Impact Voices | May 5, 2021

Boston’s Ujima Fund demonstrates the (investment) power of neighborhood democracy

Meg Massey and Ben Wrobel
Guest Author

Meg Massey

Guest Author

Ben Wrobel

Every Wednesday evening for the past few years—at least, before the pandemic—a group of Boston residents from the working class neighborhoods of Dorchester, Roxbury and Mattapan have met in person to plan for the future of investment in their neighborhoods.

They gather in the partitioned conference room of City Life/Vida Urbana, a nonprofit that lets other organizations meet in its space on the third floor of a rehabbed Samuel Adams brewery. For most of the week, the space is a meeting center for community organizers fighting for housing justice in the surrounding neighborhoods. Stacks of cardboard signs around the perimeter of the room read, “Stand Up! Fight Back” and “We Will Not Be Moved;” a papier-mâché model of Dracula labeled “Count Bankula” sits perched atop a filing cabinet. 

But during these weekly meetings of the Ujima Fund, the topic is not how to influence the city’s major developers; it’s how to build a new, resident-driven model for community investment.

The Ujima Fund, part of the Boston Ujima Project, is the first “democratic investment fund” in the United States. It’s a community loan fund with a twist. The fund has four hundred investors, ranging from low-income residents to wealthy donors and impact investors. It also has “members”, who must live in Boston proper or identify as having been displaced from their homes by rising rents. Members can join for as little as five dollars a year, which goes toward the fund’s loan loss reserve, and each member gets one vote on how the Ujima Fund invests its money. Investors who are not residents—for instance, Harvard students, foundations investing their endowments, or churches, mosques and synagogues in the greater Boston region—can become “solidarity members,” but they do not get to vote.

This is, needless to say, not the norm for Boston. The city – its leaders and its most storied families and institutions – have a long history of systemically excluding lower-income and non-white people from decisions about the city’s future. Its history of redlining and top-down city politics—not to mention blockbusting and other quasi-legal tools for segregation—created a city with deep divisions around race and wealth. 

Today, Boston’s one hundred eighty thousand Black residents have a median net worth of $8. The lifespan of a resident of Roxbury is thirty-three years lower than that of someone living in the tony community of Back Bay two miles away. These inequities have created deep distrust between residents and city leaders; more than one person we spoke to called the city’s development arm, the Boston Planning & Development Agency, the “Black People Displacement Agency.”

The Ujima Fund was created in the context of the latest racial divide: tech-driven gentrification. In the past decade, Boston has grown into a hub for biotech startups; it was considered a serious candidate for Amazon’s second headquarters. And once again, those with the biggest checkbooks in the city—the investors—are pushing a development agenda that favors young, wealthy, mostly white tech workers and threatens to displace longtime residents of places like South Boston.

Opting out

For then-Boston NAACP president Nia Evans, the last straw was the city’s 2015 decision to put in a bid for the 2024 Boston Olympics. The city submitted the bid in secret, without consulting community groups like the NAACP, or local associations of the neighborhoods that would be torn apart to make way for stadiums and hotels.

At the time, Evans chaired the Boston NAACP’s economic development committee. A tireless organizer, she had spent the early part of her career helping parents at under-resourced Boston schools fight for a larger share of the city budget. But she soon realized that economic development was never far removed from the conversation.

Evans’s first reaction to the news about the Olympics was to voice her concerns through the normal channels. She encouraged NAACP members to attend town hall meetings about the bid and share their perspective. But after a few weeks, she noticed that her members were losing interest in the process. “They said, ‘the city already knows what they want to do,’” Evans recalled. “It was obvious that the city was just going through the motions.”

That’s when she made a big decision: to opt out. Evans decided she wasn’t going to participate in a system that didn’t invite her participation. “We had tried to speak up and amplify our voices, but it was never enough,” she said. “We had been playing on the terms of city leaders and economic developers for too long. We needed to try something new.”

Evans called a moratorium on attending city meetings about the Olympics. And she decided to seek out a new model for economic development that would respect the lived experience of residents of color.

“Often, leaders in Boston believe that our communities have nothing to offer,” Evans told us. “Our expertise is not recognized and not valued, so it’s either not sought or it’s dismissed or ignored. The processes that do exist feel like formalities; it doesn’t feel like they’re enacted with good faith. And we can’t and we won’t be satisfied with that.”

So Evans teamed up with a local activist named Aaron Tanaka—one of the leading thinkers behind the Boston participatory budgeting project Youth Lead the Change—to build that new model. At the time, Tanaka was executive director of the Boston Workers Alliance, an advocacy group led by unemployed and underemployed workers. He also served on the peer funding panel for the Haymarket People’s Fund, the participatory foundation created by George Pillsbury and still running strong in Boston forty years later. He was also in the early stages of creating an ecosystem to advance the Solidarity Economy Fund in Boston; that ecosystem would become the Boston Ujima Project. Evans and Tanaka combined their backgrounds in activism and participation to design something new for the project: a democratic investment fund.

The Ujima Fund

Everything at Ujima is community-driven.

The design of the fund was developed over the course of five years of community meetings, convened by the Boston Impact Initiative and Aaron Tanaka’s Center for Economic Democracy. “It was unlike anything I’ve ever gone to in Boston,” one attendee, Phuong Luong, told us. “They were intentionally lifting up the voices of the people attending, not just the leadership. It was class-integrated. There were people in wheelchairs; there were old-lady anarchists.”

The end result was a fund controlled entirely by residents—both current and displaced. At the start of an investment cycle, the fund hosts “planning assemblies”—public events with food, music and childcare. The purpose is to get residents to share their desires for the development of the neighborhood, and build a pipeline of locally-owned businesses seeking investment.

Next, member-led committees screen those businesses on a series of collectively determined values, like how the business treats their workers and the affordability of their services. They also find out what kind of assistance the businesses might need: capital, legal advice, marketing or bookkeeping. Finally, the businesses in the pipeline go to a member-led investment committee for vetting. 

In December 2019, Ujima members undertook their first formal investment vote. The business up for consideration was CERO (which stands for Cooperative Energy, Recycling, and Organics), a small composting startup based in the Boston neighborhood of Dorchester.  Residents who recommended CERO liked its business model, and they believed it had a clear path to scale in compost-crazy Massachusetts. But they also liked the way that CERO owner Josefina Luna, an immigrant from the Dominican Republic, had structured the business. CERO was designed as a worker-owned co-op, by activists in Aaron Tanaka’s Boston Workers Alliance. Ninety percent of the worker-owners were people of color. Ultimately, any success for CERO would translate into financial success for its workers.

The vote took place on a weekend. A quorum of fifty percent (plus one) of Ujima’s voting members is required, and the project needs to receive a majority vote of support. In the end, one hundred sixteen voting members cast a ballot in the final vote, and they overwhelmingly chose to give CERO a $100,000 loan. CERO used that money to hire a new full-time sales employee and a full-time driver, as well as buy a new truck.

Evans argues that by surfacing more voices, the Ujima Fund is coming to better decisions. “Because our process is more democratic, we’re getting access to subject matter expertise and due diligence data that we wouldn’t otherwise get. We ask residents, ‘What needs are not being met in this neighborhood?’, which investors don’t typically ask.”

The above post is the third of three excerpts from “Letting Go: How Philanthropists and Impact Investors Can Do More Good By Giving Up Control” from authors Ben Wrobel of Village Capital and Meg Massey of Sanspeur. Also check out How investors are giving up control to democratize finance” and “Outsiders get the bulk of venture capital in Africa. Peer-selection can change the game.”