COMMITMENT TO ACTION

Puerto Rico CDFI Initiative

Commitment by Inclusiv

In 2019, Inclusiv committed to expand and transform the CDFI sector in Puerto Rico by supporting local financial cooperatives with the submission of at least ten CDFI certification applications and ten applications for Technical Assistance and/or Financial Assistance grants by the end of the year. In 2017, there were only seven CDFIs in Puerto Rico. After Hurricane Maria, financial cooperatives served as the only financial institutions for 20% of the island. Inclusiv will provide CDFI expertise to 50 financial cooperatives and will engage funders to establish a loan-loss reserve fund, enabling financial cooperatives to scale lending in high impact areas, including small business, resiliency financing, and affordable housing. Inclusiv aims to raise awareness of the traditional role financial cooperatives have played in meeting the needs of rural and economically isolated communities in Puerto Rico, as well as showcase and enhance this network’s untapped potential in playing an effective role in creating more inclusive, resilient, and equitable local economies.



Overview
Summary

Commitment

Puerto Rico CDFI Initiative

Launched

2019

Est. Duration

1 Year

Estimated Total Value

$500,000

Region

Latin America & Caribbean

Countries

PUERTO RICO

Commitment by

Inclusiv

Partner(s) of the Commitment Maker(s)

Asociación de Ejecutivos de Cooperativas
Details

Inclusiv commits to expand and transform the CDFI sector in Puerto Rico by supporting local financial cooperatives with the submission of at least ten CDFI certification applications and ten applications for Technical Assistance and/or Financial Assistance grants by the end of 2019.

Inclusiv will provide training and expertise, as well as facilitate collaboration between financial cooperatives and CDFIs on the mainland. Inclusiv will, first, host a two-day CDFI Convening for Financial Cooperatives in San Juan that will cover specialized expertise on CDFI certification and funding including disaster recovery, financial inclusion, micro and small business lending, and community and resiliency finance. The event will include the CDFI Fund, FDIC, the FRB of New York, FEMA, private funders and other government agencies, and will be followed by a media tour to educate the public on these efforts.

Inclusiv brings 45 years of experience building the capacity, reach, and impact of grassroots community development financial institutions. Throughout the year, Inclusiv will deliver ongoing technical assistance to 50 local financial cooperatives, offering individual consultations, and participation in targeted conferences and events to 200 people, reaching an additional 100 through broader convenings. Inclusiv will also engage funders and institutions to establish a loan-loss reserve fund to enable financial cooperatives to scale their lending in high impact areas, including microenterprise and small business, resiliency financing, and affordable housing.

Through this commitment, Inclusiv aims to raise awareness of the traditional role financial cooperatives have played in meeting the needs of rural communities in Puerto Rico, as well as showcase this network’s untapped potential in playing an effective role in creating more inclusive, resilient, and equitable local economies. By building the capacity of financial cooperatives in Puerto Rico, Inclusiv hopes to ultimately benefit the one million members of these institutions, many of whom live in rural communities not served by the traditional banking system.

Q1 2019:

Host CDFI Convening for Financial Cooperatives (FC).
Conduct media tour to educate the public on the benefits of FCs and their efforts to become CDFIs.
Coordinate with the ASEC to identify and support FCs interested in the CDFI model.
Explore support from funding community for a loan-loss reserve fund to enable FCs to scale high impact lending.
Engage three FCs.
Two FCs prepare and submit their CDFI application.

Q2 2019:

Webinar: Benefits of CDFI certification.
Engage ASEC, CGI and other networks to disseminate information to corporations, foundations and financial institutions on impact of increased capital through financial cooperatives in Puerto Rico.
Coordinate media and communications with ASEC, CGI and other potential partners to share the impact and share accomplishments.
Identify funder(s) for the establishment of a loan-loss reserve fund to enable the FCs to scale high impact lending.
Engage an additional three FCs.
Ten FCs submit applications for Technical Assistance and/or Financial Assistance.
Two FCs prepare and submit their CDFI application.

Q3 2019:

Webinar: The technical aspects of CDFI Certification.
Onboard new FCs who have joined Inclusiv.
Set up loan loss reserve fund, if funder is secured.
Disseminate newsletter in Spanish to FCs informing them of the progress of the Puerto Rico CDFI Initiative.
Facilitate site visit(s) for funders, corporate partners and government agencies to communities most impacted from natural disasters and to projects financed by FCs.
Engage an additional three FCs.
Three FCs prepare and submit their CDFI application.


Q4 2019:

Disseminate newsletter with updates for FCs.
Webinar: How to apply for a Financial Assistance Grant from the CDFI Fund.
Plan and identify funds and resources for 2020 CDFI convening in San Juan.
Facilitate collaborations between FCs and CDFI credit unions in the mainland.
Three FCs prepare and submit their CDFI application.
Engage an additional three FCs.
If loan loss reserve is set up, participant FCs scale high impact lending activities.

Background

Community Development Finance Institutions (CDFIs) have played an important role in helping communities recover from economic and natural disasters. In Detroit, CDFIs were one of the most important sources of capital, fueling that city’s revitalization. CDFIs also played key roles in the recovery efforts for Hurricane Katrina and superstorm Sandy.

Until recently, the CDFI sector in Puerto Rico has been small. In 2017, there were only seven CDFIs, primarily loan funds. After Hurricane Maria, financial cooperatives have shown strong interest in becoming CDFI certified, to become a reliable, transparent platform for the deployment of resources that can be used for a more equitable development of their communities.

This network of community owned financial cooperatives has been operating in Puerto Rico for more than half a century. Financial cooperatives operate throughout the island, with a strong concentration in rural communities where most traditional financial institutions do not have a presence. These institutions promote financial inclusion through affordable banking services and providing access to credit. Financial cooperatives responded quickly to the devastation caused by Hurricane Maria, offering services and access to cash just 48 hours after the storm, and serving as the only financial institutions for 17 of the 78 municipalities in the island.

Additionally, the financial cooperatives manage a loan portfolio of $4.7 billion and have liquidity to meet additional loan demand but their lending is limited by regulatory constraints. For every $1 million in loan loss reserves, the financial cooperatives could originate $20 million in new lending.

While natural disasters affect diverse regions and communities, their impact inevitably falls hardest on vulnerable populations. Recovery and rebuilding efforts are thwarted by historic inequities and financial isolation. The strengthening of this network of financial cooperatives will help tackle these threats by supporting low-income and economically isolated communities to prepare, recover, and rebuild.

Partnership Opportunities

As a CDFI intermediary, Inclusiv is interested in collaborating with funders, socially responsible investors, financial institutions, nonprofits, government agencies, and any other organizations interested in supporting Puerto Rico by creating more resilient and equitable communities through strengthening member owned, community development financial cooperatives. The investment can take the form of capital injections to support community initiatives, loan loss reserves to expand affordable lending options to small business and individuals, and grant funding to support the provision of technical assistance to local financial cooperatives. Inclusiv seeks a commitment of $5 million for the development of a loan loss reserve to stimulate and secure community development financing from the Puerto Rico financial cooperatives. These funds will leverage $20:$1 in financing made. This initial fund would capitalize up to $100 million in loans for resilient rebuilding for hurricane impacted homeowners, financing for small and micro businesses to expand their businesses, and would support the delivery of financial coaching for the Islands’ residents. Inclusiv is a non-profit organization committed to financial inclusion and empowerment as a fundamental right for individuals and communities who have been historically excluded from productive engagement with the financial system. The organization aims to close the gaps and remove barriers to financial opportunities for people living in distressed and underserved communities and has a demonstrated track record as a certified CDFI intermediary that transforms local progress into lasting national change. Inclusiv provides capital, makes connections, builds capacity, develops innovative products and services, and advocates for its member community development credit unions (CDCUs). Inclusiv is the US credit union industry authority on all subjects related to the Community Development Financial Fund and will offer capacity building, technical and financial assistance to financial cooperatives in Puerto Rico. Inclusiv’s ultimate goal is to help the network of financial cooperatives better connect to federal and philanthropic sources of capital to grow and build their work, reach and impact.

Progress Reports

June 2019

Inclusiv has organized several educational events and webinars, all focused on CDFI certification and resiliency building. In February 2019, in partnership with the Federal Reserve Bank of New York and Asociación de Ejecutivos de Cooperativas de Puerto Rico (ASEC), Inclusiv held a CDFI Convening for Financial Cooperatives in San Juan, Puerto Rico. This event brought together multiple stakeholders committed to redeveloping Puerto Rico in the aftermath of Hurricane Maria and building resiliency against future disasters. Participants included: 55 financial cooperatives, 141 financial cooperative leaders, 30 community development experts, and 29 financial cooperatives participating in the Technical Assistance Grants Workshop. Additionally, Inclusiv has hosted three webinars.

Inclusiv has engaged the Federal Reserve Bank of New York, the FDIC, USDA, the Federal Home Loan Bank of New York, the Department of Energy, and other organizations to identify resources to be deployed in Puerto Rico.
Inclusiv is on track to meet and exceed its stated commitment goals. Credicentro-Coop in Barranquitas, became the second CDFI certified credit union in the island, joining Cooperativa Sagrada Familia in Corozal. To date, 34 cooperatives have joined Inclusiv, with several in process.