Lending locally: CDFIs help keep your investments at home

In the early 1980s, a group of nuns laid the groundwork for what is now a growing movement to invest locally. To support the development of local businesses and schools, the nuns entrusted Community Development Financial Institutions with a portion of their retirement money. In exchange for their money, the nuns were issued interest-bearing notes by those CDFIs.

“We just knew that we couldn’t lose the nuns’ retirement funds,” said Mark Pinsky, long-time president-CEO of the Opportunity Finance Network, during a 2011 Forbes interview in which he reflected on the early success of the industry. Pinsky’s organization is the nation’s leading trade association for CDFIs.

The CDFIs didn’t lose the nuns’ retirement funds. In fact, the approach has been so successful that many individuals continue to lend their money to CDFIs across the country — including Mountain BizWorks, which provides small-business loans.

Douglas Wingeier received his first interest-bearing note from Mountain BizWorks in 2005. “I invested in Mountain BizWorks to aid local small business; to provide an alternative to Wall Street and the corporate world; and to have confidence in where my money goes and how it is being used,” said Wingeier.

Most of us are familiar with the term “interest-bearing note,” which is “a loan between lender and borrower which accrues interest over the pre-determined loan period,” according to BusinessDictionary.com.

What many people don’t know is that you can lend to local CDFIs, such as Mountain BizWorks, and receive an interest-bearing note — the organization’s promise to repay the principal as well as interest earned.

CDFI notes are similar to the certificates of deposit offered by credit unions and banks: You select the amount, term and interest rate. But bank-issued CDs are insured by the Federal Deposit Insurance Corporation; credit unions are insured by National Credit Union Administration. CDFI notes are uninsured.

It’s also important to mention that lending to CDFIs is not charity. The organizations usually offer several options for local investors, with interest rates ranging from 0 to 3 percent. Typically, notes are for $1,000 or more.

Mountain BizWorks is currently the only local small-business CDFI that allows individuals to invest.

Michael Shuman is one of the nation’s top thinkers and advocates for local business and local economies. In his book, Local Dollars, Local Sense: How to Shift Your Money from Wall Street to Main Street and Achieve Real Prosperity, he says that $15 trillion could be moved from Wall Street to “main streets” across the country by focusing on investing in our communities.

Imagine what our small business community would like if we invested 50 percent of our total assets in Western North Carolina.

— Shaw Canale is the CEO of Mountain BizWorks. To learn more about investing in your local small business CDFI, visit www.mountainbizworks.org, or call 253-2834 and talk with Shaw Canale (ext. 12) or Nathan Harlan (ext. 14).

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