Community investment in the U.S. is one of the most robust impact-investing sectors in the world. With support from public policy and subsidies from public and philanthropic sources, private capital flows to community investment from foundations, banks and insurance companies, individuals and others in the form of loans, bonds, tax-credit equity and structured investment vehicles. Often, CI involves specialized intermediaries skilled at working with marginalized communities and blending multiple sources of funding.
But practitioners frequently describe CI as working against, or around, the conventional finance system. It targets underserved people and places – where conventional markets are seen as absent, misguided or failing. In describing what they do, practitioners use metaphors like filling gaps (where markets aren’t working), providing cushions (to absorb risk that others won’t bear) and taking haircuts (to adjust prices to “market” rates). In this frame, community investment is viewed as the hard work it takes to do what the conventional finance system itself cannot or will not do.
We believe that focusing on the CI system – its functions, boundaries, practices and culture – can help reduce the transaction costs and increase the scale and impact of CI. This paper reviews some of our initial work on CI as system. Our goal in writing it is threefold:
• To encourage people to think about the system for organizing CI demand,
• To suggest ways to make the system visible and tractable in a given place, and
• To offer some suggestions based on current and past efforts on how to make the CI system more robust.
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What are the main takeaways or key points from this resource?:
We believe that focusing on the Community Investment (CI) system – its functions, boundaries, practices and culture – can help reduce the transaction costs and increase the scale and impact of CI.
Is your resource available to the public or only your members?:
Robin Hacke, David Wood, Marian Urquilla
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