Market Need: Most non-profit organizations – including social service agencies, housing organizations and an array of community development financing organizations, such as CDFI loan funds – have difficulty attracting the capital, management expertise and strategic relationships that are necessary to implement expansion and scaling efforts.
Only a fraction of foundation funding is devoted to scaling of successful NPOs. Foundations primarily fund large organizations or new programs, versus the operations required to scale successful organizations. In the corporate sector expansion financing is well established, and successful mid-sized companies receive investment and management support. However, this is exactly the stage of growth at which top performing NPOs suffer from a lack of access to capital.
SOLUTION: The Growth Philanthropy Network (GPN) is a not-for-profit organization that will create a national network of organizations that work in concert to widely replicate and disseminate proven programs in communities that need them. Through this network, GPN will provide nonprofit organizations (NPOs) with capital, hands-on management assistance and nation-wide distribution channels to spread programs that have demonstrated their effectiveness and can support sustainable growth. GPN’s operations comprise of four main functions:
- Identify and select qualified programs for expansion
- Programs will be evaluated by GPN and field experts.
- Secure co-investors for expansion projects through a syndication process
- GPN will develop a network of funders interested in supporting expansions, including major foundations, individuals and family foundations. GPN will syndicate the financing of specific scaling efforts among its network of capital partners.
- Recruit service firms to deliver technical assistance
- GPN will bring in professional service providers to help NPOs develop and execute growth plans and build the infrastructure necessary to support growth.
- Ready local communities to support scaling efforts
GPN will assemble Regional Councils that include local foundations, philanthropists, corporations and civic leaders. Councils will assess expansion programs, match national funding and generate sustained support.
PROBLEM: Most non-profit lenders – including microenterprise institutions and CDFI loan funds - cannot report their clients’ credit behavior to the three major credit bureaus—Equifax, Experian, and TransUnion due to several barriers: minimum loan volume requirements, membership fees, non-transparent and changing regulations.
There are over 1,000 CDFI and microenterprise lenders in the US currently servicing nearly 100,000 loans. The vast majority of these lenders does not report to credit bureaus, but urgently want to. A recent survey confirms this – of 115 lenders surveyed, only 17% were reporting credit to a bureau but 100% stated reporting is important to their organization.
If lenders are not reporting credit, clients have fewer opportunities to improve their credit scores with the bureaus and have less access to mainstream financing, competitive interest rates, safe products, and are more vulnerable to predatory lenders.
SOLUTION: A coalition of organizations, including the Association for Enterprise Opportunity (AEO), Central Vermont Community Action Council (CVCAC), RUPRI Center for Rural Entrepreneurship, Center for Financial Services Innovation, ShoreBank Advisory Services, and ACCION, have come together to find a solution to this problem: Credit Builders of America (CBA).
CBA will be an intermediary organization that will lower the barriers for small lenders to report to the three credit bureaus. The primary roles of CBA will be: advocacy, technical assistance, and membership and reporting aggregation. This coalition is currently developing its business plan and is in dialogue with all three credit bureaus. CBA is currently negotiating a pilot project with each credit bureau and partnering with the credit bureaus to identify cost-effective solutions to allow all non-profit lenders to eventually report. We are researching the technology issues and putting together the financing that will be necessary to open CBA’s doors to customers in September 2006.
For more information please contact: Vikki Frank