October 19, 2011

A Star Turn for Little-Understood Banking Groups

Starbucks customers who give $5 or more to the Create Jobs for USA campaign will receive an Indivisible wristband.

While the Opportunity Finance Network welcomes a big donation by Starbucks to its member organizations, the network hopes the new partnership will also raise the profile of its members—nonprofit groups that provide banking services in low-income communities—and help them do a better job of explaining their missions.

The coffee giant is kicking off the Create Jobs for USA campaign with a $5-million gift—and starting November 1, the company will be asking customers at its 6,800 stores to contribute as well.

The money will go to the more than 180 community-development finance institutions that make up the network. These organizations make loans to small business, affordable-housing groups, commercial real-estate developers, and other nonprofits—entities that often aren’t able to qualify for commercial bank loans.

Two Worlds

Explaining the mission of the organizations his group represents isn’t easy, says Mark Pinsky, chief executive of the Opportunity Finance Network, because it has elements of both nonprofit and for-profit worlds.

"We have feet in both,” he says.

One of the most valuable intangible benefits of the partnership with Starbucks, says Mr. Pinsky, has been the chance to work with “one of the great marketing companies” and learn how to communicate with people outside the community-finance world.

Like commercial banks, the community-finance groups leverage—or borrow against—their equity to get the money they use to make loans. On average, the organizations borrow $6 for every $1 they hold. “Leverage is key,” says Mr. Pinsky. “That's how you earn the money that pays the bills.”

Talking to Outsiders

Working with the marketing experts from Starbucks, the network learned how to craft a message that will appeal to people who aren’t finance experts.

Messaging from the Create Jobs for USA Web site

Instead of talking about equity and leverage, the campaign materials explain that every dollar that goes to a community-finance group makes it possible to do $7 of lending, says Mr. Pinsky: “Right there on the site, it says $5 with a little heart on it equals $35.”

For too long, people outside of community finance haven't understood the important role these groups play, says Mr. Pinsky. But he hopes things will change with the Create Jobs for USA campaign.

“Someone on my board once said that working in our industry was like working in a hall of mirrors, and we need to learn to work in a hall of windows,” he says. “Well, we're outside the windows now with Starbucks.”

Go deeper: Listen here as Mr. Pinsky describes how community-development finance institutions got their start, largely with loans from the retirement funds of Catholic nuns.