MacArthur has announced a $5 million program-related investment to the Minneapolis-based Community Reinvestment Fund (CRF). The low-interest loan will greatly expand the capacity of the CRF to purchase community economic development and affordable housing loans nationwide.
Program-related investments are low-interest loans made by foundations in support of work that advances philanthropic interests. Such loans can be a useful alternative to the more traditional foundation support provided by grants, particularly for organizations engaged in activities that can generate a financial return. Over the past 15 years, MacArthur has made approximately $168 million in such loans.
The loan will enable CRF to expand its efforts to assist community-development lenders. Since its founding in 1989, CRF has provided more than $220 million to 92 organizations in 25 states. The lenders range in size from neighborhood development organizations to state agencies. The loans they provide to small businesses and companies stimulate economic development and employment opportunity in disadvantaged areas. Other loans are for affordable housing projects that serve low-income families as well as community facilities serving the needs of residents and others.
"Most inner city neighborhoods have untapped assets waiting for development, consumers ready to buy, land prime for residential and commercial development, and a workforce eager for local employment," said Jonathan F. Fanton, President of MacArthur. "Organizations like the Community Reinvestment Fund help develop neighborhood economies and connect them to the larger city, indeed the whole region. Economic development is indispensable to MacArthur's continuing work in strengthening social capital in the inner city."
"We are gratified that MacArthur has provided such a significant level of support to CRF," said CRF President Frank Altman. "With this investment, we can bring to a far wider group of lenders services that will benefit communities across the country. It is a tremendous vote of confidence in our work, and we are honored to reach this phase in our relationship with the MacArthur Foundation."
The loan to the Community Reinvestment Fund is part of MacArthur's strategy for advancing the field of development finance through support for what are termed market catalysts, organizations that amplify or accelerate the impact of development finance by improving the flow of information, ideas, and capital to the field. Community Reinvestment Fund, through the innovative financing products it has developed, plays an important role in the rapidly growing interest of commercial investors in community development projects.
In carrying out its work, CRF purchases economic development and housing loans made by community-development lenders around the country. This arrangement enables these lenders to finance new projects without having to wait for repayment of loans already made. CRF then bundles together the small loans and pledges them as collateral for bonds or other types of debt securities that can be sold to institutional investors such as banks, insurance companies, and pension funds. CRF uses a variety of other financing techniques to help lenders access the capital they need, including participating in transactions as they are created as well as providing loans to lending organizations. All of these efforts result in a link between private institutional investors and borrowers who revitalize distressed communities through their business, housing and real-estate projects.
Examples of loans purchased by Community Reinvestment Fund have included a loan to a silkscreen company in Los Angeles that provides entry-level jobs to ex-offenders in the community where they live; a loan for a shopping plaza in Newark, NJ, that was one of the first in the nation developed for urban revitalization purposes; and a loan that supports a 144-unit senior housing project in Brandon, FL. In all, CRF has supported the creation or retention of more than 5,800 jobs and the development or preservation of 5,900 units of affordable housing.
Community Reinvestment Fund is a nonprofit organization. In addition to helping provide capital to lenders, it services loans made by community development lenders and provides technical assistance and training to lending organizations.