DoubleGreen™ Credit Builder Loan Program - RHODE ISLAND State Prize

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DoubleGreen™ Credit Builder Loan Program - RHODE ISLAND State Prize

United States
Organization type: 
nonprofit/ngo/citizen sector
Budget: 
$10,000 - $50,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

To make $200 loans to Rhode Islanders with no or poor credit history to purchase and install programmable thermostats that lower their energy costs by $180 annually. Borrowers build their credit through repayments of the loan and reduce their energy consumption, thereby reducing carbon emissions.

About Project

Problem: What problem is this project trying to address?

The DoubleGreen™ loan program meets (1) the need for small loans that build credit, (2) the need for affordable energy upgrades, and (3) the need for financial literacy. Lower-income families spend 17% of their income on energy, compared to 4% for higher-income families. At the same time, many of these families have no or poor credit history, shutting them out of the financial mainstream; in fact, 50 million Americans lack a credit score entirely. Lastly, the recent financial crisis has shown that the need for financial literacy is stronger than ever.
About You
Organization:
The Capital Good Fund
Section 1: You
First Name

Andrew

Last Name

Posner

Organization

The Capital Good Fund

Country

, RI

Section 2: Your Organization
Organization Name

The Capital Good Fund

Organization Phone

866-584-3651

Organization Address

26 7th St., Providence, RI 02906

Organization Country

, RI

Your idea
Country and state your work focuses on

, RI

Innovation
What makes your idea unique?

The DoubleGreen™ Credit Builder Loan is the first of its kind in the United States. The concepts of energy-efficiency and microfinance have existed for some time, but no one has ever combined the two to simultaneously confront the issues of environmental sustainability and limited access to credit markets. Credit builder loans– small loans designed specifically to build the borrower’s credit– are not new, but what’s unprecedented is that instead of simply writing a check to idle in the borrower’s bank account, our credit builder program funds invest in energy conservation while building credit.

What’s more, the nature of a loan program means that is it more sustainable than other approaches to poverty or environmental degradation. The loans are investments that have an environmental, financial, and social return– ensuring that we can sustainably work to further environmentalism and social equality.

The DoubleGreen™ credit builder loan finances the installation of a programmable thermostat, home weatherization, and other energy upgrades that save money in the long run but cost money in the short run. This allows a borrower to make investments in their own home to improve energy conservation while also taking initiative in their own financial future. At the same time, thanks to a streamlined and simple approval process, those with no or poor credit history can begin to build their credit and Capital Good Fund can make large amounts of loans with low overhead costs.

Do you have a patent for this idea?

Impact
What impact have you had?

The Capital Good Fund (CGF) is a non-profit microlender founded in 2009 by Brown University students and alumni. Our mission is to create a poverty-free, inclusive green economy through innovative microfinance. In order to achieve this, CGF has provided 17 loans totaling $29,375 to lower and moderate-income Rhode Islanders for business startup and growth, applying for US citzizenship and credit building. Specifically, eight of the loans have gone entrepreneurs seeking to start or expand a small business; six citizenship loans have been made to legal permanent residents to cover the costs of their U.S. citizenship application; and three credit builder loans have been awarded thus far.

CGF complements these loans with business and financial literacy courses for Rhode Island communities. These courses are designed to empower individuals with the tools they need to manage their finances, save money, and improve their credit. Trainings are led both in English and Spanish. In the past year, CGF graduated nine participants in the basic business class and we expect to train another 25 by the end of May. As previously mentioned, as of March 2010 CGF has given three DoubleGreen™ loans, and is currently seeking funding to achieve our goal of making 100 of these loans in 2010.

Actions

The DoubleGreen™ Loan was designed based on discussions with partner organizations, focus groups, and input from energy and credit-building specialists. We are 3 loans into a 10 loan pilot phase, after which we will evaluate the pilot and refine the model. Other steps to success include a strong network of two dozen community partners that refer clients to us for loans and provide clients other services, ranging from English classes to job training and housing assistance; a network of community leaders that also refer clients to us, follow up with clients and are paid on a commission basis; and a financial literacy course that we’ve designed and that we offer to all borrowers to ensure that they have the knowledge they need to successfully navigate the financial system.

Results

CGF plans to make at least 100 DoubleGreen™ loans in 2010. Each loan will result in a savings of approximately 1 ton of carbon dioxide per home per year, or 100 tons for the loan cycle. Moreover, CGF will be to recycle loan funds into subsequent loan cycles, eventually resulting in the installation of over 1,950 thermostats a savings of nearly 2,000 tons of carbon dioxide, at a cost of approximately $10/ ton of carbon. The savings will be even more significant when the benefits of additional environmental education are taken into account.
Additionally, borrowers will see improved credit scores as a result of responsible borrowing with CGF. They will also lower their monthly utilities expenses which will raise their monthly earned income. Finally, improved credit will allow access to higher loan amounts, lower interest rates, and greater financial opportunities from both CGF and traditional financial institutions.

What will it take for your project to be successful over the next three years? Please address each year separately, if possible.

Year 1:
• Expand operation from Providence to cover the State of Rhode Island.
• Host first annual fundraising gala ($5,000); reach out to high-wealth individuals that align with our mission ($50,000); sell CGF cards, water bottles and t-shirts ($2,500); and apply for grants from a number of foundations and other sources, including Ashoka ($5,000), CCHD ($15,000), Clinton Global Initiative University ($10,000), Brown University ($20,000), Dell Social Innovation Initiative ($50,000) and Rhode Island Business Plan Competition ($30,000)

Year 2:

• Raise capital or borrow at low interest rates to build a national organization and enter the Boston market
• Host the fundraising gala, reaching more people ($7,500), solicit repeat donations from existing donors ($35,000) and, building on our growth and success, reach out to hundreds more potential donors ($80,000) and apply to a wider pool of grants from larger foundations such as Ford, Carnegie and CCHD national

Years 3-5:

• Create franchisees to expand its services into other northeastern metropolitan areas, supported by grants from the national organization and supplemented by donations from community organization and local businesses
• In addition to the fundraising gala, individual donations and foundation grants, CGF will also begin reaching out to individuals interested in social enterprise: as the Fund become more and more financially self-sufficient, we anticipate that our model will increasingly appeal to these individuals and, as a result, we can raise a significant amount of funds from them
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We believe that by 2012 we will be able to cover overhead costs with the income from our loans and we will fund the loan pool primarily through low-interest loans. Thus our model allows us to serve a major need in the community in way that, once we reach scale, is minimally reliant on grants.

What would prevent your project from being a success?

During the research phase of this project CGF held focus groups to explore potential limitations of the DoubleGreen™ program. We identified three primary challenges. First, savings are particularly seasonal, so it can be difficult to convey the value of participating to potential borrowers during the off-season. The benefits of energy conservation and credit building are invaluable in the long run, but potential borrowers are often more interested in immediate savings or are unaware of credit’s importance. Limiting installations to the fall and winter would restrict our growth, so to address this issue we will proactively target the members of our financial and environmental literacy courses and emphasize the credit building aspect of the loans.
The second challenge comes from landlords, as many borrowers rent their homes and thus need permission for an installation. Landlords often misunderstand the loan program and can mistake a thermostat installation for something more complex. We are now providing landlords with contractor information and a brief summary of the program and its goals in order to clarify any issues. We have also partnered with the Providence Community Action Program (ProCAP), which does 50 free energy audits per week in lower-income homes and apartments. ProCAP will market our loan every time they do an audit, and because they already have landlord approval for the audit, we should have no problem getting approval for the thermostat installation.
Lastly, those with no credit tend to underestimate the benefits a $200 loan can have on building their credit.

How many people will your project serve annually?

101‐1000

What is the average monthly household income in your target community, in US Dollars?

$1000 - 4000

Does your project seek to have an impact on public policy?

Sustainability
What stage is your project in?

Operating for less than a year

In what country?

, RI

Is your initiative connected to an established organization?

Yes

If yes, provide organization name.

The Capital Good Fund

How long has this organization been operating?

1‐5 years

Does your organization have a Board of Directors or an Advisory Board?

Yes

Does your organization have any non-monetary partnerships with NGOs?

Yes

Does your organization have any non-monetary partnerships with businesses?

Yes

Does your organization have any non-monetary partnerships with government?

Yes

Please tell us more about how these partnerships are critical to the success of your innovation.

CGF relies on an extensive network of community partners to develop and refine its products and services, identify clients and build trust. These partners include organizations that work with small and micro businesses, assist immigrants with the citizenship process and provide financial counseling and/or energy audits. Other community partners, such as Providence Housing Authority and English for Action, work with large numbers of individuals that fall into our target market. Without these partners we would never have been able to build the level of trust that we have developed with the community nor would we have a steady stream of loan inquiries. Lastly, our partners have informed and shaped the development of our products and services based on their intimate understanding of the needs of the people they serve.

What are the three most important actions needed to grow your initiative or organization?

(1) Secure funding, (2) staff development, and (3) client recruiting– these are the most important actions considered in our work.
In order to grow we will need to secure more funding to pay for that growth. Though the DoubleGreen™ Program is already in progress, achieving scale will require that we hire a full time loan officer to oversee the program. More funding will also allow us to invest in the kind of organization efficiency that will make us cost-effective—for example, the development of an easy-to-use, web-based loan tracking system.
As we grow we will need to bring on board a fundraising director, program officer and loan officer. These individuals will allow us to raise funds, manage programs and reach out to clients. The challenge for us is a) indentifying the right people and b) developing a standardized set of training materials to ensure that all our staff have the skills and knowledge needed to be effective.
In order to access the market for our DoubleGreen™ loans, CGF will leverage connections with government and nonprofit organizations and businesses that interact with the target market. In addition, CGF will make use of Spanish radio, ads in The Providence American and Providence en Español, as well as release newsletters and fliers detailing the loan product. In addition, much of the success of the model depends on the use of community leaders who will be paid a commission for each person they refer to us that is approved for a loan. This will address the critical issue of how to maintain a steady stream of qualified applicants throughout the year.

The Story
What was the defining moment that led you to this innovation?

I read Muhammad Yunus’ book Banker To The Poor in April of 2008 (Mr. Yunus won the 2006 Nobel Peace Prize for, in effect, inventing microfinance). At the time, I was researching innovative financing mechanisms for renewable energy and energy-efficiency as a masters student in Environmental Studies at Brown University. I quickly realized that just as I was looking into unlocking the potential of existing technologies through creative financing mechanisms, microfinance was a powerful tool for empowering lower-income people to tap their existing potential through affordable loans. I immediately began researching the landscape in Rhode Island by speaking to dozens of community leaders and members; what I saw was that loan sharking and other predatory lending practices were prevalent in the community, and thousands of people were effectively locked out of the American financial system due to no or poor credit history and language, cultural and legal barriers.

Soon after I read about Van Jones and his work on green collar jobs and environmental justice, and it became clear to me that low-income Americans face the dual challenge of being shut out of the financial system while also being disproportionately affected by environmental issues such as rising energy prices and air pollution. For example, according to the Center For Financial Services Innovation 100 million Americans are either unbanked or underbanked, and another 50 million lack a credit score. At the same time, lower-income families spend 17% of their income on energy, compared to 4% for higher-income Americans, and they are also more likely to live in areas with air and water pollution and to have poor indoor air quality in their homes.

In June of 2008 I came up with the idea of Green Microfinance—loans of less than $35,000 that empower the borrower to improve her life while also improving environmental quality for herself, her family and her community. I set to work writing my masters thesis on the idea while at the same time laying the groundwork for the organization—The Capital Good Fund—that would allow me to put the ideas into action. As a student, I was able to look at the problems of poverty and environmental degradation from a theoretical perspective, but because I was also building an organization, I gained the skills and perspective needed to take concrete steps to act on that theoretical foundation.

Tell us about the social innovator behind this idea.

I hold a Masters degree in Environmental Studies from Brown University and a Bachelor’s degree in Spanish Language and Culture from California State University, Northridge. In addition to my academic background, I am also a fluent speaker of Spanish and Russian, and have lived in Spain and traveled widely, including trips of three weeks to Cairo, Egypt and Bangladesh (where I was trained by Nobel Peace Prize winner Grameen Bank). These skills and experiences make me uniquely qualified to lead a young, innovative up-and-coming organization such as Capital Good Fund.

I am passionate about leveraging new business models and technologies—such as open-source approaches to innovation and netbooks—in order to solve social and environmental problems. I have written for Treehugger.com and The Huffington Post, with a particular emphasis on the intersection between society and the environment. Indeed, I believe that the key to solving environmental degradation is to empower the people most affected by it to improve their own lives in such a way that also leads to environmental stewardship. This philosophy has led to the DoubleGreen loan as well as our green business loans and our environmentally focused business workshops. I am also an avid reader (I’m particularly fond of non-fiction) and cyclist.

How did you first hear about Changemakers?

Through another organization or company

If through another, please provide the name of the organization or company

The Swearer Center for Public Service at Brown Univeristy