An article in The Chronicle of Philanthropy details the surge of interest in investing with community development financial institutions (CDFIs), as a response to the pandemic and the country’s racial reckoning. Corporate and philanthropic leaders are recognizing that CDFIs can connect their resources to work that closes racial health, wealth and opportunity gaps, and LISC COO Annie Donovan, quoted in the piece, explains the how: “We’re working in communities where traditional capital is unavailable.”
The excerpt below was originally posted:
Affordable Loans for Nonprofits Are ‘Having a Moment’
By Marc Gunther, The Chronicle of Philanthropy
In response to the Covid-19 pandemic, the killing of George Floyd, and the Black Lives Matter protests, foundations have given many millions of dollars to activist groups fighting for racial and economic justice. Philanthropy must “attack the roots of systemic inequality” and “reimagine our democracy, our economy, our culture for the better,” declares Darren Walker, the Ford Foundation’s chief executive. Donors are called on to support social movements and community organizations led by people of color that push bold ideas like abolishing prisons and the police.
And then there’s this, also in response to the deep and troubling inequities laid bare by the pandemic and demands for racial justice: a surge of giving from businessfriendly donors that is more pragmatic, less political, and intended to make an immediate difference by helping Black and Hispanic people rescue their struggling businesses, start new ones, and create jobs in communities that desperately need them.
To that end, corporate foundations, Silicon Valley tech companies, banks, retailers, and private foundations are pumping money and fresh ideas into communitydevelopment financial institutions, or CDFIs. CDFIs, most of which are nonprofits, make loans at affordable rates to help poor people build wealth.
These mission-driven lenders are not new or anti-establishment — they have been funded, in part, by the U.S. Treasury, since the mid-1990s — but they have shown that they can provide a financial lifeline to Black, Hispanic, and female business owners who have been neglected by mainstream banks.
MacKenzie Scott, the ex-wife of Amazon founder Jeff Bezos, led the way in July with donations to seven CDFIs: Opportunity Fund ($15 million); Capital Impact Partners ($15 million); Grameen America ($25 million); Hope Enterprise (which declined to disclose the size of its grant); the Local Initiatives Support Corporation, or LISC ($40 million); the Low Income Investment Fund ($10 million); and Oweesta ($3 million). In most cases, Scott’s were the biggest donations in the history of each CDFI.
Among companies, Google, Netflix, PayPal, Square, and Twitter have pledged to either make grants to or deposit substantial sums — $170 million in the case of Google — in support CDFIs or Black-owned banks. Working through LISC, one of the America’s biggest CDFIs, Lowe’s is awarding grants of $30 million to small businesses led by people of color or women and $25 million to enterprises in rural communities.