Community investment products for retail clients
I cut my teeth at a consulting firm in Washington, DC, arranging funding for development projects in emerging markets. In a quiet time for a $ 50 million telecommunications project in Afghanistan, I visited my mother’s family in the Appalachian Mountains of Kentucky. As I walked past houses with tarpaulins for the roofs and the local high school collapsing on itself, I was struck to find that conditions in my grandmother’s town were exactly the same, if not worse, than those in my grandmother’s town. the conditions on the ground in the countries where I managed the capital. My eyes had opened to the amount of work there was to do in our own backyard. I left the international consulting firm and joined a US-based Community Development Financial Institution (CDFI) dedicated to providing non-predatory loans to people and places disconnected from major US financial arteries.
CDFIs are private financial institutions that channel affordable capital to low-wealth communities across the country. CDFIs can be for-profit or non-profit, depositories (banks and credit unions) or non-depositories (loan funds and venture capital companies). CDFIs obtain and maintain their designation with the US Department of the Treasury through rigorous enforcement and ongoing compliance requirements.
Since then, I have integrated into community development finance and have remained at the forefront of the industry’s roll-out of ready-to-use, user-friendly investment products available to a retail audience. Over the past five years in particular, CDFIs have developed community investment products based on the advice of individual investors and their financial advisers. Today, financial advisers can explore CDFI products in several asset classes for the consideration of their clients.
Products in cash and cash equivalents. Many retail investors are looking for low risk, high liquidity community investments. Opening CDs or money market accounts in FDIC-insured CDFI banks or NCUA-insured CDFI credit unions is a convenient way to dip your toes in the waters of community investment.
- Autonomous credit union, a 40-year-old deposit-taking financial institution used deposits and other sources of capital to generate more than $ 9 billion in financing for individuals, families and businesses in North Carolina, South Carolina, in Florida and Virginia. Self-Help Credit Union offers money market accounts and Community recovery or Green CDs for individual investors.
- Hope Credit Union, a federally regulated, minority and female-owned financial institution located in the Far South, is often the only deposit-taking institution in the communities it serves. One example is the town of Itta Bena, a small, predominantly black town in the Mississippi Delta with a poverty rate of 42% and a median household income of $ 20,400. Working in areas of persistent poverty, Hope Credit Union must import capital beyond its local geography to finance small businesses, housing, health care and other vital needs. Hope Credit Union offers transformational deposit CDs and money market accounts with rates comparable to conventional banks but with great social impact.
Fixed income products. Over the past five years, CDFIs have appeared regularly in the fixed income markets, including a handful that are S&P rated and offered continuously.
- The Local Initiatives Support Society (LISC) issues up to $ 150 million in AA rated S&P Fixed Income Impact Notes. Tickets are for general corporate purposes, including up to $ 10 million for our recently announced commitment to racial equity – Project 10X. As part of Project 10X, LISC will invest in Building Equity and Wealth for Blacks, Indigenous People and People of Color (“BIPOC”). This includes investing in home ownership and ownership of small businesses, creating credit and savings, strengthening BIPOC-led financial institutions, investing in community assets and welfare. community, and the support of quality jobs with good wages and benefits.
LISC’s ratings are available from Incapital, an underwriter and distributor of securities. Incapital allows individual investors to purchase LISC Notes, offered through its InterNotes debt program, through their brokerage accounts. These notes are sold on the platform inherited from Incapital in installments of $ 1,000, with maturities ranging from 1 to 10 years and at fixed interest rates. Prices are determined by the market and based on corporate financial stocks of the same rating. For more information and to get LISC’s prospectus and the latest pricing supplement, visit www.lisc.org/invest.
- Other S&P rated ratings include Capital impact investment notes and Lasting Impact Notes of the Century.
Equity products. CDFIs like Oportun and Amalgamated Bank offer equity products that retail investors can consider to complement their holistic community investment portfolio.
As any financial advisor knows, no financial product is risk free. Each investment should be assessed against the client’s individual parameters governed by their investment policy statement.
CDFI investment products are a powerful arrow in the quiver of financial advisers with clients interested in community investing, social justice and environmental justice. Since learning about community investing, I have discovered that CDFIs like Fahe and Natural Capital Investment Fund are actively lending in places like Martin County, Ken. where a large part of my family still resides. Places that are often disconnected from traditional financial institutions, but are very much linked to their place-based dreams and potential.