September 20, 2005
Community Investment Bridges the Gap from Destitution to Restitution After Hurricane Katrina
by William Baue
Predominantly low-income African Americans were barred from crossing the bridge out of New Orleans,
but now community development bridge loans are spanning the gulf back to stability.
After Hurricane Katrina, Gretna Police Chief Arthur Lawson closed the Crescent City Connection
bridge to evacuees on foot who, according to a United Press International account, were told by New Orleans
authorities that it was the only escape route. Those turned away were predominantly low-income
African Americans, whose economic disadvantage stems in part from being underserved by traditional
financial institutions. To counter this inequity, New Orleans' Hope Community Credit Union served this population before the
storm. Now, afterwards, Hope and other community development financial institutions (CDFIs) are
offering bridge loans and other financial support to span the gulf between destitution and
"The affluent in New Orleans could afford to build homes on higher
ground, while people lacking wealth were subjected to living in the lower areas of the city that
were inundated by floodwaters, so Katrina had a very disproportionate impact on these low-wealth
individuals," said Bill Bynum, CEO of Enterprise Corporation of the Delta (ECD), the parent CDFI of Hope. "Lack of wealth forced people into a
position where they were unable to leave the city in a timely way--they didn't have resources,
transportation, or a place to go."
"How and how fast we bounce back from the storms is
directly a function of assets we can tap," Mr. Bynum told SocialFunds.com. "Just as those who had
the fewest assets before the storm felt the greatest impacts, so too will it will take a lot longer
to rebound for those who didn't have renters' or flood insurance, who don't have marketable job
skills, who don't have stock portfolios."
Hope is helping accelerate the pace of recovery
by providing the necessary financial tools. For example, the Federal Emergency Management Agency
(FEMA) is issuing funds of up to $2000 to those
in need, but it requires individuals to have a bank account to receive payments.
"A lot of
the low-income residents of the Gulf South were unbanked, and so Hope is helping Katrina evacuees
set up no fee banking accounts," Mr. Bynum told SocialFunds.com.
responsible investors (SRI) throughout the nation have been making deposits in ECD and Hope,
creating a reserve from which ECD/Hope is providing bridge loans to help tide over the financial
squeeze. For example, downpayments and deposits for rental units
"It may be a bridge loan
to provide down-payments and deposits for rental units, or to repair the roofs on their homes with
Tropical Storm Rita on the horizon," explained Mr. Bynum.
The Calvert Foundation and the Shefa Fund are among those in the SRI community directing
funds to ECD/Hope. The Calvert Foundation is also directing funds to the Southern Mutual Help
Association (SMHA) Rural Recovery Fund and Mercy Corps, an international relief and
The Shefa Fund has established the Hurricane Katrina Recovery
and Redevelopment Fund in conjunction with Jewish Fund for Justice (JFJ). This effort underscores how CDFIs not only address
immediate needs, but also seek to dismantle the structural underpinnings of institutionalized
poverty and racism.
"All communities in Katrina's path suffered, but they did not suffer
equally," said Simon Greer, JFJ executive director. "Low-income communities in the Southeast were
neglected before, during, and immediately following the hurricane."
"Many of these
communities were already disenfranchised prior to Katrina's wrath, and we want to work to avoid
those same communities being further disenfranchised, economically and politically, in the
relief/rebuilding/recovery efforts," Amanda Joseph, tzedec director for the Shefa Fund told
SocialFunds.com. (Tzedec means "justice" in Hebrew). "For Shefa and our partner, JFJ, it matters
that the Jewish community has a way to focus not just on relief, but on a visible way to support
longer-term reinvestment and redevelopment for the low-income communities that need it most."
The fund also supports the Community Development Relief and Rebuilding Fund of the National Federation of
Community Development Credit Unions, which has committed to waive interest fees on its
investments in affected community development credit unions (CDCUs). In addition, none of the
contributions to the fund will be used for administrative or other Federation expenses, unlike the
American Red Cross which used donations in
the wake of September 11 to cover overhead and other expenses not directly related to 9/11.
The CRA Fund (ticker: CRAIX), a mutual fund devoted
to investments that fall under the 1977 Community Reinvestment Act (CRA) directing banks to support local communities,
has also joined the SRI community's response to Katrina. The CRAFund hopes to double the $50
million ($40 million from institutional investors and $10 million from individual investors) it has
already raised to allocate toward investments that will help alleviate adverse impacts of the
CRA qualified investments define their objectives by income, not race.
However, CRAFund Portfolio Manager Barbara VanScoy points out how class and race intersect in the
affected region's demographics.
"Even though CRA rules focus strictly on income, our
analysis of CRA Fund-backed projects shows that our past investments have had a major impact on
minority communities," Ms. VanScoy told SocialFunds.com. "That will clearly be the case with our
New Orleans/Gulf Coast Initiative."