This has been a year of reflection and introspection for me. In 2017, Capital Impact Partners, a national Community Development Financial Institution (CDFI), had its best year since our founding in the early 1980s. We implemented new programs and innovative products to unlock opportunity for underserved communities across the country, and, I am proud to say, deployed record volumes in support of economic, social, and racial justice – and have continued that critical work in 2018.
Despite our recent successes, our accomplishments sometimes feel hollow given the growing wealth gap, wage stagnation, and continuing racial and social injustice. Many Americans, including some of my own family, feel that opportunity is out of reach.
By Ellis Carr, President and CEO, and Rosemary Mahoney, Board Chair
We believe everyone deserves a voice and economic pathways that allow them to shape their own futures.
We believe that a community’s voice and economic opportunities can be strengthened with the right tools. Our objective is to develop tools for and with our communities that amplified their voices and created hope, shared prosperity, justice and inclusion.
“3. 7. 8. 2. 4. 0. 3. 7. The first thing that happens when you go to prison, they take away your name, and from that moment forward, you’re that number: Hodge, 37824037. It’s the beginning of the dehumanizing experience of mass incarceration.”
The words of Teresa Hodge give a brief and disheartening glimpse into the truth of America’s criminal justice system. What is worse is that, as Teresa alluded to, the dehumanizing experience of incarceration continues beyond the walls of the facility; it has lasting and far reaching impacts on those who have been caught up in the system.
Equitable access to education provides all children with the chance to live up to their full potential and lead choice-filled lives. With racial and socio-economic inequity growing across the nation, high-quality education is crucial to giving students from low-income communities the opportunity to achieve the same life successes as their more affluent peers.
As a mission-driven Community Development Financial Institution (CDFI), Capital Impact Partners aims to create communities of opportunity, and education is one cornerstone of that mission. For more than 20 years, we have partnered with and financed charter schools to extend high-quality education to the children who need it most.
Across the country, unemployment numbers are down and the news talks of economic recovery and the booming stock market. Outside of that news, however, are many people who are still struggling to achieve equal opportunity and prosperity with the rest of the country.
Transformative investments are needed to get struggling Americans into the mainstream economy and working toward a brighter future.
This means access to health centers, charter schools, affordable housing, grocery stores that sell fresh and healthy food, transportation, and other infrastructure improvements. However, access to financing can be a major barrier to these projects getting off the ground.
Financial services, investment capital, and affordable credit from traditional financial institutions has historically been limited for those looking to serve low-income communities.
Community Development Financial Institutions (CDFIs) have played a major role in empowering communities to address the structural barriers that exclude them from shared prosperity.
What are CDFIs exactly? How do they work? Whom do they serve? Here is a breakdown…
Insight into CDFIs
Martha’s Table provides healthy food to Washington, D.C. communities daily.
CDFIs as we know them today began more than three decades ago as private financial institutions focused on increasing economic prosperity for low-income and underserved communities by providing affordable lending for community projects. Today, more than 1,000 CDFIs operate across the United States.
Over time, their work has evolved to address key issues of economic, social, racial, and political justice. These mission-driven institutions provide support in disinvested areas that traditional lending institutions deem too risky to finance; in fact, they are mandated to embrace risk in order to create social impact.
CDFIs fall into four sectors: community development banks, community development credit unions, community development loan funds, and community development venture capital funds. Each has a slightly different way of operating, but the end product is the same: communities of opportunity that break down barriers to success.
CDFIs work as market creators and market catalysts by supporting community businesses—including small and family businesses, micro-enterprises, cooperatives, non-profit social service organizations, mixed-use real estate, and affordable housing. CDFIs’ ability to foster catalytic change comes from loans and grants from government institutions like the CDFI Fund, loans and grants from large financial institutions, and program-related investments from major donors and foundations.
Meals on Wheels support older adults to age within their communities.
Financing from CDFIs targets specific populations – often low-income individuals in both urban and rural settings, and heavily concentrated with women and people of color. These high-impact interventions build community infrastructure and resilience.
CDFIs work for and with the communities they serve, developing strategic financing packages – ranging from pre-development to real estate acquisition, from construction to refinancing – for vital projects needed to help communities succeed. Generally smaller than mainstream financial lenders, CDFIs come in different sizes and provide loans ranging from $50,000 to $5 million. CDFIs have also jointly raised capital to deploy larger loans in the multi-millions.
In addition to core lending services, some CDFIs also provide capacity building, help build and scale social innovation programs and support policy advocacy as a means of further supporting local organizations. Combined with our lending services, these efforts promote increased job growth and retention, improving communities’ economic outlook and viability.
Importantly, CDFIs are not in business to maximize profits. Instead, CDFIs maximize support for community needs and empowerment.
CDFIs’ Immense Impact on Communities
The impact of CDFIs shows in their support and empowerment of underserved communities to address the barriers that hold them back from shared prosperity.
Axis Community Health provides high-quality health care services for its clients.
In 2016, CDFIs supported by the CDFI Fund financed nearly 12,000 businesses, created 37,600 jobs, and created 34,000 affordable housing units. Nearly 450,000 individuals received financial literacy capacity building through CDFIs. As part of the CDFI Fund’s Bond Guarantee Program, $119 million was spent on rental housing, $102 million on charter schools, $13.3 million for health care facilities, $2.7 million on daycare centers and $2.9 million on small businesses.
Capital Impact Partners’ Role in the Space
Equitas Academy is one of many charter schools preparing students for future success.
Since 1982, Capital Impact has served often-neglected communities, starting with the cooperative model to foster economic development for low- and moderate-income areas.Our non-profit, mission-driven lending began in 1984 and progressively expanded to support communities nationwide, including establishing offices in Oakland, California and Detroit, Michigan. Capital Impact also grew to support access to quality health care, education, housing, healthy food, dignified aging and cooperative development.
Capital Impact Partners works to improve the lives and futures of individuals and communities through four strategic pillars: addressing systematic poverty, building equitable communities, creating healthy communities, and ensuring inclusive growth.
Through it’s place-based focus, Capital Impact Partners has played an integral role in revitalization efforts in Detroit.
Since its inception, Capital Impact has deployed more than $3 billion for community development projects nationwide. In that time, our lending has created more than 36,500 units of affordable housing, helped more than 2 million patients receive quality health care, facilitated access to quality education for 240,000 students in 235 charter schools, financed 86 retailers to provide healthy food for 1 million people, helped 37,000 older adults age with dignity through 191 projects, and supported cooperative services for 870,000 customers. Our place-based strategy has also facilitated the revitalization of Detroit neighborhoods, creating mixed-use spaces and multi-family housing to help the city rebound.
In addition to our lending, we advance programs to create equity and opportunity. For example, our EDI program provides catalytic capital and training to minority real estate developers in Detroit so that they can participate in the city’s revitalization efforts. We are also investing nationally in efforts to scale worker-owned, home care cooperatives that are creating quality jobs for women aged 50 and older who care for our loved ones as they age.
Capacity building is another service we extend to organizations. A great example is the Answer Key, a step-by-step guide with practical tools designed to help charter school operators successfully navigate the often difficult process of building or expanding charter schools.
Like several other CDFIs, Capital Impact also embraced impact investing in 2017 by creating Capital Impact Investment Notes as a means to drive more capital from socially conscious investors – big and small – into the communities that need it most.
All that individuals and communities want is the opportunity to succeed. When traditional financial institutions refuse to invest in communities, CDFIs offer a chance of living a dream that so many Americans hold: providing their children with a quality education so that they can achieve greater gains. Receiving quality health care and healthy food access so that they can enjoy many years with family. Having affordable housing to call home.
In supporting communities to reach these goals, Capital Impact Partners and other CDFIs help create equitable and inclusive spaces that lead to communities of opportunity for all.
This year has been a whirlwind for our country and for Capital Impact Partners.
For all the headlines of stock market records and rising incomes, the reality is that too many of us across America are struggling. People of color are disproportionally impacted, with black households still lagging behind where they were in 2000, and Hispanic households not doing much better.
Due to this stark reality, the question “How can we bring about improved outcomes in access, income, health and opportunity in the communities we serve?” remained central to our efforts.
Through our dedicated focus on breaking the barriers to success – and with your support – I am proud to report that this has been our most impactful year ever in working to turn underserved communities into communities of opportunity.
Fostering Innovation to Address Inequity
To answer that central question, we concentrated on identifying and addressing inequalities within systems and driving equitable means for individuals to propel themselves out of poverty and live the dream America is known for.
Several resources were researched and developed to inform practitioners and communities and influence policy makers about best practices in our areas of practice.
Capital Impact’s Answer Key walks charter school operators step-by-step through facility construction.
We heard from many charter school operators that the school construction process can be daunting. In support of their efforts to build or expand high-quality charter school facilities, Capital Impact published The Answer Key, a step-by-step guide to the school construction and financing process.
With the influx of development in Detroit, long-term residents face the risk of relocation or displacement. Capital Impact published a report to help groups involved in development manage processes to reduce resident displacement.
Alongside these resources, we also developed programs to directly address inequity in access to services and economic participation.
Capital Impact’s Equitable Development Initiative will support minority real estate developers with resources and capital.
In Detroit, where lending and resources for minority real estate developers are limited, we launched the Equitable Development Initiative. This two-year, $5 million program is designed to help minority developers participate in Detroit’s continued economic recovery by providing them with critical training opportunities and access to capital. Our longtime partner JPMorgan Chase provided initial support.
More broadly across Michigan, the Michigan Good Food Fund invested more than $10 million in statewide healthy food programs since its launch two years ago, creating approximately 213 construction jobs, 366 full-time jobs and 32 part-time jobs.
Cooperatives can provide a considerable economic and social benefit for communities. Our cooperative work focused on expanding racial and economic equity to the communities we serve by supporting worker, food and housing co-ops. We gave our third year of Co-op Innovation Awards to Project Equity and the Food Co-op Initiative for exemplifying innovation in the co-op space with a focus on communities of color. Additionally, there has been movement in the home care worker cooperative space. Capital Impact partnered with the AARP Foundation to create quality work options for women 50 and older through a national effort to scale worker-owned, home care cooperatives. With women – mostly women of color – making up 90% of all home care workers and wages for these jobs keeping workers hovering around the poverty line, worker ownership is a viable option for giving older women employment empowerment while providing quality care for their clients.
Supporting Communities to Succeed
Our lending team also had an incredibly full year. Fueled by a record-breaking projected loan volume of more than $200 million, 2017 will be our largest year ever.
Martha’s Table’s relocation and expansion in a new community-services campus will help address local disparities.
As we have expanded our lending, we have also expanded our footprint. We’ve reached into new geographic areas to continue addressing the increasing need of communities across the country, including work in the Southeast and Midwest. I am particularly excited about our growing focus in the “backyard” of our headquarters. We helped launch a number of impactful projects in Washington, D.C., including a focus on education with the Mamie D. Lee development, Martha’s Table and the D.C. International School.
Setting a Foundation for the Future
Along with these outward successes to empower new communities of opportunity, we made great strides in focusing inward to further position ourselves to address the nation’s biggest challenges. In January, S&P Global, the world’s leading provider of independent credit ratings, assigned Capital Impact a “AA issuer credit rating.” Being one of a few Community Development Financial Institutions (CDFIs) that have received an S&P rating is not only an honor, but it improves our ability to access financial tools that allow us to support vibrant economic opportunity and shared prosperity.
That set the stage for the October launch of our Capital Impact Investment Notes. This first-of-its-kind offering from a CDFI – with its own “AA” S&P rating and offered on a continuous basis – gives us the flexibility to invest in new programs and initiatives in communities needing support. It has already been incredibly well-received, selling more than $41 million in the last quarter, making it among the most successful in the impact investment space by a non-profit.
We closed the year by launching a unique partnership with Annaly Capital Management. Through this first-of-its-kind $25 million joint venture with the world’s largest REIT, we were able to raise direct equity for our mission. We are thrilled to embark on this partnership, as it enables us to expand our work to new communities.
Of course, these numbers mean little without impact. We reached more than 200,000 beneficiaries this year and created more than 750 jobs.
I am immensely proud of the work that our team has done to make this year our best yet. Their commitment allowed us to increase access to health care, education, affordable housing and healthy food for many deserving individuals. You can learn more about our approach and focus on equity from my interview with the More Than Money podcast.
More than ever, communities across the country need support to help themselves out of poverty, and Community Development Financial Institutions are becoming an ever greater tool for realizing that goal.
Capital Impact is well placed to continue affecting positive change for communities in 2018 and beyond.
Of course, we can’t do it alone. Thank you for all of your support, this year and in the future.
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