. Hairdressers outnumbered all other occupations. Not only did these companies provide sick and burial benefits, but the insured were also able to leave substantial sums of money to their dependents.
The mutual-aid and secret societies also gave birth to a wide range of business enterprises, including churches, banks, insurance companies and most independent Black colleges and universities. Abram L. Harris, in The Negro as Capitalist: A Study of Banking and Business Among American Negroes (1936), writes that the first African-American-owned bank was organized in 1888 and from 1888 to 1934, 134 banks were formed by African-Americans.
The latest official figures show some 824,000 African-American-owned businesses in the United States. These account for 4 percent of the 20.8 million registered U.S. firms. Black businesses generate $71.2 billion in revenues, which represents 0.9 percent of total business revenues. These are very small percentages. But the most disturbing and embarrassing statistic is the number of persons employed by African-American-owned businesses. They employ only 714,341 people, an average of less than one person employed per business. The number of African-Americans employed by Black business enterprises would increase slightly if we include Black churches and other African-American not-for-profit organizations.
With African-American unemployment hovering at more than 11 percent, we’re doing a dismal job of employing our own. No group can truly prosper without a strong economic base that creates jobs for its members. Some Black churches still maintain some of the principles of the early self-help societies through “building funds” and social service organizations. But the emphasis that once was placed on entrepreneurial development and economic empowerment has been sidelined.
The fourth principle of Kwanzaa, “Ujamaa” (cooperative economics), has as its goal “to build and maintain our own stores, shops and other businesses and to profit from them together.” What if, in the spirit of Ujamaa and the foundation laid by our forefathers, local groups began forming Ujamaa self-help societies? What if there was a national organization whose mission was to promote and facilitate the organization and development of local, national and international Ujamaa self-help societies? What if this national Ujamaa self-help society had a Web site with information and resources for groups that wanted to form self-help societies for the express purpose of providing financial support and furthering the business interests of their members? And what if a business development credit union was formed to service these self-help societies?
If the African-American community made the same commitment and focused the same energies on economic development that it did in the fight for civil rights, our economic empowerment could be fully realized.
Ron Watkins is an international trade consultant and the author of Doing Business in Africa: Myths and Realities. He can be reached at firstname.lastname@example.org .
By Ron Watkins