MaRS Centre for Impact Investing is now seeking a Senior Associate, Capital Advisory Services! From persistent poverty to climate change, we face entrenched social and environmental problems. Fortunately, a growing number of charities, non-profits, co-ops and for-profit companies are building business models to tackle these problems. They are turning to investors for the financing to […]Read More ›
By the numbers: Capital for communities and opportunities
The capital for communities and opportunities for people = 25 years, US$1.3 billion, 46 states and 47,000 jobs.
This past week, I had the pleasure of meeting with Frank Altman, president and CEO of the Community Reinvestment Fund (CRF), USA. Since 1988, the CRF has injected $1.3 billion into mostly low-income neighbourhoods across the United States, helping to retain or create 47,000 jobs. The impact has been sustained economic development within the urban and rural communities that need it the most. The CRF works through Community Development Finance Institutions to provide loans for businesses, affordable housing and community facilities such as daycares.
Altman, who founded and leads the CRF, has transformed the community development finance system by accessing capital markets on behalf of local development lenders to enable them to increase their impact.
The CRF created a secondary market for community development nationally. It is the first not-for-profit to:
- become a Standard & Poor’s–rated servicer;
- issue rated affordable housing debt offerings;
- provide small business loans using the New Markets Tax Credit; and
- rate community development debt offerings.
Another amazing tool in the CRF’s pocket is a non-bank lending license from the U.S. Small Business Administration, called an SBA 7(a). The CRF owns one of only 14 licenses available allowing for a 75% loan guarantee.
At this point, I’m increasingly curious – and a bit jealous – and find myself asking: “How can we get this infrastructure available in Canada?”
The big question I had for Altman was about how the CRF is capitalized. Around 2% of the CRF’s revenues are charitable donations, with another 18% being program-related investments and social investments. The remaining 80% of revenues are made up of market-rate investments into the fund.
The CRF has developed a standardized flow through a product that allows them to buy loans from organizations that they know, and then sell the loans at a profit. Sound familiar? Well, the CRF keeps a close eye on the loans that flow through this product, and it has proven to be a successful mechanism for the organization. There is obviously much to learn from Altman and the work of CRF.
It was Professor Marguerite Mendell, the vice-principal of Concordia University’s School of Community and Public Affairs and a global leader within the social economy, who invited a group of us to meet with Altman.
In terms of financial infrastructure in Canada, we can look to Quebec for a successful legacy of community investment. For instance, on this trip, I met with members of the Desjardins Caisse d’économie solidaire, whose mission is to support the development of the social and solidarity economy focusing on not-for-profit and co-operative organizations. The caisse had a business model volume of more that $1.2 billion across Quebec with over 14,000 members in 2011.
I also met with members of the Finance and Sustainability Initiative (FSI), which represent a cross-section of finance and sustainability professionals who are focused on transforming the traditional business model. The Caisse d’économie solidaire and the FSI are only two of many actors in the Quebec landscape.
I encourage those in the world of social finance to take the time to learn from our neighbours, as their experience and progress can help shape this field across the country.
Note: Here is a 2010 presentation by Dr. Mendell on social finance in Quebec: