Ghanaian-American Derrick Ashong didn't like what he was seeing when he watched images of Africa on TV: "When I see stories of my homeland, it's like death, destruction, warfare, violence, the worst things on the planet." Ashong decided to do something about Africa's image problem. The 32-year-old Hip Hop musician, along with fellow members of the band Soulfège, founded the pop music and multimedia phenomenon Sweet Mother Tour, which has brought positive music, videos, and stories about Africa to 146 million viewers through television and radio broadcasts in more than 45 countries. The goal: to bring to Africa a sense of empowerment and cultural self-worth as a foundation for cultural progress.
In April 2006, the group convened a gathering of 250 people from several countries to discuss issues facing the pan-African community. The Tour has also expanded its focus beyond Africa to support youth leadership in art, business, and politics.
Read more stories about citizen diplomats in YES! Magazine's A Just Foreign Policy issue.
For all the freedom we claim in the United States, we lead lives that are mapped out for us from the beginning. We go to school and, if we're fortunate, to college; then to a job to pay for all we and our families need and want. We teach our kids to do the same.
This path once served at least some of us well. But today, it is tied to a system of institutions, habits, and beliefs that is leading us all to an ecological and human train wreck.
What if we got off the train? What if we walked out on this tangled web of businesses, laws, freeways, drugs, television-addiction, dead-end jobs or no jobs, strip malls, prisons, and war?
There are places where people are doing that. Those who need homes claim space and work together to build them. People go to universities where they find their own teachers, or teach each other the skills to make their communities work better for everyone. Artists do their work unconstrained by the profit-seeking of corporations and middlemen. Bicycles rule the streets, making cars take second place, at least some of the time.
In short, people are creating spaces for community, for learning, for fulfilling their own dreams while supporting the aspirations of others.
With some sod and pockets full of quarters, citizens are upping the square footage of green space in cities. Activists have named September 21 PARK(ing) Day, transforming public parking spots into public parks, complete with grass, trees, and benches. Started in 2005 by the San Francisco-based environmental art/absurdity group Rebar, the idea of claiming public places has spread quickly in just two years. PARK(ing) Day 2007 brought 180 new mini-parks to the world, with citizens in 47 cities taking part. Above, a lending library park created at Market and Duboce in San Francisco.
Grow Food on Your Roof At Start Now Farm in Bremerton, Washington, Jean Schanen and Glenn Huff grow enough produce to feed themselves and to stock their stall at the local farmers' market. Their acreage? A city lot plus the roof space on their garage, carport, and house.
:: Restraining corporate power requires changing the way we think about business. This means changing who owns, controls, and benefits from it. ::
Profits, for instance, can flow to workers, consumers, or the community—not just to outside investors. And these businesses succeed! Examples from outside the United States include worker-cooperatives in Argentina; Grameen Bank of Bangladesh (which, with its founder, Muhammad Yunus, won the 2006 Nobel Peace Prize); and the Mondragón cooperative in northern Spain, which employs over 75,000. In the United States over 120 million co-op and credit union members form the beginning point of a growing continuum of ownership forms that controls trillions of dollars in assets. The range is vast: from small worker- and community-owned firms to state pension funds, many of which are flexing their ownership muscle to force changes in corporate policy and target investment to meet public needs. What follows are seven of the best current models.
1 :: Creative Cooperatives :: Weaver Street Market Carrboro, North Carolina Founded: 1988 / Worker-owners: 92 Consumer-owners: 9,794 / Annual Sales: $20 million
Weaver Street Market is a food co-op that combines employee and consumer membership, with each group electing representatives to its board. The co-op has expanded greatly in recent years, adding a second storefront and a restaurant, with a third storefront in development.
Weaver Street illustrates a growing trend in the emerging community economy—businesses that meet a triple bottom line of economic, social equity, and environmental returns. Almost half the food it sells is produced locally, and it has invested in a local chicken-producing co-op. It estimates that 50 cents on every dollar spent at the co-op remains in the community versus 15 cents at chain stores.
The co-op hosts an average of four community events a week and has formed its own community foundation. Weaver Street fuels its truck with bio-diesel fuel from the Piedmont Biofuels co-op and purchases 10 percent of its electricity from green energy sources. It also recycles 15 types of waste.
Weaver Street is just one of the nation's estimated 21,840 co-ops and credit unions. Credit unions alone have over $700 billion in assets. Nationwide, co-ops in 2005 generated $273 billion in revenue and employed more than 600,000.
2 :: Social Enterprises :: Pioneer Human Services Seattle, Washington Founded: 1963 / Employees: 1,000 Annual Revenue: $60 million
We tend to think of nonprofits and businesses as opposites, but Pioneer Human Services shows that the mission orientation of nonprofits can blend with the financial savvy of business with impressive results.
Pioneer, which offers drug- and alcohol-free housing, employment, job training, counseling, and education to recovering alcoholics and drug addicts, finances 99 percent of its budget through fees for services and earnings generated in the manufacture, distribution, and sale of products. Businesses include retail cafés, sheet metal fabrication, aerospace precision machining (it's a contractor for Boeing), wholesale food distribution, and contract packaging.
Not only do these enterprises stabilize funding for Pioneer's social services, the businesses themselves are central to Pioneer's mission of helping “people on the margins of society” stay out of prison and off the streets. Its businesses enable Pioneer to give jobs to more than 700 men and women drawn from the ex-offender, homeless, and drug-recovery populations that it serves. Pioneer forms part of a growing “social enterprise” trend. Using IRS data, a National Center for Charitable Statistics researcher estimated that, in 2001, U.S. human service sector nonprofit commercial income totaled $41.6 billion.
3 :: Community Land Trusts :: Champlain Housing Trust Burlington, Vermont In operation since: 1984 / Members: over 5,000 Annual Revenue: $5.9 million
Formed in October 2006 from the merger of two Vermont community land trusts that date back to 1984, Champlain Housing Trust is the largest community land trust in the country, providing affordable housing for 2,100 households. “Even though we work throughout a large region, we are still community-based,” CEO Brenda Torpy says. “One-third of our volunteer Board of Directors are residents in our housing, and the Board also has representation from four municipalities and someone with a regional housing perspective.”
A study of Burlington land trust's first two decades found that 61.9 percent of residents who sold their land trust home, after an average residency of six years, were able to “step up” to traditional homeownership. Meanwhile the equity gain the trust retains enables it to continue providing affordable housing to future generations.
These findings are important. The revival of inner-city neighborhoods often displaces long-time residents, leading to widespread gentrification. Community land trusts are nonprofits that hold land in trust and prevent gentrification by keeping land off the market. Instead, the trust sells houses using a restricted deed while retaining title to the land. This lowers prices, allowing lower-income residents to purchase the homes; in turn, the homeowner signs a deed agreeing to restrict the resale price and share the equity gain with the trust to preserve affordability for future buyers.
Large-scale community land trusts, drawing upon the lessons from Burlington and 150 others across the nation, are now being developed in cities ranging from Chicago, Illinois to Irvine, California. In Irvine, the city plans to develop 9,700 units of land trust housing by 2025.
4 :: Community Development :: ONE DC Washington, DC Employees: 8 / Housing Units Organized: over 1,000 Annual Revenue: $750,000
Spun off last year as an independent group after nine years of work in Washington, DC's Shaw neighborhood, Organizing Neighborhood Equity DC—or “ONE DC”—builds community equity and wealth through developing neighborhood businesses, including a worker-run temp agency, a bike repair shop, an ice cream store franchise, and an African-American heritage tour company. ONE DC combines these efforts with community organizing, focused in three areas: affordable housing, living-wage jobs, and community control over development. When a developer wanted to build a mixed-use facility above a local public transit stop, ONE DC helped residents leverage their political power and negotiate a “community benefits agreement” mandating that at least 25 percent of housing units would be affordable and 15 percent of the retail space would be set aside for local business. ONE DC also helps tenants buy their own buildings by taking advantage of a city law that gives renters the first right to purchase their apartments if the landlord chooses to sell. Executive Director Dominic Moulden proudly boasts that his small group has organized “1,000 units of subsidized housing in a gentrifying area.”
ONE DC is just one example of the nation's 4,600 community development corporations (CDCs), nonprofit, neighborhood-based groups that play a key role in giving residents a voice in community planning and development in virtually every city. A 2005 survey found that nationwide CDCs help create 75,000 jobs per year.
5 :: Cutting Edge Ownership :: Market Creek Plaza San Diego, California Initial Public Offering: 2006 / Number of Investors: 416 Project value: $23.5 million
Market Creek Plaza's ties to its community can be seen in its portrait wall, which honors local residents who have made significant contributions to this San Diego neighborhood.
We usually hear the term “initial public offering” in connection with Silicon Valley, but in San Diego, community leaders came up with a new twist on the IPO concept: a local, community-based public offering linked to a new model of individual and community ownership.
The community is the diverse working-class Diamond neighborhood in southeast San Diego. With the support of the Jacobs Family Foundation, the community raised philanthropic and government funding to develop a commercial and cultural complex, anchored by a shopping center. A key element was the community public offering, which provided community residents and employees an exclusive opportunity to buy shares (valued at $200 and capped at $10,000) for a total 20 percent ownership stake in the project. As one community owner noted, “That we own stock, and that we have an opportunity to make a difference in what type of business goes in the community is unbelievable. We have some say-so in the community environment.”
The new Neighborhood Unity Foundation also has a 20 percent ownership share that provides it with a sustainable source of funding for its community wealth-building efforts. The Jacobs Family Foundation, which retains 60 percent ownership, intends to turn over its share to community owners by 2018. Ultimately, area residents will own 50 percent of the project and the neighborhood foundation the other 50 percent, retaining the profits generated to benefit the community rather than outside investors.
6 :: Public Pensions :: CalPERS Based in Sacramento, California Founded: 1932 / Plan Participants: about 1.5 million Assets: $244 billion
Public pension funds in the United States hold approximately $3 trillion in assets. California's Public Employees' Retirement System, better known as CalPERS, is showing that these assets can be managed for community benefit. CalPERS is the largest public pension fund in the nation, giving it significant leverage to challenge corporate practices.
And CalPERS uses its leverage, especially to push for limits on executive compensation and severance payments. For instance, it acted as sole lead plaintiff in a federal court lawsuit against UnitedHealth Group over its executive stock-option practices. It has also supported shareholder resolutions to require information disclosure, greater corporate attention to environmental cleanup, and better human rights practices in developing nations.
CalPERS' direct investment activity has been equally impressive. As of 2004, CalPERS dedicated 11 percent of its fund to in-state investments. Roughly 2 percent is targeted specifically for investments in California's low-income communities through organizations like Pacific Community Ventures (PCV), a group that identifies businesses in low-income communities that are likely to generate high-wage jobs. A typical example is Niman Ranch, an Oakland-based natural meat product distributor. With pension fund support, Niman now does about $50 million a year in business and employs 110 formerly low-income workers at an average wage of $14 an hour.
Employee ownership and a highly egalitarian workplace culture make W.L. Gore very different from your typical corporation. A worker may be a team leader on one project and follow others on another. Compensation is not determined by “the boss,” but is tied to your contribution and decided by a committee, like many law firms. The firm regularly ranks on Fortune's “Best Companies to Work For” list.
Gore is best known for its Gore-Tex fabrics, but also is an industry leader in other areas. Gore's heart patches and synthetic blood vessels have been implanted in more than 7.5 million patients.
When Gore was founded, there were fewer than 300 employee-owned businesses in the United States. Now workers own a growing share of nearly 10,000 American businesses. All told, 10.5 million employee-owners own $675 billion in business assets. This ownership stake is financed by workers' pension contributions through Employee Stock Ownership Plans (ESOPs). Workers do not “run” most ESOPs, but federal law gives them control over “major decisions” such as merger or dissolution, which leads ESOPs to keep jobs and capital anchored in home communities. Many ESOPs, like Gore, informally give workers considerable say. ESOPs also financially benefit their employee owners. The average value of an ESOP retirement account now exceeds $64,000, far greater than most people's 401(k) holdings.
Gar Alperovitz, Steve Dubb, and Ted Howard are leaders of the Democracy Collaborative at the University of Maryland. Gar Alperovitz's recent book, America Beyond Capitalism, is now available in paperback. For additional examples of alternative corporate models, see their website at www.community-wealth.org.
Read more about how people are standing up to corporate power in the Corporations issue of YES! Magazine.
Wednesday, January 23, 2008, 12:32 PM EST
[General]
by Judy Wicks
:: The owner of the White Dog Cafe on building a business and a national movement ::
My story of the White Dog Cafe begins with the first time I walked onto the 3400 block of Sansom Street in 1972. I was enchanted. The narrow tree-lined street, with charming, if somewhat rundown, Victorian brownstone houses, was an oasis from the high-rise dormitories, office buildings, strip malls, and parking garages that surrounded it. The 100-year-old houses on Sansom Street, with a few small businesses on the first floors, were human-scale—quaint, homey, inviting.
I moved into an apartment at 3420 Sansom, future home of the White Dog, and soon learned that the entire block had been condemned to make way for a shopping mall.
I eagerly joined the local community group organized to fight the demolition and save our homes and businesses. This was my first experience in community organizing; my first act of civil disobedience (but not the last) was lying down in front of a bulldozer that was to begin demolition, even as our group sought a restraining order.
It was Jane Jacobs’s fight to save her neighborhood in Greenwich Village and her vision, articulated in her classic book, Death and Life of Great American Cities, that provided our group with the inspiration to save our block.
From her home above a candy store, Jacobs observed what she called the “intricate sidewalk ballet” of urban life. The complex goings-on of shopkeepers opening up in the morning and closing down at night; people heading to work or school, home again, then back out for leisure activities; housewives chatting on the stoops; children jumping rope and playing hopscotch.
Jacobs wrote about communities where people lived and worked in the same neighborhood. And she challenged the top-down urban renewal of the ‘50s and ‘60s in which vibrant communities and thriving local businesses were razed to build sterile high-rise office buildings and housing projects.
She pointed out that the housing projects were segregated by class—low-income projects plagued by crime, moderate-income developments that were dull and gray, and luxury developments that were vulgar displays.
Walkable communities were replaced by suburbs where housing developments and shopping malls destroyed rich farmland for no more than what Jacobs called “cheap parking.” As Bill McKibben points out, it was in the 1950s, as people were separated by migration to the suburbs, when happiness in our society began its decline.
Eventually, we won the fight to save our block from the wrecking ball, which gave me the opportunity to buy the house at 3420 Sansom Street. Jane Jacobs’s vision of vibrant urban life became my own. I wanted to “live above the shop” as Jacobs described. In 1983, I opened the White Dog Cafe as a coffee and muffin take-out shop on the first floor of my house, where I have now lived for 35 years. Today the White Dog is a full-service restaurant occupying three of the brownstone row- houses. Our gift shop, the Black Cat, sells local and fair-trade crafts, books, and novelties. The other row houses are home to other restaurants, a coffeeshop, real estate office, newspaper and magazine shop, and a hair salon.
By living above the shop on Sansom Street, I saw my own sidewalk ballet and grew to understand first hand how the wonderful diversity of people added to the vitality of my neighborhood and to the success of my business.
It’s About Relationships Jane Jacobs saw cities as the natural ecosystem for human beings. The parts of the city are not separate, but interconnected and interdependent, as in nature. Our strength comes from diversity, not monoculture.
Her obituary in The New York Times said that Jacobs’s “prescription for cities was ever more diversity, density, and dynamism—in effect to crowd people and activities together in a jumping, joyous, urban jumble.”
Judy Wicks lives above the White Dog Cafe.
Living and working in the same community has not only given me a stronger sense of place, but a different business outlook. There’s a short distance between me as the business decision-maker and those affected by my decisions—a basic principle of the local living economy movement. As a small business owner, I am more likely to make decisions from the heart, not just from the head, and those decisions are more likely to be in the best interest of the employees, customers, neighbors, and suppliers I see every day. Business is about relationships with everyone we buy from, sell to, and work with.
Jane Jacobs talked about the importance of human-scale—whether it be architecture or enterprises. As a society, we are taught that economic growth benefits everyone and success is measured by material gain. Yet continual growth is destroying the planet, using up more natural resources than can be regenerated. And it is the rich who are getting richer, while the share of wealth for everyone else is declining.
I made a conscious decision to stay small and learned to grow in other ways besides the physical. As the Earth Charter says, “After basic needs are met, it’s about being more, not having more.”
Rather than growing our size, sales, and profits, we can grow by expanding our knowledge, consciousness, and creativity, and deepening our relationships. We can have more fun in our communities rather than thinking that happiness comes from having more stuff and taking vacations to distant places.
Jane Jacobs wrote not only about diverse and lively neighborhoods, but also about regional economies and the importance of producing goods with local resources and labor for local consumption. Today, as we face the dual challenge of fossil fuel–induced global warming and peak oil, Jane Jacobs’s vision for walkable communities and vibrant local economies is more significant than ever. We can reduce shipping by developing community self-reliance with local energy security, local food security, and interdependent local economies to provide basic needs.
Jane Jacobs wrote that cities prosper when they practice “import replacement.” Business people can ask these questions when they consider how to replace imported goods with ones produced locally: What does our community need? Where are opportunities to build community self-reliance? Where are the gaps in our local economy that we can fill with a new business? When products aren’t available locally—such as sugar, coffee, tea, and chocolate—how can we insure fair trade, supporting the producers and workers where products originate?
We have been using the old paradigm of continuous growth to measure success, while neglecting the issues of place, appropriate scale, and broad-based ownership. Democracy depends on having many owners. The more owners, the more freedom. As we build a new economy of new local businesses, this is the time to help those who have been left out of the industrial economy find ownership opportunities in local living economies.
Jane Jacobs talked about how ingenuity came from the “close-grained juxtaposition of diverse talents.” Diversity increases creativity and innovation.
When I think about preparing for the challenges of peak oil and climate change, I imagine a town coming together to prepare for a big storm or an invading army, passing sand bags from hand to hand to protect entrance ways, or rushing supplies of food in from the countryside. Competition is not an option—everyone recognizes that we need each other to survive.
Stewards of Farm Animals My own recognition of the value of cooperation came from my love of animals. For a long time I bought only cage-free chicken and eggs, but I did not know about the factory farming of pigs until I read John Robbins’ book in the ’90s. There I learned about the way pigs are raised in confinement with unspeakable pain and deprivation. Treating them in this inhumane way is institutionalized cruelty that is destroying our own humanity.
I realized that the pork I was using must be coming from factory farms, so I took off the menu all the ham, bacon, and pork chops, and our chef set out to find a new source. A farmer who was bringing in free-range chicken from Lancaster County started bringing us pork raised by his neighbors in a small-scale, traditional way.
Eventually, all the meat and poultry on our menu came from small family farms where animals are raised on pasture and treated with respect. We finally had a cruelty-free menu, and I wanted to be the only restaurant in town that could make this claim.
But then I thought, if I really care about animals, the environment that’s being polluted by industrial farming, the family farms being driven out of business, consumers eating meat full of hormones and antibiotics, then I couldn’t keep this as my market niche. I have to share what I’ve learned with other businesses, including my competitors.”
It is not enough to do the right thing within my company. I had to move from a competitive mentality to one of cooperation in order to build a local economy based on humane and sustainable farming.
So I started the Fair Food Project. Our first project director, Ann Karlen, has been providing consulting to restaurateurs and chefs on how to buy from local farmers. She’s connected hundreds of restaurants, stores, and farms, so that our region has become known for our local food system. Community self-reliance is something we can all work on together—a way of doing business that not only builds loving relationships, but is essential to our survival in a changing world.
What do you love' At its heart, our movement for local living economies is about love. It’s love that can overcome the fear that many may feel in the hard days to come. Our power comes from protecting what we love—place, people, animals, nature, all of life on our beautiful planet Earth. Even business. Business has been corrupted as an instrument of greed rather than one of service to the common good. Yet we know that business is beautiful when we put our creativity, care, and energy into producing a product or service needed by our community.
Our materialistic society has de sensitized us to the suffering underlying our industrial economic system.
We must open our hearts and eyes and ears—to hear the cry of the pigs in the crates and of animals in laboratories and in the fur industry.
We need to feel the suffering of women and children in sweatshops, or enslaved in chocolate production.
We need to feel the suffering of migrant workers in slaughterhouses and pesticide-soaked industrial farms, the suffering of the people of Iraq, of Nigeria, of the rainforest tribes—everywhere there are oil and other natural resources to exploit and fight wars over. And we need to hear the cry of the whales, polar bears, and the natural world that is dying around us.
What can provide the energy and passion for all that we must do now?
We must simply allow ourselves to love what we love. And in so doing, we will find our place as humans in the family of life—in the jumping, joyous, jumble of life.
Judy Wicks is founder and proprieter of the White Dog Cafe, and cofounder of the Business Alliance for Local Living Economies (BALLE). This article is adapted from her speech at the June 2006 BALLE meeting in Vermont.
Photo's of the White Dog Cafe by Tom Gralish for YES! Magazine. Tom is a Pulitzer-prize winning photographer. For the past 25 years, he has been photographing the life and culture of Philadelphia for the Philadelphia Inquirer. His latest project is “Scene on the Street,” a weekly column documenting the city’s urban neighborhoods.
Read more articles on local economies in our Go Local! issue.
:: These credit unions invest in their members and stand by them, even in hard times. And the members, in turn, stand by their communities ::
Jerry Moore lost his home, his truck and his business when Katrina hit. But he didn't lose his connection to Hope -- the financial institution that helped him get started and stuck with him when times got tough.
Jerry Moore had always been a hard-working guy. He earned a decent salary working for the local phone company in Louisiana's St. Bernard Parish, but he was always reaching for something better. So he bought a used dump truck and started a hauling business on the side.
But his truck was old and didn't run well, so Moore knew that if he really wanted to make a go of it, he'd need a better vehicle. Unfortunately, he didn't have the credit history he needed to expand his business into a money-making enterprise.
He started working to boost his credit, and he took a six-week course on helping small contractors obtain city contracts, the banking and finance portion of which was taught by Lynette Colin, manager of Hope Community Credit Union’s New Orleans branch.
“After my class was over, Jerry approached me and asked about getting a loan,” says Colin.
Unlike conventional banks, Hope is a community development financial institution (CDFI), so it puts a priority on serving working-class and low-income people as a means of rebuilding disadvantaged communities. Colin helped Moore get a Hope loan to purchase a new dump truck for Moore & Moore Trucking in the summer of 2005.
A few weeks later, Hurricane Katrina hit. Moore and his wife evacuated in time to avoid the worst of the storm. But as he watched news reports of the devastation, Moore realized he’d lost his home and everything he owned, including his new truck.
Colin also evacuated the city, but she had her computer and files with her. As soon as the storm cleared, she made her way to the temporary office Hope set up in Baton Rouge and started calling her clients. She reached Moore on his cell phone.
“I was just praying he’d gotten his truck out of St. Bernard Parish,” she says. “I found out he hadn’t, but at least he and his family were safe. My advice then was to contact his insurance agent and get that truck paid off. Then we had to think about the future.”
Though Colin urged Moore to apply for a loan for another truck right away, he had bigger plans. Knowing that it would take many hands to clean up his beloved city, he asked Hope to finance three trucks plus trailers for hauling away the debris.
“It was a bold move in uncertain times, especially for someone who had just lost his home,” says Colin. “So I said, ‘Jerry, don’t you think you’re being a little aggressive here'’ And he said, ‘Lynette, there’s going to be a lot of work here, and I can do it.’ Because I’d gotten to know him up front—we do that with all of our customers—I knew that if he wanted to make this work, he’d make it work.” She laughs. “Sure enough, it’s working.”
While Moore was rebuilding his business, Colin kept an eye on resources that would help him. When she found out about a state bridge loan program, she called him and told him to apply. When the Army Corps of Engineers called a meeting with small developers to discuss subcontracts, she called Moore and other contractor clients and told them to go. Moore was able to secure one of the Corps subcontracts.
“That’s part of what CDFIs do,” says Colin. “We look out for our clients.”
Within a few short weeks, Moore & Moore Trucking was back and bigger than ever, thanks to a loan from Hope that financed one truck and two trailers. With his newly built credit history with Hope, Moore was able to quickly secure additional funding for the remaining two trucks and one trailer through another financial institution. Business boomed.
Today, Moore’s company continues to haul debris out of Louisiana neighborhoods and work in other fields, such as highway construction. Moore is so busy that he’s hired nine employees, most of whom also suffered losses due to Katrina. Some of Moore’s employees have applied to Hope for their own loans, to rebuild their homes and otherwise improve their lives and communities.
The Need for Community Investing For some people, calamity isn’t a once-in-a-lifetime storm. It’s an on-going fact of life. Consider families trying to survive on minimum wage. A small loan for college or to start a micro-business might be just what they need to improve their situation, or perhaps a small loan to help them make it through a bad month. But without a sufficient credit history, few conventional banks will take a risk on those who need it most.
To get a loan, low-income people are often forced to turn to unscrupulous lenders, such as pawn shops and payday lenders, which perpetuate the cycle of poverty by charging ridiculously high interest rates.
That’s where CDFIs like Hope come in. These banks, credit unions, and loan funds serve low- and middle-income people by providing alternatives to high-cost lenders that prey on the financially vulnerable. By offering low-interest, small loans and low-minimum accounts, CDFIs help people lift themselves up economically and, in so doing, improve their communities. They help struggling farmers hold on to land their families have been farming for generations. They provide loans for single mothers to start small businesses. They supply capital for much-needed community services, such as child care, affordable housing, and health care.
In addition, most provide mentoring, education, and technical support to help borrowers succeed, from holding financial literacy workshops to sitting down with borrowers and drawing up a business plan.
“When a conventional bank looks at someone like Jerry Moore, it sees an unbankable financial risk,” says Colin. “When I looked at Jerry, I saw a resourceful, hardworking man with the drive to make his business succeed.”
Though many people (and conventional banks) assume that the nation’s poorest people will often default on loans, studies show that middle- and low-income borrowers have high payback rates. A survey of 517 U.S.-based community development banks, credit unions, and loan funds, showed payback rates of over 97 percent, according to the CDFI Data Project.
Serving Diverse Populations While most CDFIs share a general mission to put capital toward lifting up economically disadvantaged neighborhoods in the regions they serve, some have even more targeted missions.
ShoreBank Pacific in Ilwaco, Washington, provides loans that benefit low- and middle-income people and the planet, for example, believing that long-term economic prosperity goes hand-in-hand with a healthy environment. In 2004, this CDFI helped Portland residents save a beloved seven-acre farm surrounded by public parklands from housing developers.
The Try/on Life Community Farm (TLC Farm) nearly met its end in 2004, when the renters who ran this nonprofit sustainability and education center received an eviction notice. The landowners had decided to sell the property to a developer, who planned to build 23 luxury homes on the land.
The farm residents approached the developer, who agreed to sell them the option agreement for $150,000, giving the TLC Farm nine months to raise $1.4 million to purchase the property. Since none of the farm volunteers had that kind of cash, they approached ShoreBank Pacific for a loan.
“At the time, they didn’t yet have the resources pulled together to be considered bankable, even by a community development lender,” says ShoreBank’s Lucy Brehm. “But our loan officer believed in their mission and stuck with them over a long period as they raised funds, helping them think through creative ways of making this a bankable loan.”
With the possibility of funding at hand, the 15 residents ramped up their educational workshop schedule and hosted picnics and barbeques to get to know their neighbors better and engage them in their mission.
Eventually, they secured $400,000 in government funding, $600,000 in a ShoreBank loan, and the remainder in private donations to complete the purchase—just as the option was about to expire. Today, the land is held in trust by the Oregon Sustainable Agricultural Land Trust, which leases it back to TLC Farm. The farm continues to host educational workshops on natural building, permaculture farming, herbal medicine, and social activism.
Since opening in 1997, ShoreBank Pacific has supported other sustainable projects from San Francisco to British Columbia. Its borrowers have used their loans to establish an environmentally focused alternative school, create a green office building, expand an organic dairy, and more.
Finance in Indian Country Sometimes, a particular population will create a CDFI to serve its members. The Lakota Fund was created to help low-income Lakota Sioux on the Pine Ridge reservation gain access to development capital and credit to buy homes, start small businesses, or pay for college.
When the Lakota Fund started in 1986, the majority of its borrowers had never had a loan or even a checking account, and 95 percent had never owned a business. In 2003, the South Dakota Business Review noted that real per capita personal income in Shannon County, which encompasses the Pine Ridge Reservation, had grown by 80 percent since 1985—in contrast to just 44 percent for South Dakota as a whole. It attributed much of that growth to the Lakota Fund.
Community investing is at the heart of building thriving local communities, giving a hand up, not a hand out, to those who need it most.
Tracy Fernandez Rysavy is editor and Prianjali Mascarenhas is Community Investing Program manager for Co-op America, a leading nonprofit organization working on market solutions to social and environmental problems. To find out more about using your money to create a better world, check out Co-op America's Real Money newsletter. Photo by Greg Campbell Photography
