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December 10, 2003
US Community Investment Assets Nearly Double Over the Past Two Years
    by William Baue

Community development financial institution assets rise 84 percent from 2001 to 2003, making community investment the fastest growing segment of socially responsible investing.


Providing affordable housing for low-income women recovering from substance abuse in Baltimore and creating 10,000 beekeeping jobs in rural South Africa. These are just two of the initiatives supported through community investment, or financing that serves economically disadvantaged people who are often ignored by traditional financial institutions. Community investment is the fastest growing component of socially responsible investing (SRI) in the US, with assets in community development financial institutions (CDFIs) nearly doubling over the past two years, according to the Community Investing Program.

Yesterday, the Community Investing Program, a project of the Social Investment Forum (SIF) and Co-op America, announced that total assets held by CDFIs in the US grew 84 percent during that period, from $7.6 billion in 2001 to $14 billion in 2003.

"This new data shows the growing power and reach of community investing in our underserved communities across the United States and throughout the world," said Jean Pogge, Community Investing Program chair and ShoreBank senior vice president of mission-based products.

There are four types of CDFIs: community development banks, community development loan funds, community development credit unions, and community development venture capital funds. Of these, the most robust growth occurred with community development banks, whose assets rose by 130 percent, from $3.1 billion in 2001 to $7.2 percent in 2003. While most of this increase represents real economic growth, some of it can be attributed to improved data collection.

"Community development bank assets surged 130 percent because of an increase in newly CDFI-certified banks, the improved capacity of the national network intermediary for development banks, the National Community Investment Fund, and growth in existing banks' assets," SIF spokesperson Todd Larsen told SocialFunds.com. "[Because of the improved capacity of the National Community Investment Fund,] a portion of that growth is due to better tracking."

Of the remaining three community investment categories, community development venture capital funds grew by 58 percent, from $300 million in 2001 to $485 million in 2003. Community development credit unions and community development loan funds each grew by 50 percent: assets in the former rose from $1.8 billion in 2001 to $2.7 billion in 2003, while assets in the latter increased from $2.4 billion to $3.6 billion.

Investment managers typically allocate CDFI investment through the cash portion of portfolios, whereby they can earn a market rate return while also being covered by the Federal Deposit Insurance Corporation (FDIC).

"The risk that depositors take is almost nonexistent--there have not been significant failures or losses in this industry," said Ms. Pogge.

Michael Lohmeier, investment manager of affordable housing and community development at the General Board of Pension and Health Benefits of The United Methodist Church, concurs. The General Board allocates five percent of its assets, or more than $600 million, to community investment, with an additional $400 million in future commitments to community investment.

"We have found, as studies have shown, that community investing is a safe and sound investment," said Mr. Lohmeier. "The General Board, in the thirteen years of our program, has never had losses, we have consistently beaten our benchmark in returns, and we have done this by using a wide range of community development investments."

Since the General Board began its affordable housing and community development program in 1990, it has earned a compounded annual rate of return of 8.4 percent. Of the 20,000 affordable housing units underwritten by the General Board, 29 are located in the Margaret J. Bennett House in downtown Baltimore, Maryland. The Bennett House, a project of the Women's Housing Coalition, provides single occupancy rooms for low-income women recovering from substance abuse.

Domestic CDFIs also support overseas initiatives. New York City-based Shared Interest is collaborating with South African partner Thembani to help 10,000 inhabitants of rural Mpumalanga and Limpopo create new livelihoods as apiarists. The project will provide bee-keeping and business skills training, a bee-keeping suit, 50 hives of African bees, and above-market prices for organic honey to each new entrepreneur, 75 percent of whom are women who are regularly excluded from commercial activity.

 

 
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