Why do poor communities remain poor? One
major factor is the problem of absentee ownership in low-income communities.
More often than not, the people who own businesses and buildings in poor
neighboorhoods live elsewhere, in the suburbs where they maintain
their own business structures additionally. Herego, income arrives and
promtly leaves the community through rent and commerce. Absentee ownership
makes savings difficult for low-income families. This means that these
families have little in the way of collateral, which they would need to
recieve loans- loans that could, let's say, help an individual get a car
so that she can get to her job or help a family get a mortgage on their
home. Without this collateral, the community is regarded as "high risk"
by banks who could lend credit in these situations, meaning that the bank
is at high risk of losing their money if they lend it out to poor people,
who obviously don't know what to do with their finances or they wouldn't
be poor. (sarcasm) Families can't get mortgages. Absetee ownership continues.
The net result of this cycle is capital drain for low-income communities
and the perpetuation of absentee ownership. What comes of this are nasty
goverment-sacntioned attempts to validify this cycle with the very logic
of its own creation: red lining. Red lining means that if you live in x
"high risk" community, you are eligible for either no loans or very high
interest loans (which would perpetuate debt). Often times, areas that are
redlined are communities of color.
In the late 1970's, the community investment movement responded
to these issues by making money available to those in need. Theirs was
a three prong approach. (I.) Through not-for-profit, democratic means,
community investment advocates sought to maintain secure, long-term financial
bases that would be maintained by the community. (II.) The movement looked
to engage those with wealth in a process of reflection on wealth: Where
does value come from? Is there such a thing as unearned wealth (example:
inheritance)? What role does moral responsibility play in our financial
endeavors? Essentially the cry was if you don't support a state-mandated
redistribution of capital, then put your money where your morals are! (III.)
Finally, advocates challenged those who manage capital (banks and other
lending institutions) to re-evaluate the realities of "risk." It turns
out, as many studies show, that "poor people" are not bad investments.
Briefly, here are a few different types of those community-organized
finacial institutions the movement establishes:
community development banks: functions as a regular bank- accepts deposits,
but makes money available for geographically-targeted community development
projects. insured and regulated.
community development credit unions: a financial co-operative; low-income
individuals can pool their rescources and lend back to themselves, but
these institutions will accept deposits from non-members. also insured
and regulated.
community development loan funds: charitable, not-for-profit organizations.
as a donor to such a funcd, you can name your interest rate, generally
set between 1% and 6%.
social venture capital: a group of investors will purchase equity and
invest in different projects together.
Why should I as a student here at Mount Holyoke care about all
this anyway?? Glad you asked. Here's the connection: We are currently working
to get the Mount Holyoke College Board of Trustees to designate 1% to 2%
of the school's endowment to invest in community development financial
institutions, such as those described above. As you can imagine, the endowment
here is *quite* large and ripe for doing good in the world! Will the school
lose money? No! Comparing community development investments to the "non-equity"
investments already in place in Mount Holyoke's investment portfolios,
which yield 5%-6% returns, the greatest differnec in returns would be maybe
1% at the most, if any reduction of return at all. We hope to give alumae
who desire to donate money to the school the option of sending their money
to the "socially responsible fund". Isn't that what capitalism is about?
Choice! Furthermore, socially responsible investing is no radical, unfeasible
concept. In line with the morals and mission of our school, SRI means executing
in action the theory element of our education. We bang our heads with frustration
over discourse on poverty, racism, and globalization, meanwhile private
colleges and universities sit on an ever-accumulating amount of rescources.
Think of the possibilities if each school were to contribute just a fraction
of their endowments to projects that promote positive structural change
in low-income communities! SRI gives higher education the opportunity to
serve to its noble purposes. Indeed, in its ultimate projection, SRI means-
from top to bottom- all of the school's money (or our own money for that
matter! SRI gets right to the heart of our personal finances!) is invested
with social consciousness at the forefront of decsion-making, ie. the school
does not support unethical businesses/business practices, the school actively
supports business that cultivates social justice, the school's finacial
portfolios are available for the entire Mount Holyoke community's obsevation
(trasparency-- something we currently do NOT have), etc.
The Student Conference Committee is meeting with the Board of
Trustees in early March. Please note on their survey (in circulation now)
that SRI is something that makes sense to you and also should to the trustees.
The first step is a campus that understands and supports the principles,
and a Board of Trustees that respects that support. Fall 2002, we will
move to formulate logistics for the Board.
RESOURCES:
Social Investment Forum- www.socialinvest.org
National community Capital Association- www.communitycapital.org
Association for Eneterprise Opportunity- www.microeneterpriseworks.org
National Federation of Community Development Credit Unions- www.natfed.org