Data, Risk Management, Decisions: Three Lessons on Racial Equity for Financial Inclusion
By Nicole Anand, Deputy Director
A Seat at the Table is a Learning Journey
September marked one year of service on the US Treasury Committee for Racial Equity (TACRE) in my two-year term. This seat at the table gives economic justice advocates and community lenders, like us at Inclusive Action, the opportunity to advocate for financial inclusion for underinvested communities directly. I spent the last year with colleagues on the committee, community partners, and Inclusive Action colleagues identifying key priorities and recommendations on racial equity for economic transformation that the US Treasury can enact.
Sitting on TACRE has encouraged me to investigate our grand challenges to racial equity deeply, which has both illuminated patterns and raised questions. I’m sharing three insights that I hope are useful for fellow financial inclusion advocates thinking about data-driven change, managing complexity, and making decisions.
1. Data transparency is the first step. But data usage is even more critical.
We can't drive toward a more equitable financial system or economy without data. We need disaggregated data indicating race and ethnicity to understand who is being served and underserved and to uncover why and how we address the inequities that this data reveals. The value of data is exemplified in recent reporting on disparities in tax audits, acknowledged by IRS Commissioner Werfel’s statement published to address the findings.
At every level of intervention imaginable, data transparency is critical. During our first year of service, my TACRE colleagues and I have advocated for race and ethnicity data disclosure of boards of tax-exempt entities, data monitoring of the Inflation Reduction Act (IRA), race and ethnicity level data of access to capital program recipients, and data transparency in US Treasury procurement.
At the same time, I believe that we have more to push on with data-related recommendations. For a decade before my current work, I was a leader in the international Open Government and Open Data movement. It taught me two things: one, while data transparency is necessary, data usage is the key to reaching outcomes, and two, data will be used for good and for harm (and even unintentional harm).
The first lesson is clearly evidenced in the release of datasets by governments around the world with the faulty assumption that there will be users of open data to hold governments to account. While accountability was brought about in certain cases where there were dedicated civic technologists, researchers, and academics who worked with the data to advocate for changes, in most cases, open data was not released in formats for easy analysis, and power users were not widespread enough to create a data-driven impact. In sum, opening up data is a step in the right direction, but the data must be analyzed and used in advocacy efforts for changes to occur.
The second lesson is explained through open data efforts that ended in misuse of the data or manipulation of it to mislead people or harm certain groups. It is no secret that data collected (and shared) by one institution can be used by another institution that seeks different outcomes. Similarly, once collected, data can be leaked to the public, increasing risks to a population. In Inclusive Action’s own work, we’ve seen street vendor data released that puts vulnerable communities into even more vulnerable situations.
At TACRE, we stand a chance to improve racial equity through data, and I am committed to working with my colleagues to use the lessons from the Open Data movement to ensure that our data transparency recommendations are paired with recommendations for data analysis, data privacy, and data-driven structural change.
2. For every effort at inclusion comes new opportunities for harm and abuse.
The bad, unscrupulous, predatory actors - those lending with unreasonably high interest rates - are a hot topic of discussion on TACRE. We know they exist, we understand their harm, and we are motivated to stop them. However, as my colleagues and I designed recommendations for intervention, it became abundantly clear that the 'good' can come with the 'bad', and the intertwining of the two makes structural change difficult.
To clarify, we are seeing a few tensions: if tax benefits are on the table, who's intended to get them, and who's actually getting them? With Federal capital access programs, are we giving opportunities to 'good' actors or creating openings for 'bad actor' markets? How do we motivate the good actors without giving room for the predatory ones to grow?
I believe it is possible and imperative to identify strategic investments combined with thoughtful guardrails to advance economic justice, and I am motivated to work closely with my TACRE colleagues to probe these tensions and ideate solutions in the coming year.
3. To make robust but timely decisions, we need a framework.
Our service mandate on TACRE is to design recommendations for racial equity that the US Treasury can enact. Beyond the subject matter knowledge required, there are a number of considerations we have to think through to craft sound and impactful recommendations. Here are just a few to give you a taste:
How impactful will this recommendation be? How do we measure the potential for impact — is it the reach or scale, the immediate effect and potential to address urgent issues, and/or the potential for long-lasting structural change?
Is there a window of opportunity to enact this recommendation? Is there political will and urgency to do so?
Will this recommendation lead to sustainable change? Will this outlast administrations and be institutionalized?
Who needs to implement this recommendation? What do they need to be able to do?
What lessons are we learning, and what lessons are we building on?
The list of considerations could continue, so perhaps the final question is when do we stop making considerations and make decisions? What triggers a decision? What is the threshold that considerations must pass to move into a decision? I'm looking forward to finding out as we move into year two.
What’s Next For Inclusive Action and TACRE?
This year, TACRE recommendations required examining the purview of the US Treasury and its partner institutions, including a deep dive into specific initiatives and efforts, including IRS modernization, the activation of resources from the Small Business Credit Bureau Initiative (SSBCI), the CDFI Fund's recertification process and the management of its Small Dollar Loan Pilot, and the creation of the US Treasury's Financial Inclusion Strategy.
Many of us at the frontline of community lending — who are focused on supporting communities of color with limited opportunities to access healthy capital — are eager to address the acute issues we see daily. On TACRE, we’re dissecting these priority issues, overlaying them onto what the US Treasury has power over, and determining which aspects of these problems can be solved with our seat at the table.
Two important focal areas for Inclusive Action going forward are: i) fair and equitable access to capital by immigrants; and ii) public benefits and protection of communities of color from predatory actors. With the first issue, we seek to remove the structural barriers to wealth building faced by populations that are treated differently, including undocumented immigrants. Undocumented workers and entrepreneurs require an Individual Taxpayer Identification Number (ITIN) to file a federal tax return, a process filled with extreme pain points that Inclusive Action is all too familiar with because we host a low-income tax assistance site (VITA). We’re keen to streamline ITIN administration and improve ITIN usage, building on the IRS’ ITIN modernization plan. With the second issue, we want to curb predatory lending that is crippling our communities and keeping community members locked into cycles of poverty. We see a role for the US Treasury to play: first, encouraging their peer institutions to regulate predatory practices further; and second, making direct and meaningful investments in community lenders to create strategic products and services that compete with, and ultimately replace, payday loans.
I want to give a tremendous shout-out to US Treasury Secretary Janet Yellen, Deputy Secretary Wally Adeyemo, Counselor for Racial Equity Janis Bowdler, committee Chair and former Mayor of Philadelphia Michael Nutter, committee Vice Chair and President and CEO of the Roosevelt Institute Felicia Wong, the numerous US Treasury and White House officials who have welcomed us and been so generous with their expertise, and all my TACRE committee colleagues who are truly inspiring leaders. It's been quite the journey, and I am so grateful to be on it with you! TACRE’s mandate and Inclusive Action’s mission are intertwined, and 2024 will be a year of important progress together toward a more inclusive economy rooted in racial equity.