Tackling poverty through social investing

MAKING A DIFFERENCE: While studying at Brown University, Andy Posner founded the Capital Good Fund, which offers small loans and financial coaching to families. He says R.I.'s colleges and universities are great resources to help companies develop innovative products and services. / PBN PHOTO/RUPERT WHITELEY
MAKING A DIFFERENCE: While studying at Brown University, Andy Posner founded the Capital Good Fund, which offers small loans and financial coaching to families. He says R.I.'s colleges and universities are great resources to help companies develop innovative products and services. / PBN PHOTO/RUPERT WHITELEY

Andy Posner founded Capital Good Fund, a nonprofit, certified community-development financial institution that offers small loans and personalized financial and health coaching to families in Rhode Island, Florida and Delaware, while getting his Master of Arts in environmental studies at Brown University. After reading “Banking to the Poor” by Dr. Muhammad Yunus, Posner realized equitable financial services could unlock the potential of the poor, just as they could for so-called “clean-energy” technologies. He created Capital Good Fund in 2008 as the Great Recession devastated communities with low incomes, with an eye toward using financial services to tackle endemic poverty. Along the way, he earned the 2011 Hitachi Yoshiyama Young Entrepreneur Award, and his 2013 American Express Emerging Innovator award was one of 45 given out globally.

What are the biggest hurdles to starting a business in Rhode Island?

A simple one-word answer: capital – and access to capital. There’s not a very robust angel or venture-capital market, banks here and everywhere else tend to be fairly risk aversive.

Does Rhode Island have the resources to help companies develop innovative products and services?

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Yes and no. If you know where to look, we have great resources, the greatest being our colleges and universities, some of the best in the country, particularly if you’re a student. I was at Brown when I started this. If you’re a student, it’s easy to leverage relationships and talent, and harder if you’re not from that world. If you know how to look, you can tap into that. One of the biggest challenges, though, is if you want biotech, this is not the place to start. It’s all Boston and Cambridge. You want to be around other companies doing similar work. One nice thing, however, is the commute; people prefer to commute here than vice versa.

What industry offers the greatest potential for growth through innovation in Rhode Island and why?

Subjectively, it’s social enterprise, nonprofits and for-profits seeking to solve social or environmental issues. The reason I say that, Rhode Island is a nice Petri dish; it’s a manageable size, you can understand the issues you want to address. We have issues; high rates of poverty, we’re affected by climate change, but we have a lot of cool social enterprises you can interact with and learn from. That said, similar to the barrier of capital, there are so many nonprofits and only so much grant money. It’s easy to get into social enterprise, but you reach a point beyond which it’s hard to grow.

How has the company grown?

We’ve doubled our staff and quadrupled our assets, and expanded to Florida and Delaware. How easy was that to do? It took a year of planning, but more how to capitalize and fund it. The logistics weren’t bad, it’s about planning and understanding the market.

Is this a good place to do what you do?

We couldn’t have started this organization anywhere else. We wouldn’t have known how to get a handle on the issues. There are several dozen social enterprises doing all sorts of things, [such as] granola-bar companies, some based here and doing it internationally. It’s like Paris in the ’30s, where you had artists and writers talking shop in cafes. If you’re at a place [such as Massachusetts Institute of Technology] that’s teeming with ideas, the more you feed off each other and grow.

Are you doing innovative things no one else is?

Our goal is to do 17,000 loans over the next five years, here and Florida and Delaware. That’s $120 million. Part of the funding is borrowing $4.25 million from social investors, and as of now we have over $1 million. People can lend us that money and we pay up to 6 percent. We’re the first in the country to do this. It’s a different public offering, basically a social-investing model. We ask for a minimum of $1,000. The question we ask is if you have $1,000 and want to invest it socially, how do you do it? Most don’t know how to answer that. This is one of the places that you can do it.

How would you describe yourself?

I’m a pragmatic idealist who believes that creative business models, advanced data analytics and a mix of market and mission-centered forces can lead to dramatic social change. •

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