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James is a resident of Grant County, Indiana, with big dreams. He has hopes of furthering his education and starting a business, but he has become mired in a vicious cycle of trying to dig himself out of a financial hole. Traditional lenders reject James’ loan applications, citing low earnings, sparse savings, and less-than-stellar credit scores. That rejection leaves would-be borrowers like James with limited options – either do nothing or resort to payday lenders that charge sky-high interest rates, which can lead to deeper debt, worsening credit, and fading hope. 

Yet there’s a new promise for breaking that cycle thanks to the Indiana Impact Accelerator, a first-of-its-kind program launched by Locus in partnership with the Indiana Philanthropy Alliance. The program convened leaders and board members of four local community foundations who learned how to implement local impact investing strategies that go beyond traditional grantmaking. Programs like this can create avenues for individuals like James who are seeking long-term, sustainable solutions to improve their financial outlook. 

A $1 million commitment 

In Grant County, the Accelerator laid the groundwork for The Community Foundation of Grant County to partner with Afena Credit Union to establish Bridge the Gap, a program offering loans to people living below the poverty line, as well as those needing immediate financial assistance or a chance to improve their credit scores. 

The community foundation committed $1 million as collateral guaranteeing the loans, allowing the credit union to focus time and resources on helping those in need without fear of defaults. 

Under-resourced families and struggling individuals can borrow $500 to $2,500 for financial support and repay the loans over a generously extended period of time so they can continue to take care of daily expenses and necessities without missing payments. 

Meanwhile, the credit union provides additional support, teaching borrowers how to build a savings account, increase their financial literacy, and build better banking relationships. 

Restoring faith 

In the first year of the program, Afena issued 96 loans totaling $215,000 to borrowers with an average credit score of 401. Among those receiving loans, 26 of the borrowers had no credit score at all. 

Afena President and CEO Karen Madry worked tirelessly with community foundation leaders to launch the program. Growing up in a family that struggled financially, Madry saw firsthand how the lack of access to credit dimmed opportunities to escape the clutches of poverty. 

“This program can help elevate families from poverty with a hand up, not a handout,” Madry said. “It allows them to prove to themselves they can handle finances and are responsible citizens, regardless of what a credit report might say. Bridge the Gap could be a game changer for the credit union movement and the banking system as a whole because it can help to restore faith in individuals.” 

Exploring new possibilities 

The Accelerator helps address a long-standing practice adhered to at most community foundations of only deploying five5 percent of endowed investable assets annually for community grants. While this practice helps ensure ongoing financial stability and endowment growth, it limits the possibility of leveraging capital to maximize community impact. 

Over the course of 10-month capacity-building trainings, workshops, and interactive exercises, LOCUS guides community foundation leaders to think beyond just traditional grantmaking. They consider alternatives that can free more capital for community needs such as housing, small businesses, clean energy, and community health. 

Foundations also explore a range of strategies such as offering mini-grants for specific projects and streamlining the grant application process to make it more user-friendly and accessible.  

“Through the Accelerator process, we help foundations develop the tools that they need internally, like policies and processes, and equip them with decision-making tools,” said Lisa O’Mara, vice president, solutions consultant of Locus. “As a result, they are ultimately prepared to become local impact investors.” 

While the program encourages collaboration, it doesn’t take a “one-size-fits-all” approach, adapting to meet the needs of each community foundation team. 

“We work with a team from each community foundation that includes members who normally wouldn’t work with one another from start to finish and create a network that allows them to go through the process together,” O’Mara said. 

Results stemming from the Indiana Impact Accelerator have been positive. Every foundation in the cohort received board approval of a policy or stated goal to commit a certain percentage of investable assets to be leveraged via impact investing over a period of time. 

A model approach 

What transpired in Indiana has the potential to take root with community foundations across the country, O’Mara said. 

Foundations in the Midwest and New York have all started their own process to become impact investors in their own communities. 

“The impact of this is really cool,” added O’Mara. “It’s serving low-income communities, which is what community foundations are all about and it is mission aligned. It’s helping high-risk individuals build their credit, increase their financial literacy, and help families who are on the edge. Everything about its impact is just perfect.” 


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