can take several institutional forms. Each offers advantages and
funds can be flexible lenders because they are free from many
unions are member-owned financial institutions that are chartered,
insured, and regulated by government agencies.
development banks provide all the services, security, and
regulations of commercial banks, but have a community development
capital funds provide businesses with financing in return for
an ownership stake in the company.
funds provide financing to very small businesses.
Loan funds are able to be creative and aggressive in lending to unbankable
customers because they are not subject to the same regulations as banks
and credit unions. Although they don't offer investors insured-deposit
accounts, many of them have established excellent records of repayment.
To find a loan fund in your area, or to learn about loan funds that
are doing work you'd like to support, contact the National
Community Capital Association.
Credit unions are cooperative financial institutions that take deposits
and make loans only to their members. Members of a credit union must
all be part of a defined group, such as employees of a particular company,
or residents of a particular town. Among the hundreds of credit unions
throughout the United States, Community Development Credit Unions are
a self-defined group of institutions dedicated to serving needy communities.
To find a community development credit union in your area, or to find
a credit union designated as low income that does work you find interesting,
contact the National
Federation of Community Development Credit Unions.
The goals that guide the lending decisions of community development
banks are what make them different from commercial banks. Rather than
working to maximize profits for their stockholders, community development
banks focus on helping the communities they serve.
well-established government rules and regulations govern both commercial
banks and community development banks. This means individuals can invest
in a community development bank by buying a certificate of deposit or
opening a savings account, just as they would in a commercial bank.
These same government regulations, however, can limit the flexibility
of community development banks.
There are only a few community development banks in the United States.
The largest is South
Shore Bank in Chicago, with subsidiaries in Oregon and Washington.
Bank operates in Brooklyn, New York; Community
Bank of the Bay is located in Oakland, California;
Southern Development Bankcorp serves rural Arkansas.
Venture capital funds
Community development venture capital funds typically make equity investments
in small businesses that hold the promise of rapid growth. The financing
is structured so that if the business does well the venture fund will
share in the upside. They apply the same powerful engine of economic
growth that has driven the expansion of Silicon Valley and other hotbeds
of business development to create good jobs, entrepreneurial capacity
and wealth in communities that the current prosperity has passed by.
information, contact the Community
Development Venture Capital Alliance.
Microloan funds operate in much the same way as traditional loan funds.
The difference is that they focus on very small loans, made to very
small businessesor micro-enterprisesoften sole proprietorships or
family businesses. The most common type of microloan lending is done
on an individual basis, using creative forms of collateral. Some microloan
funds have also adapted lending strategies, such as group lending, that
are used in developing countries. Group lending, devised by the Grameen
Bank in Bangladesh, is a lending strategy in which small groups of borrowers
co-guarantee each other's loans.
information visit web site of the Association
for Enterprise Opportunity.