Reliable market data — including demographic and financial information — are essential to tapping the economic opportunities in America′s low-income communities and inner cities, according to a report by the Milken Institute. Emerging Domestic Markets: Increasing Capital by Improving Data recommends creating a data consortium to jump-start a collaborative data-sharing process that would, in turn, increase investment in EDMs (ethnic- and women-owned businesses, low-to-moderate-income communities and inner cities), and benefit the national economy. Funding for the report was provided by the Ford Foundation.
Lack of robust, transparent information at the transaction level makes it difficult for investors to assess risk and evaluate opportunities in these markets. EDM businesses receive less capital, and when they do, often at less-favorable terms. Efforts to improve data collection, while worthy, are fractured, with lack of communication and coordination, differing agendas, dependence on self-reporting and non-standardized collection.
"A well-designed data consortium will provide the kind of information that financial investors need," said Betsy Zeidman, director of the Center for Emerging Domestic Markets at the Milken Institute. "Reliable data turns risk into reward."
The report provides a comprehensive look at the multiple parties collecting data on these markets, and identifies areas of overlap and information gaps. The authors′ recommendations incorporate feedback from a wide variety of EDM experts and market participants, including investors, lenders, government agencies, researchers, community-based organizations and advocates. The report outlines design elements that could be used by members to create innovative lending programs and develop tailored financial products for the EDM market. It also recognizes the need to safeguard contact information and transactions to protect the businesses and investors.
Emerging Domestic Markets: Increasing Capital by Improving Data is a product of the Milken Institute Center for Emerging Domestic Markets. The report was made available to a select audience in April at the 2007 Milken Institute Global Conference. The report is available here.