By Harlington L. Hanna Jr.

In viewing the possibilities for the economic development of Black, Brown, and other historically disadvantaged communities, there is a significant need for a system that would resolve the multiplicity of problems that factor into resolution of this age old dilemma. My analysis of the problem is the need to provide a Capital Market Driven Economy (CMDE) for such communities which also incorporates unified common market concepts.

Perhaps the greatest problem is the availability of investment and funding for business operations, and development of a system to capture and control the spending power of the local catchment area and its citizens.

While operating the Hannaian Investment & Publishing Group, a Self Directed and Controlled Investment Research Group, we developed a concept for economic development called the “Hannaian Economic Development Investment Council (HEDIC)”. We proposed that Hedics be established in Historically Disadvantaged Communities to promote self directed and controlled investment in such communities. One or more one HEDICs can be operated within a catchment district if needed. HEDICs would essentially be a special type of publicly traded Business Development Company (BDC). BDCs are established under the provisions of the 1980 amendments to the Investment Company Act of 1940, and regulated by the Securities & Exchange Commission (SEC) of the United States.

BDCs operate similar to Venture Capital (VC) and Private Equity (PE) Funds which provide funding and investment opportunities for other businesses and projects. BDCs are specifically designed to provide small investors with a facilitated, highly regulated and protected way to invest in small developing businesses. BDCs must comply with certain debt accumulation and income distribution requirements, and can obtain special beneficial tax treatment if operated in compliance with SEC and IRS regulations specifically governing BDCs. Generally, as a Regulated Investment Company (RIC) under the Internal Revenue Code, a BDC must distribute the large majority of its taxable income as dividends to its shareholders.

While all BDCs are publicly registered with the SEC not all BDCs are publicly traded. I believe it is important that HEDICs be publicly traded entities so that local residents can easily invest in the operations, and become equity shareholders in the process of economic development of their community.

Hannaian Economic Development Investment Councils (HEDICs) should be established with the following guidelines;

• Identify the service or catchment area or district which will generally be a historically underserved and disadvantaged community typical of many Black & Brown communities within the United States.
• Raise funding though the capital markets as a publicly traded company in which the local citizenry and other investors can invest and gain equitable ownership in the HEDIC by buying shares on the open market.
• Invest the funds raised into funding local businesses located within the catchment area, which create economic development, produce jobs, equity ownership, and increased business operations and control by the indigenous investor shareholders.
• Encourage local citizens, investors and others to expend their money and other resources to support the funded businesses, products and services, or those which otherwise support local economic development.
• Encourage local governmental authorities to provide incentives to attract applicable businesses into the catchment district.
• Encourage locally based investment banks and professionals to provide incentives, programs, and promotions to attract investors into the catchment district.

In addition, major investors and investment entities should see HEDICs as important and potentially lucrative investments because of the spending power and business support of their potentially large base of dedicated indigenous investor shareholders.

Groups of business leaders within a community can organize a HEDIC which will comply with all BDC requirements and provide centralized business leadership in the catchment district. As a publicly registered and traded company the HEDIC will obviously require more sophisticated setup and management than a privately held company. However, the additional benefits of a BDC providing significant equity accrual and community economic development are tremendous.

When operated properly HEDICs should provide excellent investment opportunities and tools for development of a local Capital Market Driven Economy which produces equity ownership, control, and pride among community members.