TRANSCRIPT:

This transcript has been edited for length and clarity.

Jessica David: Thank you for having me, Luis. I’m happy to be here.

Hernandez: Tell us about what the community investment fund is, and where did this idea come from?

David: So the community investment fund is in some ways exactly what it sounds like. It’s a opportunity to pool money, investments, from various people in Rhode Island who care about Rhode Island for the benefit of the community. There are a number of community investment funds and vehicles around the country. This local return Diversified Community Investment Fund is the first for Rhode Island that will be investing here locally and is open to any Rhode Islander to invest in.

Hernandez: It’s a $3.5 million investment target. I’m wondering, where does that come from?

David: Yes, our goal is to raise $3.5 million. It just felt like a good target to start with. Obviously it’s not going to solve every problem we may have in every community, but it gives us the opportunity to try some things out, to test out some community investment strategies that haven’t been tried in Rhode Island before, to really assemble a portfolio of different and diverse projects across different communities. It’s ambitious, but we also think doable.

Hernandez: So my understanding is this isn’t a grant. The fund will be offering loans or equity investments. Why is that?

David: Well, certainly grants are really important and there are a lot of projects where that’s exactly what they need. But there’s also a need for investment where there is a return. It’s either being paid back through a loan or taking out equity at some point with a return on that investment, but there’s a need for a different kind of that investment, so a little bit more, we call it patient capital in the community investment world, has a longer term time horizon [and] might be willing to take a little bit lower return than the traditional market investments, but we think that there is an opportunity for this type of investment that has both the financial return for investors, but also an enormous social return for the community neighborhood residents who are benefiting.

Hernandez: We mentioned at the beginning that this is going to help out folks in neighborhoods that have been, again, historically excluded from these traditional types of funds. What does that mean exactly? How would you define it?

David: Well, we are prioritizing neighborhoods that have poverty rates and diversity rates over 20%. So certainly there are a lot of neighborhoods within our metro core – Providence, Pawtucket, Central Falls, Woonsocket – but also main street districts that have hit on hard times and have really never figured out what’s next for them in places like West Warwick in places like Westerly, Warren, other communities throughout Rhode Island. These are places where either there hasn’t been investment, There’s been no real significant finance flowing into those communities. It’s been sporadic. Or in some cases, it’s actually been harmful and extractive. So it might be money coming in from elsewhere from people and entities who don’t know that neighborhood. It might be taking properties and assets and removing them from local control. So all of a sudden, there’s a presence in the neighborhood that doesn’t really understand that community and what that community needs and doesn’t benefit the people there. So it’s really trying to reverse some of those more typical or traditional patterns that can show up through finance.

Hernandez: What are going to be the criteria when taking into consideration how to distribute the money and who can access these funds?

David: Well, we are setting up a process to use a different set of criteria than are typically used. So often in traditional finance, obviously the viability of the project, but also things like the credit score or the financial track record of the applicant, things like collateral, which are not accessible to everyone. Not everyone has had the opportunity to develop a good credit score for reasons that are often beyond our immediate control, or we may not have had the opportunity to develop Real estate development experience or business development experience. So we’re really going to be developing a process that looks at things like character, that looks at how this particular project, what it means for that particular neighborhood. How do residents feel about it? What will be the benefit to local residents? Does this person or team have relationships within this community? Do they have experience in their life that suggests that this is a project worth investing in? So certainly it’s taking risks. We don’t necessarily think they’re higher risk, but they are different kinds of risks than a traditional fund might take. Part of the process for us, which is really important, is we’re in the process of creating an investment committee that’s made up of investors into the fund, primarily of people who live in the neighborhoods that we’re prioritizing. They will actually have a say in vetting all of these potential investments and developing a due diligence process that doesn’t just look at the traditional finance metrics, but also looks at these other criteria.

Hernandez: I just want to get a sense from you as to what some of these investments may be. What projects would you like to see invested in?

David: We’ve identified four potential types of investment. So again, we have a focus on real estate. We’d like to help small businesses who have not owned their real estate, their space before actually take over ownership. Many small businesses we heard from in Rhode Island are renting and they put a lot of money into customizing equipment. They’re beloved by their neighborhood residents by their customer, but they are at the mercy of the landlord who might raise the rent, who might move them on for a different tenant. So helping small business owners own their own spaces. One second category is we’d like to help neighborhood residents become real estate developers themselves. This is small scale, early stage real estate development. So it might be someone buying a triple decker they live in or the multifamily property next door. Real estate is, for many of us, the biggest opportunity to build wealth, family wealth, generational wealth. And so opening up that possibility for folks who haven’t had that before. We’re also looking at community development projects. We’ve seen things like food hubs and community centers. These are often led by nonprofits. We think there’s a role for the fund to play there. And then the last category would be some shared real estate ownership models. So cooperatives, housing trust, land trust, things like that. We don’t see a ton of that in Rhode Island. Other communities that have community investment funds have done more of that. So we’d like to nurture more of those here.

Hernandez: When can people start applying for this?

David: Not yet. We are hoping to raise at least our first million dollars before we start deploying the fund. I anticipate that will take us several months. I’m going to guess by late spring, summer, we’ll be in a position to start taking applications. People can also come to our website and sign up for our list. So they’ll be notified when we’re ready to take applications.

Hernandez: I’ve been speaking with Jessica David, president and CEO of the Rhode Island Community Investment Cooperative. Jessica, thanks so much for the insight. I appreciate it.

David: Well, thank you for having me, Luis.