SHOREBANKNORTH? AsouthMinneapolisgroupexplores sociallyresponsiblelending By Lansing Shepard A sure sign of a successful idea is the way it spreads. In south Minneapolis, a group calling itself Common Profits has been following Chicago’s Shorebank story with particular interest. The group, incorporated as a nonprofit in 1988, was created by local business people, theologians, academicians, and state government officials who, back in 1985, came together seeking a way to break the cycle of urban poverty and governmental dependency. They found their inspiration in a social and economic development organization based in Bogota, Colombia, called Grupo Social. Although little-known in this country, Grupo is one of South America’s shining successes in effecting social economic development. Referred to in Colombia as “ an experiment in social capitalism,” Grupo is essentially a corporate conglomerate of businesses dedicated to social and economic change in that country. Its constituent firms are set up and managed specifically to use their profits to further social and economic justice within their various communities. An important part of Grupo’s corporate strategy is to extend loans to people who are traditionally considered too poor to be credit-worthy. Paul Halverson, executive director of Common Profits, says his group has a way to go before it becomes anything like a lending institution, let alone a Grupo. “What we’re doing is setting up an opportunity where people who have money can invest in something for both financial and social return, to help underwrite and support the social purpose or development lending that we want to do,” says Halverson. “ Profit is our second-to-thebottom line. Social purpose is our primary bottom line. “ But at this point, we’re just working on a business plan. Right now, we can’t guarantee anything. We’re not even sure that a bank is feasible for this market,” he says. Operating on an $80,000 budget, the organization is based in the Franklin Business Center in south Minneapolis. It is staffed only by Halverson, a self-styled “ reframed economist” and economics professor who has taught at Augsburg College and Metro State University, and by Jim Cylkowski, a former president of the White Rock State Bank in Cannon Falls, Minnesota. Funded primarily by the Emma Howe and Dayton Hudson Foundations and the Headwaters Fund, Halverson and Cylkowski are beginning to get acquainted with the southside neighborhood’s community groups and business leaders and explaining Common Profits' mission. “ It’s critical to us to build credibility and rapport with the various community groups and the bankers,” says Halverson. “We're trying to build a partnership here. And by working with the banks, we’re trying to demonstrate that banks can be leaders in this area. “ Remember, we’re dealing in an area that banks typically don’t touch. So you have to prove yourself ...you have to build a track record.” How that track record can be established is a central focus of the group’s business plan. “There are ways to lend money other than by being a bank,” says Halverson. “We’re talking about a threetiered lending program and structuring a lending operation that can manage a higher degree of risk than can regulated banks. We want to use this as a way of demonstrating how one works in this market.” Halverson estimates that the process, the building of a track record, will take probably three years. “As you can see, this is all tremendously complex.” Eventually, should the organization’s successes lead to the formation of a community bank, Halverson envisions it occupying a unique niche among its kind. “We’ll probably be a hybrid of Shorebank and some other models out there,” he says. “The situation in the Twin Cities is very different from that in the south side of Chicago." Lansing Shepard is a writer living in St. Paul. access to government deposits, favorable interest rates from the Fed, and so on) but not to demand more control than any other equity investor, a development bank program might work. If government treats development banks as government programs, required to meet all the public accountability standards and to jump through all the bureaucratic hoops, it will never work. “Sometime in the last century or before,” Grzywinski says, “we figured out ways to create universities and hospitals as major not-for-profit organizations that were capitalized either with public funds or private funds, to achieve a public purpose. We created them in a way that they would be substantial, permanent, and in the marketplace. They have to be managed like businesses. And one could ask, ‘Why don’t we create development institutions the same way?’ ” TERTULIA: An informal gathering for conversation and discussion of the day’s issues. TheCSQwill host atertulia of people involved and interested in community based credit: credit unions, revolving loan funds, ‘‘community responsive banking,” and their relationship to the people they serve. Therewill be representatives of Southside Credit Union, Common Profits and local banks. All arewelcome toSt. Martin’sTable, 2001 Riverside Avenue at 7 p.m. on October 16. David Osborne is the author of Laboratories of Democracy published last year by Harvard Business School Press. Excerpted with permission from The New Republic (May 8,1989). Subscriptions: $56/yr. (48 issues) from Box 56515, Boulder, CO 80322. Rod Massey is a Minneapolis artist. Jay Miller has natural rhythm.
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