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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 restitution.

"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 "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

Additionally, socially 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 development organization.

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 (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 hurricane.

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 "That will clearly be the case with our New Orleans/Gulf Coast Initiative."


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