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Report on Access to Capital Initiative - Butte Region

INTRODUCTION

The Butte Region initiative seeks to develop a regional lending structure that connects local investors, smaller CDFI’s with local governments, and regional branches of larger lending institutions. This structure will build capital by promoting both financial and social returns on investment.  The social responsibility motivator is much easier to activate when connecting local capacity with local need. This initiative becomes another model of regional solutions to regional problems that naturally incorporates a Triple Bottom Line Philosophy.

The profit – social responsibility structure requires a champion to continually rally investment dollars through a stewardship message. This message naturally resonates with our citizenry, but is easily drowned out by the “profit only” perspective of investing. 3CORE is a champion of this initiative in the Butte Region.

The demand for social return on investment (ROI) is increasing. The question is how to measure social return? The DuPont Return on Investment method compares operating efficiency in relation to profitability. This measure is a way to compare different business units on an “apples to apples” baseline.
Modifying DuPont measure to fit the community development lending model, the social ROI focuses on how well does a community development investment generate loan volume (efficiency) x % growth in loans made over the investment life (profitability) or stated another way, ROI = E x G.
Profitability is always important for non-profits. But in terms of impact, profitability is also how well a social investor penetrates the intended underserved market.

We should formalize measuring social ROI and then manage to meet the targeted ROI, consistent with the social investor’s mission.

Marc Nemanic is Executive Director and Chief Credit Officer at 3CORE and a Summit Capital Action Team co-lead.

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