What impact have you had?
The Capital Good Fund (CGF) is a non-profit microlender founded in 2009 by Brown University students and alumni. Our mission is to create a poverty-free, inclusive green economy through innovative microfinance. In order to achieve this, CGF has provided 17 loans totaling $29,375 to lower and moderate-income Rhode Islanders for business startup and growth, applying for US citzizenship and credit building. Specifically, eight of the loans have gone entrepreneurs seeking to start or expand a small business; six citizenship loans have been made to legal permanent residents to cover the costs of their U.S. citizenship application; and three credit builder loans have been awarded thus far.
CGF complements these loans with business and financial literacy courses for Rhode Island communities. These courses are designed to empower individuals with the tools they need to manage their finances, save money, and improve their credit. Trainings are led both in English and Spanish. In the past year, CGF graduated nine participants in the basic business class and we expect to train another 25 by the end of May. As previously mentioned, as of March 2010 CGF has given three DoubleGreen™ loans, and is currently seeking funding to achieve our goal of making 100 of these loans in 2010.
The DoubleGreen™ Loan was designed based on discussions with partner organizations, focus groups, and input from energy and credit-building specialists. We are 3 loans into a 10 loan pilot phase, after which we will evaluate the pilot and refine the model. Other steps to success include a strong network of two dozen community partners that refer clients to us for loans and provide clients other services, ranging from English classes to job training and housing assistance; a network of community leaders that also refer clients to us, follow up with clients and are paid on a commission basis; and a financial literacy course that we’ve designed and that we offer to all borrowers to ensure that they have the knowledge they need to successfully navigate the financial system.
CGF plans to make at least 100 DoubleGreen™ loans in 2010. Each loan will result in a savings of approximately 1 ton of carbon dioxide per home per year, or 100 tons for the loan cycle. Moreover, CGF will be to recycle loan funds into subsequent loan cycles, eventually resulting in the installation of over 1,950 thermostats a savings of nearly 2,000 tons of carbon dioxide, at a cost of approximately $10/ ton of carbon. The savings will be even more significant when the benefits of additional environmental education are taken into account.
Additionally, borrowers will see improved credit scores as a result of responsible borrowing with CGF. They will also lower their monthly utilities expenses which will raise their monthly earned income. Finally, improved credit will allow access to higher loan amounts, lower interest rates, and greater financial opportunities from both CGF and traditional financial institutions.
What will it take for your project to be successful over the next three years? Please address each year separately, if possible.
• Expand operation from Providence to cover the State of Rhode Island.
• Host first annual fundraising gala ($5,000); reach out to high-wealth individuals that align with our mission ($50,000); sell CGF cards, water bottles and t-shirts ($2,500); and apply for grants from a number of foundations and other sources, including Ashoka ($5,000), CCHD ($15,000), Clinton Global Initiative University ($10,000), Brown University ($20,000), Dell Social Innovation Initiative ($50,000) and Rhode Island Business Plan Competition ($30,000)
• Raise capital or borrow at low interest rates to build a national organization and enter the Boston market
• Host the fundraising gala, reaching more people ($7,500), solicit repeat donations from existing donors ($35,000) and, building on our growth and success, reach out to hundreds more potential donors ($80,000) and apply to a wider pool of grants from larger foundations such as Ford, Carnegie and CCHD national
• Create franchisees to expand its services into other northeastern metropolitan areas, supported by grants from the national organization and supplemented by donations from community organization and local businesses
• In addition to the fundraising gala, individual donations and foundation grants, CGF will also begin reaching out to individuals interested in social enterprise: as the Fund become more and more financially self-sufficient, we anticipate that our model will increasingly appeal to these individuals and, as a result, we can raise a significant amount of funds from them
We believe that by 2012 we will be able to cover overhead costs with the income from our loans and we will fund the loan pool primarily through low-interest loans. Thus our model allows us to serve a major need in the community in way that, once we reach scale, is minimally reliant on grants.
What would prevent your project from being a success?
During the research phase of this project CGF held focus groups to explore potential limitations of the DoubleGreen™ program. We identified three primary challenges. First, savings are particularly seasonal, so it can be difficult to convey the value of participating to potential borrowers during the off-season. The benefits of energy conservation and credit building are invaluable in the long run, but potential borrowers are often more interested in immediate savings or are unaware of credit’s importance. Limiting installations to the fall and winter would restrict our growth, so to address this issue we will proactively target the members of our financial and environmental literacy courses and emphasize the credit building aspect of the loans.
The second challenge comes from landlords, as many borrowers rent their homes and thus need permission for an installation. Landlords often misunderstand the loan program and can mistake a thermostat installation for something more complex. We are now providing landlords with contractor information and a brief summary of the program and its goals in order to clarify any issues. We have also partnered with the Providence Community Action Program (ProCAP), which does 50 free energy audits per week in lower-income homes and apartments. ProCAP will market our loan every time they do an audit, and because they already have landlord approval for the audit, we should have no problem getting approval for the thermostat installation.
Lastly, those with no credit tend to underestimate the benefits a $200 loan can have on building their credit.