I suppose that in an ideal world we wouldn’t care about the financial implications of injustice; doing the right thing ought to be sufficient motivation. Of course, that’s not always the case, and rather than restricting ourselves to the high road, I think it’s preferable to adopt an approach I like to call Pragmatic Idealism (PI).
Mission Versus Business
Here’s a fundamental challenge in our business: the greater the alignment between our lending and our mission, the greater the strain on our loan portfolio performance. Phrased another way, the highest impact loans–those to ex-offenders, domestic violence survivors, and the temporarily homeless– are also the riskiest. This is through no fault of their own; rather, it’s simply a result of the tremendous strain that personal and financial instability places on a person.
As a nonprofit, it is incumbent on us that we adhere to our mission, which is to use financial services to create pathways out of poverty. Yet as a business, especially as one that debt finances its lending operations, we must also ensure that we are fiscally sound. To address this tension, we’ve taken several approaches. First and foremost, the interest rates we charge are designed to compensate for higher losses
The Power of Live Theatre (yes, I prefer the British spelling!)
Growing up I was privileged in many ways, one of them being the number of plays, musicals, and concerts I had the opportunity to see. I distinctly remember dressing up for the show, the architecture of the theatres, the voices and movements of the actors. Several theatrical experiences stand out as seminal moments in my development as a person in general and a writer and poet in particular. For instance, a number of years ago my parents and I went to see The Glass Menagerie at a small playhouse in Burbank, CA. The play, which is a masterpiece, came to life thanks to absolutely brilliant acting; when the curtain finally came down I was transfixed.
Live theatre, when done well, can be a transformational experience. It opens the mind, stirs the soul, and awakens the senses. In short, it can play a critical role in a person’s life–making them more cultured, thoughtful and self-aware. Unfortunately, as I’ve grown older and become more involved in fighting poverty and injustice, I’ve found myself increasingly concerned that all too often the arts are by the rich, about the rich, and for the rich.
Dogs–We Sure Love ‘Em
Take a dog lover to an animal shelter and you will almost certainly hear some variation of, “What did the dog to do deserve being here?” And unless it is particularly vicious, the answer is: nothing. We don’t blame dogs for being strays, and we are sad to know that so many of them live out their days in small cages in noisy, dirty pounds, often destined to be euthanized.
Our love of dogs is understandable. By and large, they are loving companions. They bring us joy and friendship. They guard us and guide us and support us. And in exchange, we Americans spend just under $56 billion on them!
Now, this isn’t going to be one of those “instead of spending that money on dogs we should be spending it on social issues” posts. I love dogs, and will soon be spending money on one too. I do, however, want to point out that in 2013 Americans donated a little over $41 billion to human service organizations–considerably less than spending on pets**. But most importantly, I want to talk about personal responsibility by asking a simple question: Why do we feel more compassion for dogs than we do for humans, or even for other animals (for we mustn’t forget that–thanks to our eating habits–there is a massive industry whose profits depend on the confinement, mistreatment and slaughter of animals)?
Happy New Year!
It’s that time of the year again: family gatherings, reflections on the past, and commitments for the future. That last item, New Year’s Resolutions, is of particular interest to me. I see a lot of similarity between the packed gyms of January 1, the “back to business as usual” gyms of January 30 and the challenges of affecting social change. A fundamental tension seems to exist in humans; evolutionarily speaking, it is in our best interest to eat when the bounty if plentiful, for we know not when we will again be flush with food. In modern life, however, we must constantly resist that instinct–when food isn’t scarce and calories are cheap, the challenge is not starvation but rather obesity.*
Put another way, we struggle to think long-term and to delay gratification. We eat too many sweets and tell ourselves we’ll exercise tomorrow; we buy the cheapest appliance even though the more efficient one will cost less over time; and we avoid building retirement savings until it’s too late. So powerful is this dynamic that social science research has shown that “..a child’s ability to delay [gratification]…predicted higher SAT scores and a lower Body Mass Index” thirty years after the initial study (the famous Marshmallow Test). Why? The hypothesis–and I think it makes perfect sense–is that those with better self-control are more likely to have the discipline to eat right and study.
Dogs!
Bianca (my fiancee) and I are interested in adopting a dog and, as many perspective dog owners are wont to do, we’ve visited more than our fair share of adoption websites and shelters. Throughout the process I’ve noted several things. First, there are (obviously) far more dogs than there are people to adopt them. No surprise there. But second, I’ve been blown away by how many nonprofits exist to help animals: each shelter is full of volunteers and and veterinarians and computerized systems for keeping records on the animals. And lastly, the more I pay attention to dog owners walking their dogs, the more I see that pets immediately bring smiles to strangers, passers-by, children, the elderly…pretty much anyone and everyone.
So what does all this have to do with Capital Good Fund and The Nonprofit Life? Well, it seems to me that whenever there is an excess supply of something that brings people joy (adoptable dogs) and a lot of people in need of that joy (ex-offenders, the homeless, the elderly), you have the opportunity to put two-and-two together and solve a problem.
Suppose I were to tell you the following about Capital Good Fund clients: borrowers who pay off their loan on-time are more likely to build their credit than those who default. I imagine you wouldn’t find that surprising; after all, by virtue of making payments you are bettering your credit, and those who don’t pay us are likely falling behind on other debts as well.
So far so good. Now what about this: borrowers who complete Financial Coaching before taking out the loan are more likely to pay back than those who did not receive Coaching. Again, not too surprising. The skills you learn in Coaching translate to better and more responsible financial habits
Going Undercover
Once per quarter we gather the staff of Capital Good Fund for a half-day “staff date.” Each of these staff dates revolves around a different topic: customer service, fundraising, social impact, etc. Last Friday’s topic was all about understanding our competition, and to do that we decided to go into the “belly of the beast.”
We met at our storefront office in Woonsocket, RI and then split up into two-person teams. We assigned each team to a predatory lender–payday lender, pawn shop, or rent-to-own store–and then sent them out to pose as customers and learn how they do business. Laura, our Connecticut Programs Coordinator, and I posed as a brother and sister making $1,500 per month and looking to purchase the biggest TV possible. To do that, we went to Aaron’s Rent-to-Own, a publicly traded firm that sells TVs, furniture, appliances, and other electronics. Our goal was to pay attention to signage, the layout of the store, the nature of our interactions with their employees, and how they pitched their products.
I’ve spent so much time thinking about predatory lending here in the US that it’s been a while since I’ve contemplated what the picture looks like in other countries. Sure, I know that Grameen Bank got started in Bangladesh in the ‘70s to put the loan sharkes out of business, but I haven’t stayed on top of what’s going on today.
Two articles this week helped me gain some perspective. First, Eli, my Development Assistant, spotted a hilarious art installation called Pocket Money Loans, which satirizes the payday loan industry in the UK; I highly recommend you check out their website, http://pocketmoneyloans.com. The joke is brilliant: pocket money cash advance loans for kids at the wonderful interest rate of 5,000%!
President Obama’s recent Executive Order on immigration will have a significant impact on 4-5 million immigrants who are at present living in this country illegally. I’m not interested in discussing the politics of his action, so no need to read on if you’re looking for that! Rather, I want to go over what I think will become a key challenge for immigrants who wish to participate moving forward: the cost.
This is nothing new. Ever since our founding in ‘09 we’ve been doing loans to cover the cost of applying for US citizenship–$680 to the government plus legal fees. For many low-income families, that fee is simply too high; in fact, I estimate that there are around 700,000 to 800,000 legal permanent residents in this country who are eligible for citizenship and don’t begin the process due to cost.
