05 Mar Community Investment Loans
Calvert Foundation in Bethesda Maryland is a leading institution that offers “Community Investment Notes” designed to pay a fixed below-market rate of interest. As discussed here, “Calvert raises capital from private and institutional investors, lends it to socially oriented organizations, then returns it to investors, with interest. It works to create a more effective and efficient social-capital market by creating innovative financial products and services such as Community Investment Notes, a first-of-its-kind debt security now sold through Charles Schwab and Merrill Lynch.”
Investors can choose from a variety of products to target their investment, but all products share the goal of ending poverty in the United States and the world. For example, you can invest in their Gulf Coast Recovery Initiative, Jubilee Investment Initiative that directs faith-based investments to non-profits throughout the world, or the Grameen Project for microcredit for the poor in Bangladesh. The investor also can choose the amount of their investment (as little as $1,000), how little a return on investment they desire (0 to 3%), and the duration of the note (5, 7 or 10 years).
I particularly like their “Social Return on Investment Calculator.” If, for example, you want to know what a $10,000 low-interest five-year loan in Asia will do, you can plug in the numbers and discover that it will finance 142 microenterprises and create 225 jobs.
Calvert was recognized by Fast Company magazine as one of the top 25 social enterpreneurs in 2006. The award recognized that for over the past 10 years, “Calvert Foundation has recycled more than $250 million in investments that have helped to create more than 119,000 jobs for low income individuals, built or rehabilitated 6,600 affordable homes, and financed more than 6,900 nonprofit facilities, including daycare centers, community health clinics, and schools.”
But Calvert is thinking much bigger. “What would happen if every investor made an investment allocation of this sort? We estimate that $100 billion of investment over a 10-year term would finance more than one billion microenterprise jobs, 160 million affordable housing units and 70 million cooperatives or nonprofit facilities. And each one of those new jobs, small businesses and homes would generate ripple effects creating additional benefits in towns and cities across the United States and around the globe. Amounting to just about one half of 1 percent of the roughly $19.2 trillion in investment assets in the US capital markets alone, this commitment would make a significant impact in improving the lives of those in struggling communities, and create a healthier global economy for all.”
Read this brochure and be inspired. Providing low-interest liquidity for the poor and needy throughout our nation and the globe. Great idea.
Bravo to Roger for raising the Calvert Fund’s innovative notes program. I want to note that you can also invest, through the Calvert notes program, in supporting independent media worldwide, by purchasing notes of Media Development Loan Fund (MDLF). Roger focuses on US programs funded by Calvert, but in some respects, the international steps it has taken are still more innovative.
MDLF is a nonprofit venture fund that invests in “independent media” – meaning newspapers, radio, TV, internet that present a substantial amount of objective information and news in their programming, are not owned by the government, political parties, or the local mafia – around the world, including B-92 TV/radio in Belgrade, El periodico in Guatemala, the Mail &Guardian in South Africa, along with many other smaller and lesser known clients in Indonesia, Malaysia, Russia, Colombia, etc. The total portfolio is about $25 million invested. See http://www.mdlf.org. I chair the board, hence the unapologetic cheerleading.
What I wanted to point out, though, is that the most important innovations in philanthropy these days have to do with finding ways to access capital from the real capital markets – not simply the amounts available from traditional philanthropic donors. But that means, as Roger points out, that those funds need to be used in the form of loans, credits, and other financing that provide at least some kind of actual financial return to the provider.
There are many kinds of development goods for which that approach won’t work – public investment in child vaccination, for example. But awareness is gradually taking hold that a vast amount of international development depends upon the quality of the government where the aid is delivered – corruption, free flow information, democratic accountability, all these kinds of good governance structures determine in large part whether there will be private investment that, in the end, is the machine that lifts people out of poverty. That is seemingly indirect mechanisms such as independent media are so important in international development.
The Calvert Fund has taken a big step forward in two ways. The first is by creating these utterly innovative notes and, along with that, establishing the infrastructure to navegate the securities and other regulatory laws to make them function with reasonable transaction costs. MDLF could not have issued the notes on its own – the transaction costs even to establish in the bare minimum number of US states that it was exempt from registration would have been too daunting. But Calvert offers a reasonable price to take care of all that. Second, Calvert has recognized the importance of being willing to do international work, in areas such as independent media that on traditional aid models seem quite indirect.