海角大神

Where local residents help birth the businesses that serve them

The kale is from down the street. The honey came from 10 minutes away by bike. The hot sauce? It was made across the hall. For Fresh Foods Generation, local resources matter.

Founders Cassandria Campbell and Jackson Renshaw launched the company in 2015 with a mission to bring healthy food to city residents who usually couldn鈥檛 afford it. They鈥檝e seen their business grow from a single food truck to a cafe and catering service, and their staff balloon from two to 14 during peak season.

The duo want to keep expanding their reach and to do so, they plan on seeking the help of a brand-new community initiative with some lofty goals. Named after the Kwanzaa principle of 鈥渃ommunity work and responsibility,鈥� the Ujima Project is a group that yesterday launched what it calls the 鈥渘ation鈥檚 first democratic investment fund.鈥� The Ujima Fund will allow residents from low-income neighborhoods to decide for themselves how to allocate communal funding to local businesses.

The initiative here reflects a broader trend 鈥� growing interest nationwide in how to boost communities where residents face significant economic headwinds. Across America, a persistent challenge is not just widening rich-poor gaps but also opportunity disparities linked to geography, down to the ZIP Code level.

And although the idea of community-based investing is an old one, Ujima seeks to take it in a grass-roots direction that could serve as a model. For low-income and minority entrepreneurs, the project is building a bridge to investment funds that used to be out of reach.

鈥淪mall business owners are very aware that there's all this capital floating around and there is no way for them to connect to it,鈥� says Ram贸n Borges-M茅ndez, associate professor of community development and planning at Clark University in Worcester, Mass. 鈥淚 think the reaction has been, 鈥楲et鈥檚 see what we can do ourselves. Let鈥檚聽see what we can do in these communities in order to start mitigating that inequality.鈥� 鈥�

Redlining鈥檚 legacy

In Boston, economic power has long been tied to race. A 2015 from the Federal Reserve Bank of Boston found that white households in the city have a median wealth of $247,500. That figure for black households was just $8. Racial disparities here also exist in home ownership, retirement funds, and debt.

To understand where this inequality comes from, it鈥檚 important to consider the history of banks in communities of color, Dr. Borges-M茅ndez says. Redlining in the 20th century placed lower value on real estate and businesses owned by people of color 鈥� especially if they were black. And with the Great Recession a decade ago, banks pulled back on loans to small businesses assuming, sometimes incorrectly, that those projects were riskier. The legacy of that disinvestment, says Borges-M茅ndez, is not only a lack of wealth 鈥� it鈥檚 a fundamental business disadvantage.

鈥淚f you don't fit what the bank considers as their standards for a good application, the cycle just keeps going on until you find someone who鈥檚 willing to quote unquote take a risk or make an investment,鈥� says Ms. Campbell at the catering business. 鈥淪ome of those things are like 鈥楧o you have collateral?鈥� So that鈥檚 often like 鈥楧o you own your own house?鈥� 鈥榃hat does your credit score look like?鈥� 鈥�

She adds, 鈥淚 think that Ujima recognizes that [with] businesses starting off particularly in the neighborhoods that are hardest hit with income disparities, those things might not be the strongest indicators of how successful a business will be.鈥�

How democratic investing works

The Ujima Fund will pool investments from nonprofits, individuals, businesses, and civic organizations both locally and nationally. Neighborhood assemblies, composed of community members who pay a small yearly fee, vote on how to allocate those funds to local business owners.

As long as businesses meet a list of community standards (things like committing to a green energy plan and employing a minimum percentage of women and people of color) they can qualify for a loan. Some members also work with local finance experts to assess the business plans and make recommendations before the vote.

Ujima offers several levels of investment,聽each named after another Kwanzaa principle. The Kujchagulia Note for non-accredited investors starts with a minimum of just $50. The Nia Note for accredited investors asks for a $5,000 minimum. Depending on the contribution, investors can lend for three- or seven-year increments.

The people who distribute the fund鈥檚 resources to businesses are also potential customers 鈥� a different dynamic than the parallel trend of social-impact investing or the lending that traditional banks do under the Community Reinvestment Act.聽That relationship ensures that projects receiving funding have community interest. It also incentivizes members to patronize them.

鈥淭here is an increasingly growing number of people 鈥� that no longer want to plug their money into the Wall Street system,鈥� says Kwaku Osei, chief executive of Cooperative Capital, a community investment firm with a similar mission, based in Detroit. For people investing in their neighborhoods, 鈥渢here is a sense that because you鈥檙e close to it you could in some ways affect the outcome.鈥�

Unlike the Ujima Fund, Mr. Osei鈥檚 organization is a for-profit, and once its fund opens, it expects to offer annual returns of at least 6 percent to investors. That鈥檚 about double the highest return rate the Ujima Fund expects for some investors. And at Ujima, interest rates paid by borrowers are expected to be 5 to 10 percent, slightly higher than what most banks offer. These facts cause at least some concern from participants here.

鈥淚t takes a lot of financial discipline and a lot of hard work to step outside of industry standards and create the world you want to live in. So I wouldn鈥檛 say that I'm not worried about it,鈥� says Campbell.

But, she continues, 鈥淚 think that they have definitely shown discipline and commitment and consistency, and they have definitely built a base of people who are committed to seeing that happen.鈥�

For Borges-M茅ndez, the rise of impact investing from banks signals that the interest among financiers exists, and community initiatives like Ujima could find solid support.

The wisdom of crowds

So far, this new investment model has at least found solid interest, and Ujima aims to raise $5 million that can be put to use in loans. Director Nia Evans was recently in Chattanooga, Tenn., to meet with stakeholders about starting a similar fund there. And Osei, in Detroit, says he鈥檚 spoken with community leaders from Los Angeles to Baltimore about replicating his approach.

But scaling this up won鈥檛 necessarily be so simple. The Ujima Fund鈥檚 structure was designed for a Boston-specific context that links local nonprofits, companies, and governments here. Ms. Evans refers to the fund as an 鈥渆cosystem.鈥�

鈥淲hile we think it鈥檚 scalable, we also understand that there isn't going to be some some rigid cut-and-paste template, it is going to be very dependent on what the local context is,鈥� she says.

Despite the challenges, Campbell, who received a community-allocated grant at an Ujima event earlier this year, is optimistic. To earn the funding, she and Mr. Renshaw had to convince about 150 residents that their business could make it and in the process air somewhat intimate financial details with the group. That kind of grit and transparency fuel her hopes for Ujima, too.

鈥淧eople were really worried about how we were going to get local food at an affordable price point into some neighborhoods 鈥� and still be a for-profit business,鈥� she says. 鈥淏ut at that time we were very steadfast. Everybody eats.鈥�