By Lauren Counts, Senior Director, Strategy, Innovation, and Impact Management
Mission-driven organizations face down some of the world’s biggest challenges – systemic poverty, inequality, and racial inequity, to name a few – as a matter of business practice. Certainly these are not easy issues to tackle; they require bold thinking and brave action in order to create transformative change for those underserved communities that experience these inequities.
A veteran of the Community Development Financial Institution (CDFI) sector, Scott Sporte has helped shape Capital Impact Partners’ lending priorities and has envisioned innovative pathways for supporting our communities. Scott recently transitioned from his role as Chief Lending Officer to a new role within Capital Impact, Chief Strategy & Innovation Officer.
In this interview, Scott discusses new focuses for CDFIs, outlines his vision for his role, and describes how championing equity and inclusion can transform the communities that Capital Impact serves.
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.
By Nancy O. Andrews, Ellis Carr, Donald Hinkle-Brown and Joe Neri
As leaders of four of the nation’s largest nonprofit community development financial institutions (CDFIs) with the mission of investing in low-income communities and entrepreneurs, we ask Congress to protect the desperately needed flow of investment capital to America’s struggling cities and towns.
In short, we ask Congress to ensure full funding for the U.S. Treasury Department’s Community Development Financial Institutions Fund (CDFI Fund), whose support enables us and more than 1,000 other CDFIs nationwide to provide patient, innovative capital solutions to help small businesses, expand educational opportunities, and build affordable homes. These investments provide a tremendous bang for the taxpayer buck: On average, CDFIs leverage every federal dollar with at least 12 additional dollars from other sources, including banks, foundations, and impact investors.
CDFI investments in underserved communities promote economic opportunity and inclusive growth.
Last year, $233 million in CDFI Fund appropriations led to more than $2 billion worth of investments and loans across the U.S. Most importantly, this capital has fueled economic growth in thousands of distressed cities and towns, providing economic opportunity for millions of Americans. In 2016 alone, with support from the CDFI Fund, CDFIs nationwide created 36,000 jobs, made 11,000 business loans, and financed 24,000 affordable housing units in urban and rural communities that need it most.
Yet, despite a solid track record of success and consistently strong bipartisan congressional support since its founding in 1994, the CDFI Fund is on the chopping block. The Trump administration’s proposed budget for fiscal year 2018 would eviscerate the CDFI Fund’s vital programs, cutting all but $14 million of its current $248 million budget.
The House voted to restore some of that funding, and although that’s a good first step, we need more than that. The CDFI Fund must continue to operate at full strength. Without the CDFI Fund, small businesses like veteran-owned Honor Capital, which brings affordable grocery stores and jobs to underserved neighborhoods, wouldn’t exist.
Honor Capital’s seven grocery stores in Kansas, South Carolina, Virginia, and Oklahoma have all been financed with CDFI loans. In Wichita and Winfield, Kan., for example, Honor Capital opened two stores that have brought fresh, affordable foods to their communities, created jobs, and attracted new businesses. Each Honor Capital grocery store serves thousands of customers every week.
As part of Honor Capital’s ambitious plan to increase access to healthy foods and support veteran entrepreneurship nationwide, the company will expand to operating a total of 10 stores by the end of 2017, including new stores in North Carolina and Georgia. This growth is made possible by $9 million in innovative financing provided by a partnership of three CDFIs—IFF, Reinvestment Fund, and Enterprise Community Partners. CDFI financing is essential because many start-up and early-stage businesses like Honor Capital have difficulty accessing credit.
In the District of Columbia’s Congress Heights neighborhood, a $14.4 million capital infusion from two CDFIs, the Low Income Investment Fund (LIIF) and Capital Impact Partners (CIP), enabled the Charter School Incubator Initiative to renovate a building that houses two charter schools. Somerset Prep DC and Community College Preparatory Academy serve students in grades six through 12, as well as adult learners. These two schools expand the opportunities for youth and adults to secure high-quality education in their community. Congress Heights, a predominantly African-American and low-income neighborhood, is undergoing pressure from the rapid public and private-sector development in the District. Like other CDFIs, LIIF and CIP are working to ensure inclusive growth by enabling all residents to participate in the revitalization of their community.
The impact of the CDFI Fund’s support goes well beyond dollars and cents.
CDFIs help communities realize their visions of prosperity. They work closely with local nonprofits, businesses, and government to ensure that they are addressing community needs and priorities. They seek out opportunities that traditional financial institutions often overlook: in neighborhoods where median incomes and school test scores fall below national averages, and in businesses like grocery stores that have thin profit margins and higher risk.
CDFI financing is about helping Americans live better lives—through good jobs; safe and affordable housing; access to fresh, healthy foods; high-quality education from early childhood to college; and excellent health care.
America’s cities, towns and rural areas need the CDFI Fund in order to thrive. Congress should ensure that funding for CDFIs is fully restored in the 2018 budget and keep investment capital flowing to vulnerable communities.
Nancy O. Andrews is President and CEO of the Low Income Investment Fund, which is dedicated to creating pathways of opportunity for low income people and communities. Ellis Carr is Capital Impact Partners’ President and Chief Executive Officer and has more than 20 years of experience in the financial services and mortgage industries. Donald Hinkle-Brown is President and CEO of Reinvestment Fund, a national CDFI which integrates data, policy and strategic investments to improve the quality of life in low-income neighborhoods. Joe Neri is President & CEO of Chicago-based IFF, the Midwest’s leading non-depository, diversified Community Development Financial Institution, which focuses on strengthening nonprofits and the communities they serve.
The idea of “community” often conjures images of a geographic place, a shared space where people congregate. While true, communities can be so much more. Their true potential can manifest itself when they foster connections between individuals who share mutually beneficial ideals. Through championing those shared values, community members can create a future of shared prosperity.
By Emilie Linick, Senior Loan Officer, and Quanic Fullard, Impact Strategy Specialist
Capital Impact Partners has long been driven by a mission to help people build communities of opportunity that break barriers to success. To that end, we continually look to expand our lending and incubate, scale, and advocate for new ideas that advance community development for those most in need.
The concept of identity politics has had a lot of press of late. How do we, as professionals, as voters, as members of our community, as individuals, apply our own identity and personal narrative to our actions and convictions? Given the diversity of our organization and the communities we serve, is the act of presenting and leveraging our own backgrounds an appropriate starting point for our professional work?
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