What�s the problem with traditional financial institutions?
In low-income communities, the buildings people live in and the businesses where they spend their money are predominantly owned by corporations and by higher-income individuals who live elsewhere. Yet the residents of these communities don't have the wealth or the good credit history they need to get loans from traditional financial institutions to buy a home or start a business, or to start a non-profit organization addressing their community's needs. They're seen as credit risks. Poor neighborhoods are often economically depressed for decades and generations.

How does community investing work?
Investors/depositors (individual people, or institutions like Northwestern) deposit or invest their money into Community Development Financial Institutions, which are mostly banks and credit unions. (Common methods include savings, checking, and money market accounts as well as CDs and bonds.) The CDFIs make loans to people who otherwise couldn�t get them, and try to advance social goals with their lending. Studies have shown that loans to low-income people are no more risky than other loans.

Many CDFIs also focus on:

• Small loans (microcredit) to poor people in developing countries, especially women
• Loans to support environmentally friendly and innovative community businesses and organizations

Who benefits from community investing?

• When Jimmy and Lorraine Love tried to buy a home for their family of eight, they were turned down for a mortgage 35 times in five years. They had a shaky credit history, and couldn't save enough money to cover a down payment. Then they found University Bank, a community development bank in St. Paul, Minnesota, which loaned them 100% of their purchase price, and now they're living in their own two-story St. Paul home, making mortgage payments every month instead of writing another rent check.
• Single mother Annie Hall, of Durham, NC, was providing day care for her neighbors in her home to pay the bills when she found a run-down building for sale which she was sure she could turn into a perfect day-care center. But she couldn't get a loan to fix it up � she had credit problems and no one to co-sign for her. Then she got a loan from Self-Help Credit Union, another CDFI, and now she provides affordable daycare for 20 children and employs four teachers.
• Dr. Elena Perry-Thornton, born in Panam�, was committed to providing healthcare to Latinos in southwestern Detroit, but six months after her clinic opened, she was struggling financially because her low-income patients were unable to pay their bills on time. But ShoreBank, a Chicago CDFI, got her a loan that allowed her practice to survive and thrive, becoming a model healthcare provider to a medically underserved population and receiving a Governor's Award for Excellence in 2001.

What have the results of community investing been so far?

• more than 185,000 jobs created or supported, almost two-thirds held by low-income persons, in more than 24,000 businesses
• more than 280,000 housing units affordable to low-income families constructed or rehabilitated more than 3,800 community service facilities-- childcare centers, health clinics, educational centers, and arts and performance spaces-built or renovated in low-income communities

What can Northwestern do?
Move its money market account to a market-rate money market account at ShoreBank, a Chicago CDFI Investigate (through the Socially Conscious Finances Committee) other ways to put some of our $4 billion endowment into community investments.