Back in August when Starbucks CEO Howard Schultz made his plea for others in business to turn their backs on politics (at least giving money to politicians) and focus on creating jobs, many dismissed it as a sort of quixotic fantasy. At the time, Mr. Schultz criticized representatives in Washington for pushing "partisan agendas before the people's agenda." He also said, "In these uncertain times, it's important that we ask what we at Starbucks can do. We have a responsibility as well as an opportunity not to be bystanders, but to act in ways that can ease the collective anxiety inside and outside the company."
Now, Starbucks has announced a new initiative that appears to support Mr. Schultz's agenda. The company said that beginning on November 1, it will team up with the Opportunity Finance Network (OFN) on an initiative called "Create Jobs for the USA" to collect donations at its stores that will be used to fund lending to small businesses across the country.
People who go to Starbucks and donate $5 or more will receive a red, white and blue wristband with the message "Indivisible" on it.
"Small businesses are the backbone of America, employing more than half of all private sector workers — but this critical jobs engine has stalled. We've got to thaw the channels of credit so that community businesses can start hiring again," said Mr. Schultz in a press release. "Create Jobs for USA empowers Americans to help other Americans create and sustain jobs, with Starbucks and OFN as a catalyst and the Indivisible wristband as a symbol of our country's unity."
OFN represents 180 Community Development Financial Institutions (CDFIs) across the U.S. that have been set up to provide financing in places where traditional lenders are hard to come by. The Starbucks Foundation is donated $5 million in seed money to the Create Jobs for USA Fund at OFN.
According to the Starbucks' release, "Lenders will issue $30 in financing, on average, for each $5 donation. ... Based on conservative forecasting models developed by OFN with input from independent economists, one new job will be created or retained for approximately every $21,000 in loans." CDFIs in the program have a 98 percent repayment rate based on historical averages.
Mark Zandi, chief economist at Moody's, said, "Create Jobs for USA is exactly the kind of innovative and entrepreneurial solution that America needs to get its economy back on the right track. CDFIs are well known to be highly effective at creating local jobs in communities that need them the most, especially when it comes to helping community businesses that are having difficulty securing credit during the current economic climate."
How much will Howard Schultz's 'jobs' campaign help or hurt Starbucks' business?