Greetings, Agents of Impacts!
Featured: ImpactAlpha Original
How community banks and local lenders are bridging racial gaps in COVID recovery. While many big banks made excuses, Little Rock, Ark.-based Southern Bancorp made loans. With $1.5 billion in assets and branches in Arkansas, Mississippi and other southern states, Southern is demonstrating the critical role of community development financial institutions, or CDFIs, in getting relief to vulnerable small businesses that big banks and federal aid programs are struggling to reach. On a video conference call with President Trump this week, CEO Darrin Williams said his bankers processed $16 million in Paycheck Protection Program (PPP) loan applications last Friday, the program’s first day. Bank of America’s average PPP loan size was roughly $180,000; over the weekend, Williams and his team processed an $8,000 loan for an African American-owned radio station and a request for less than $2,000 from a small photography studio in northeast Arkansas. “That may seem very small to you,” Williams told the president. “But it’s a lifeline for the employees of that small business.”
CDFIs are part of a network of locally-focused government, financial, philanthropic, and business entities that have become what Nowak Metro Finance Lab’s Bruce Katz calls a “parallel system” for addressing the urgent needs of underserved small businesses. Chicago’s $100 million Small Business Resiliency Loan Fund received applications for more than $215 million in the first four days after launching on March 31. Local funds in Indianapolis, Birmingham, and Kansas City also were heavily oversubscribed (see, “How community investment funds are building resiliency to disasters, pandemics and economic shocks”). Treasury Secretary Steven Mnuchin has called for another $250 billion in small business assistance; Williams and a growing chorus of advocates are calling for a carve-out for CDFIs. “Big banks don’t do well in providing capital in underserved communities” that are disproportionately affected by the health and economic ravages of the coronavirus, Williams told ImpactAlpha. “I’m pushing for communities of color, rural communities, markets without Internet access.”
Keep reading, “How community banks and local lenders are bridging racial gaps in COVID recovery,” by Amy Cortese in ImpactAlpha.
Dealflow: Follow the Money
African Development Bank ratchets up COVID relief with $10 billion commitment. The full health impacts of the coronavirus crisis haven’t yet hit most emerging markets, but the economic downturn is already severe (see, “Needed: Responsive, aggregated and accessible capital for (once-) growing businesses in emerging markets”). Development finance institutions are dialing up their relief efforts. The African Development Bank has announced $10 billion in relief funding for the continent, including $5.5 billion for national efforts, $3.1 billion for the most vulnerable and low-income countries, and $1.4 billion in direct funding to private sector operations supporting the relief effort. Last week, the bank issued a $3 billion social impact bond to raise capital for the relief. In Latin America and the Caribbean, the Inter-American Development Bank is allocating $12 billion in COVID relief funds, including a $2 billion bond issuance. Read on.
- Incomplete picture. The number of cases of COVID-19 in Africa is undoubtedly higher than reported, given low rates of testing and high levels of urban density. In spite of its swift lockdown, South Africa has the highest number of confirmed cases, 1,845, as of April 8.
SourceDay raises $12.5 million to help businesses streamline supply chains. Coronavirus is redefining impact tech. Austin-based SourceDay’s software helps 6,000 manufacturers, distributors and suppliers forecast the movement of goods. “More than ever, companies need resilient and agile supply chains,” said Joanna Arras of Baird Capital, which led SourceDay’s Series B round.
Tyto Care raises $50 million to expand telemedicine services. The New York-based company makes at-home examination kits so doctors can remotely diagnose colds, allergies, infections and respiratory issues. The round was led by Insight Partners, Olive Tree Ventures and Qualcomm Ventures.
Impact Voices: Pass the Mic
The financial industry was not prepared. Five strategies to mitigate systemic risks before the next pandemic. Investors should halt investments in companies that don’t pay their fair share of taxes, say William Burckart and Steve Lydenberg. Investing in resilient government is among the systemic strategies the co-founders of The Investment Integration Project lay out in a guest post on ImpactAlpha. Avoiding taxes may not be illegal, but it starves local and national governments of one of its most basic sources of revenues. Most investors think systemic risks are beyond their control, say Burckart and Lydenberg, co-authors of, “21st Century Investing: Redirecting Financial Strategies to Drive Systems Change,” expected next year. “We believe they’re wrong. We think individual investors and the financial system at large can and should invest and lend in ways that intentionally enhance, and not destroy, these systems.”
- Corporate resilience. High risk: Fossil fuel companies that are merely running out the clock on their current business models. More resilient: Automobile companies and electric utilities that are adapting to a future of alternative fuels.
- Forgo and forgive. In the same way lenders should forgo making a loan that is in fact too risky, they should be willing to forgive those that cannot be repaid through no fault of borrowers, say Burckart and Lydenberg. “Debt is the most efficient way to boost the consumer economy. It works its magic for corporations too. Except when it cannot be repaid.”
- Keep reading: “Five investment strategies to mitigate systemic risks before the next pandemic,” by William Burckart and Steve Lydenberg.
Agents of Impact: Follow the Talent
Kauffman Foundation promotes Philip Gaskin to vice president of entrepreneurship… Boston Ujima Project seeks a director of investments (see, “Boston Ujima Project is rebalancing risk, returns and power in local impact investing”)… Closed Loop Partners is looking for a communications associate.
Thank you for reading.
–Apr. 9, 2020