A Catch-22 that exacerbates economic inequality is that people at lower income levels are often shut out of financing that would expand opportunity and help their communities.
In other words, you need money to get money.
As impact investing becomes more common for foundations, this is a gap where there’s a lot of potential, and one that the Kresge Foundation has taken on. The latest social investment program by the Michigan-based funder set out in the spring to offer standardized loans to two types of community development entities, paired with grants, for work that aligns with Kresge’s interests. The foundation focuses on arts, education, health, human services, and the environment, with an emphasis on cities and low-income communities.
The RFP was designed in part to demonstrate that there’s demand for such an off-the-shelf finance product to serve these community investment entities, CDFIs and DFAs, and that there’s opportunity for lenders to offer such loans to organizations closer to community needs.
It seems to have drawn the response they were hoping for, with more than 130 organizations applying for more than $280 million in capital requests. The first round was recently announced, and will support six entities to the tune of $14 million, with a common theme of sustainability and livable communities popping up among recipients.
For example, two organizations won $3 million each for creative placemaking and mixed use projects, one benefiting cities in Massachusetts, the other for Baltimore, Atlanta, and New Orleans. Another $3 million goes to Connecticut Green Bank for installation of solar power in urban and coastal communities. And a Memphis institution won $1 million in financing to promote residential density and walkability. Affordable and cooperative housing was another winning topic, and one New England investment includes funds for healthy food retail.
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Kresge’s been whipping up a lot of creative grantmaking and investment programs in American cities, in more adventurous ways than we see from a lot of funders of its size (assets of $3.6 billion). The foundation has committed $350 million in social investments, for one, carving a path toward better leveraging its assets to make an impact beyond annual payout.
But it also puts an emphasis on community-led projects, as in the case of this initiative. Efforts to redevelop communities, whether that means urban density, renewables and efficiency, or housing, can crumble if they aren’t driven and supported locally. What’s cool about these loan/grant combos is that they have potential to develop a good track record for the act of putting money into the hands of those who understand the needs and wants.