Catalytic Capital | June 18, 2020

Scaling the ‘capillary banking system’ to expand access to capital

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, June 18 – When the COVID crisis hit, Alphabet’s philanthropic arm,, zeroed in on boosting access to capital for women and minority-owned businesses by supporting community development financial institutions, or CDFIs.

When Alphabet and Google chief financial officer Ruth Porat heard of the effort, she jumped on board – and upped the ante. Porat carved out $120 million from Google’s balance sheet to make low-interest loans to CDFIs, a key conduit to underserved small businesses.

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The Grow with Google Small Business Fund, in partnership with the Opportunity Finance Network, also includes unrestricted grants from for small CDFIs serving the most vulnerable populations.

Now, Google has announced another $45 million in loans and $5 million in grants specifically for Black-owned businesses, bringing the total fund to $170 million in loans and $10 million in grants. “Working through CDFIs is really vital to bridging the gap” for access to capital, especially in communities of color, said Porat at OFN’s Small Business Finance Forum

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First awards

OFN has disbursed the first $16 million in loans and grants. Recipients include Citizens Potawatomi Community Development Corporation, one of the largest Native-owned CDFIs; women-focused Grameen America; MoFi, which serves the Northern Rockies in Montana, Idaho, and Wyoming; Opportunity Fund, which serves under-resourced businesses in 45 states; California-based Pacific Community Ventures; Texas-based PeopleFund; and Washington Area Community Investment Fund in Washington DC.

Banking deserts

Some 70% of African Americans don’t have a local branch bank, noted tech investor Robert Smith of Vista Equity Partners. Smith, who spoke with Hope Credit Union’s Bill Bynum at the OFN forum, famously paid off the student loans of Morehouse College’s class of 2019. He called on big banks to channel 2% to 3% of their net income to expanding the “capillary banking system” of CDFIs and minority-owned banks.

“Let’s feed the infrastructure that knows what that community needs,” he said. 

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Economic opportunity

The new funding for OFN was part of a larger $175 million “economic opportunity package” announced yesterday by Google to support Black entrepreneurs and professionals.

The largest chunk, $100 million, is earmarked for Black-led startups, funders, and organizations supporting Black entrepreneurs, including for Google Ventures spin-off Plexo Capital. (You Tube, which is owned by Google, has a $100 million fund for Black creators and artists). 

Beyond CDFIs 

New organizations and models are arising to support and fund underserved entrepreneurs. has awarded a $5 million grant to Common Future, a nonprofit run by Rodney Foxworth. 

Rodney Foxworth, Common Future

The idea: “to place some bets outside of the CDFI system that could spur innovation and perhaps create new ecosystems that support access to capital,”’s Justin Steele told ImpactAlpha. “It’s in the Google DNA. Let’s also take some risky bets on things that are a little different.”