Capital for communities : connecting community development loan funds to individual investors

Abstract

Community development loan funds (CDLFs) play a critical role in financing affordable housing, small businesses, and non-profit organizations in low-income communities throughout the US. Since the 2008 financial crisis disrupted CDLFs' primary sources of capital-banks and foundations-many CDLFs have been pursuing new sources. During these years of economic recession, individuals' confidence in the financial system declined while the Socially Responsible Investing and Impact Investing sectors experienced significant growth. With these concurrent trends as a starting point, this thesis explores the potential for socially-minded individuals to become a more substantial source of capital for CDLFs. Using case studies of two organizations with successful individual investor programs- Boston Community Capital (BCC) and Calvert Foundation-my research examines the costs and benefits of individuals as a source of capital. Specifically, I study BCC's local capital raising for its Boston Community Loan Fund and newer Stabilizing Urban Neighborhoods Initiative and Calvert Foundation's Community Investment Note, a retail product available to individuals nationwide. My research analyzes the advantages and shortcomings of these differing approaches, assesses the viability of replicating each model, and makes recommendations for scaling up individual investing in CDLFs.