Twitter will invest $100 million in Community Development Financial Institutions (CDFIs) in an effort to combat the racial wealth gap, the social media giant announced Thursday.
The investment will be used for loans provided by the Opportunity Finance Network's collection of CDFIs through the newly created Finance Justice Fund. Twitter is the fund's first corporate investor.
The social media giant follows a growing number of corporations, including Netflix and PayPal, that have embarked on similar initiatives aimed at funneling more capital to Black and Latinx financial institutions and businesses.
"The Finance Justice Fund will help to address long-standing issues of disinvestment, the racial wealth gap, and persistent poverty in our country," Lisa Mensah, president and CEO of OFN said in a statement. "I commend Twitter for stepping up as the first corporate investor, for investing substantial capital, and for making a large grant to a fund that will deliver loans through CDFIs to underserved people and places across the country. I invite more corporate and philanthropic partners to invest in this unique opportunity to advance justice."
There are more than 1,100 CDFIs nationwide managing more than $222 billion, according to OFN.
OFN said 85% of the customers in its network are low-income, 58% are people of color, 48% are women, and 26% are from rural areas.
CDFIs must deploy at least 60% of their lending into low- to moderate-income communities, areas which are often considered high-risk by mainstream lenders.
Twitter also announced Thursday it will reinvest some of the interest it earns on the loans made to CDFIs to Operation HOPE, a nonprofit organization aimed at improving financial literacy and economic inclusion in underserved communities.
"Twitter is proud to partner with OFN and Operation HOPE to bring more support to Black, Latinx, Indigenous, and rural borrowers," Twitter CFO Ned Segal said in a statement. "This is renewable, durable corporate philanthropy that creates a blueprint for other companies to join us in this critical work."
In June, Netflix pledged to allocate 2% of its cash holdings — up to $100 million — to lenders that serve the Black community, the company announced in a blog post.
The streaming service said it will shift $25 million 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, which has 1.5 million customers in five Southeastern states.
"We are capital-starved, just like the people in the communities we serve," Hope Credit Union's CEO, Bill Bynum, told Bloomberg following the announcement. "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."
In October, payments company PayPal announced it would invest $50 million in eight early-stage Black and Latinx-led venture capital funds. The company said the investments are part of its commitment to invest $530 million to support Black-owned businesses.
PayPal competitor Square, which is owned by Twitter CEO Jack Dorsey, made a commitment in September to invest $100 million in CDFIs and minority depository institutions (MDIs). The investment amount represents 3% of Square's cash and marketable securities at the end of the second quarter of 2020, according to American Banker.