Starbucks is joining up with a network of nonprofit groups whose aim is to offer credit to individuals and businesses in
underserved 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.
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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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?
Bryant Simon's EVERYTHING BUT THE COFFEE (UCalf. Press, 2009) offers a sharp critiuqe of labor relations at Starbucks.
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.