Philadelphia, PA, April 13, 2016 (CDFI Connect)—The Kresge Foundation recently announced Kresge Community Finance, a $30 million program-related investment (PRI) finance offering to certified Community Development Finance Institutions (CDFI) and quasi-public and private Development Finance Authorities (DFA) expanding opportunities in America’s cities. The foundation will select applications through a competitive Request for Proposals (RFP). Successful nonprofit applicants also will receive an equity grant, equivalent to five percent of the amount of PRI financing disbursed. Information on how to apply can be found below.
CDFI Connect spoke with Joe Evans, portfolio manager for The Kresge Foundation’s Social Investment Practice, to learn more about the drivers behind Kresge’s focus on PRIs and why this is especially important for CDFIs.
What past experiences have influenced Kresge to issue this request for proposals?
We have learned a lot of lessons in the last decade around social investment. In 2009, we started building an intentional social investing program. Last year, we did a lot of reflection on where we have come and what we want to do going forward, and the culmination of that is a commitment equivalent to 10 percent of total assets ($350MM) dedicated to social investing, including $50MM for mission-related investing directly from our corpus.
This PRI indicates a long-term commitment; can you tell us more about this?
A lot of what went into this is feedback we have been receiving for some time, which is that longer-term money is hard to raise. Specifically, we are looking at what 10-year money can do, especially when organizations like CDFIs either cannot connect to 10-year money or there are too many strings attached. Kresge already has a portfolio of long-term projects, so we have the experience of addressing this need and wanted to continue to make this a focus.
We also see this as an opportunity to set a tone for increasing the range of participants on the investor side. Kresge—along with similar foundations like MacArthur, and Ford—envisions a day when we can log into our retirement accounts and put our own individual assets to work in disinvested neighborhoods. There are a lot of steps to get to this point, and this is possibly one of a number of needed baby steps, in this case demonstrating that you can offer a standardized product through an efficient process to build a portfolio of investments that expand opportunity in America’s cities that are relatively easy to manage over time.
Why did you decide to make this RFP exclusive to CDFIs and DFAs?
CDFIs represent some of our best partners, particularly for PRIs, where they make up about a third of our portfolio. We have a great deal of experience working with them and I see them as akin to fund managers in the community development space. Working with CDFIs you know that capital is flowing into the disinvested areas where it is needed. We know CDFIs well and we heard this is a product that they need and we want to demonstrate the ease and potential for other partners considering engaging in the field.
We do not have quite as much experience with Development Finance Agencies (DFA), but similarly they are a key financing player in cities and we understand longer-term commitments also are hard for DFAs to come by.
In regard to this PRI offering, when you talk about America’s cities, are you talking only about major metropolitan areas?
No, but we aren’t not talking about those either. The scope of work Kresge has been involved in includes work in both larger and smaller cities. Kresge has been very active in Memphis, and recently made a $3MM commitment for secondary capital to Hope Federal Credit Union, which will support its work in Memphis, but also in 8-10 other cities, some of which are quite small.
How wide is the scope of this PRI? There seems to be an opportunity to do different kinds of projects.
There is a bit of a tradeoff. Kresge, like any large foundation, works to craft pretty specific targeted program strategies. We have six program areas, and each has articulated program focus areas we are interested in in leveraging finance for innovation. Requesst must be for projects or activity that benefits or expands opportunity for low-income people in America’s cities, particularly in ways that are aligned with one or more of our program strategies. It is up to the applicant to let us know how their work is connected. That said, we also are interested in supporting innovation, and hope to surface some interesting activities through this exercise.
We don’t want to be too prescriptive on what we are looking for, but rather ask that interested organizations review our program pages, and if they see a fit, tell us about it.
Learn more about this PRI in two upcoming webinars where Kresge will provide technical assistance:
- At 2:00 PM on April 13, the foundation will co-host a webinar with the Council of Development Finance Agencies. Members of the CFDA network can sign up for the webinar here.
- At 1:00 PM on April 15, Kresge is hosting a webinar geared toward interested CDFIs, but any interested person is welcome to attend. You can sign up for this webinar here.
Letters of inquiry are due by 5 p.m. PST on April 29, 2016.