Community lending, Catholic style

Starbucks is joining up with a network of nonprofit groups whose aim is to offer credit to individuals and businesses inStarbucksunderserved communities to jumpstart job growth. NPR reports:

Starbucks is teaming up with a network of community-based financial institutions to help create jobs. Beginning Tuesday anyone can make a tax-deductable contribution at a Starbucks store or online to the Create Jobs for USA Fund. The money will go to companies so they can hire or retain American workers.

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Mark Pinsky heads the Opportunity Finance Network, a group of about 180 mostly nonprofit lenders that work in underserved communities where credit is often hard to get. Over the past couple of years, Pinsky chatted informally with individuals at Starbucks about ways they might collaborate, but he certainly wasn't expecting the communiqué he got from the company a couple of months ago.

Where did this particular model of community lending originate? Catholic nuns, of course. NPR again:

The deal creates a new pot of money. The Starbucks Foundation is putting up $5 million and is encouraging others to chip in. All the funds are slated for the Community Development Financial Institutions, which are part of Pinsky's network.

He explains the contributions represent equity: Lenders can use it to leverage even more financing. A $5 contribution, Pinsky says, will likely support $35 in new lending, and will be targeted at job-creating projects.

The Opportunity Finance Network was born more than a quarter of a century ago. Pinsky says Catholic nuns were among to invest in these community lenders.

"There were two things we learned back then that I think are still true for us today: One, when you are borrowing the nuns' community money, their retirement money, you better do something really important with it; you better do something that matters, right. But the second lesson is when you are borrowing the nuns' retirement money, you don't lose the nuns' retirement money," he says. "You work really hard to do that."

Listen to the full report here

Michael J. O'Loughlin

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5 years 11 months ago
Is this really a viable investment where a few nuns and others with sparce investment funds can make "community investments" that yields real economic results like create jobs and establish buinesses and also return the principle and interest to the investors as a real successful investment would?  Or is "community investment" a euphorism for something? ?v?e?r?y? ?d?i?f?f?e?r?e?n?t? ?l?i?k?e? ?????????????"wealth redistriibution" or giveaways????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????? ??
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JOHN SULLIVAN
5 years 11 months ago
Heaven forbid that we should even brouch the possibility of a little bit of wealth redistribution and/or giveaways. To hell with euphorisms! Let,s not leave out of the conversation corporate welfare and our regressive tax system.
RON HOVERSTAD
5 years 11 months ago
A quick check of the Opportunity Finance Network's web site shows that they have provided over $23 billion in loans to a variety of small businesses and microenterprises in low income communities all across the United States.  That doesn't sound like ''scarce investment funds'', ''wealth redistribution'' or ''giveaways'' to me.  It sounds like giving people a chance to pull themselves out of poverty.  And I thought giving people a chance to work themselves out of poverty was an old-fashioned American value. 
Tom Maher
5 years 11 months ago
Ron Hoverstad (#3)

The way this article is presented suggest that these "investments" are very high rise and therefore it is possible that the nuns retirement money could actually be lost.  But the risk is not really dealt with here whcih is very odd.  Risk can be defined as how much of the principle you expect to get back with interest.  It is possible if these loans are risky enough no interest will be earned and all or part of the principle will be lost.  If enough loans do not given back all the principle the whole "community investment" enterprise could go bankrupt.  So it is reasonable to ask is this a real investment? And if so how come the risk and reward are not mentioned?  

And if its not a real investment why are the nuns risking thrie retirement money?
ed gleason
5 years 11 months ago
I think Tom M is talking about GS. not the 'nuns'
Vince Killoran
5 years 11 months ago
I'm a little wary of big business doing these kinds of things when they don't exactly have their own social justice house in order.  I notice that WalMart is now attempting to burnish its imiage to women employees with a number of "foundations."

Bryant Simon's EVERYTHING BUT THE COFFEE (UCalf. Press, 2009) offers a sharp critiuqe of labor relations at Starbucks. 
C Walter Mattingly
5 years 11 months ago
If done well loans to underserved communities can be great things; if done poorly on a massive scale, such as the mostly Clinton/Frank government guaranteed mortgages to those whose financial histories demonstrated they were likely to run into trouble paying them back, they can contribute greatly to financial disaster, as we have just experienced. No good deeds were done those borrowers.
In any case, most of such loans are considered high risk, the only reason banks shy away from making them in the first place. If the good sisters have a surplus of retirement funds and wish to engage in such high-risk lending for social improvement purposes, more power to them. If however their retirement funds are limited, this is not the sort of thing that a prudent manager would normally suggest.
On the other hand, let's not sell the sisters' financial and management acumen short. Perhaps they have direct knowledge, skills, and insight into the community and the borrower that the bankers lack. They certainly have demonstrated they can run rings around the public school system in management of resources and student performance.  
ANN JOHNSON
5 years 11 months ago
Perhaps some of the commentors should read about kiva.org. Lots of small loans to help small businesses. Every one that I have contributed to has been paid back. I have re-invested each repayment. As for the concerns about the nuns' retirement funds, it seems that they understand better than any of the men who wrote the earlier comments the command of Jesus to consider the lilies of the field and not be as concerned with financial security as some of the men seem to be.

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