Invest for Impact? Lend to Local Nonprofits

A story from Marin Community Foundation.

Most place-rooted foundations use only their grantmaking to help local nonprofit programs and organizations do their critical work in the community. Not the  Marin Community Foundation. Recognizing that short-term grants may not be the best tool to help bring about change on a long-term issue, MCF is now also providing loans and using its investment portfolio to strengthen nonprofit capacity.

Marin County, just north of the Golden Gate Bridge, is well-known for its beauty and affluence, but less known for its higher-than-average poverty rate (19%) and wide income disparity. A few years back, MCF noted that area nonprofits were struggling to sustain their efforts to address the challenges related to family poverty, the environment and other priorities. Analyzing the situation, MCF realized that local non-profits had trouble accessing traditional commercial debt – often because banks considered the nonprofit sector too risky.

mcf loan fund

Download a description of MCF’s loan fund.

At the same time, MCF had a growing list of donors with donor advised funds who cared about producing “triple bottom line” results with their giving. These donors also had a longer-term perspective; they knew that getting enduring equity, economy and environment results takes time. So the Foundation engaged these donors and other partners to create a loan fund to meet the financing needs of critical nonprofits in the region. In just 10 years, MCF’s nonprofit lending pool has grown to $20 million – and likely $25 million by the end of 2015. But more important, over that same time, MCF has already tallied 800 affordable homes, hundreds of acres preserved, and new domestic violence and arts programs that have resulted from its nonprofit lending.

mcf report screenshot

Download MCF’s loan fund impact report.

Not only have MCF loans helped these organizations build capacity, acquire or rehabilitate sites (with a 0% default rate), and restructure when needed, but the Nonprofit Loan Fund is now one of the six impact investment pools that MCF’s donors may choose when they give to MCF.  Offering this option puts significant donor resources besides grantmaking right back in the community. Marc Rand, MCF’s Program Director for Loans and Affordable Housing, shared the genesis, design and lessons from MCF’s lending and investment pool approach – now being researched and replicated in other places – in an in-depth session during our recent Advancing Economic Success: Community Foundations Building Family, Community, and Regional Prosperity workshop.