The First National Nonprofit Bank
Everyday, nonprofits go to the bank.
They deposit grants and manage their investments portfolios. They repay loans, draw down on lines of credit and make payroll. What they do not do however is recognize the social, political and economic power they could wield if their assets we aligned.
Nonprofits in America have $3 trillion is combined assets. In 2007, they received close to $300 billion in donations. And with almost 14 million employees in the sector, our bi-weekly payrolls could equal, if not surpass, the GNP of countless small nations.
Yet nonprofits in America have yet to take advantage of this staggering wealth.
This came up recently, following a speech I made concerning on the recent economic meltdown and the affect it might have on charities. During the question and answer session that followed, one audience member suggested, rather forcefully I might add, that now might be the time when nonprofits might finally be forced to consider merging. The questioner went on to suggest that, with so many groups competing for that city’s shrinking pool of grant funds, if groups did not merge, then too much of the money would have to be allocated just to keep the doors of thousands of struggling nonprofits from closing for good.
I suggested that this was a very important question……but that there were three kinds of mergers that needed to be considered.
The first, of course, is the classic interpretation of the concept of a merger—when two groups decide to become one. Indeed, all across the country, there are serious discussions going on between board committees and founders, funders and community leaders, all attempting to forge a consolidation of entities. This is a good thing.
Seldom considered though is another, more viable option; the merger of services or backroom operations. In this setting, groups that are evolving from organizations where one or two people raised the money, kept the books, and managed the PR while also delivering services would share the costs of hiring an human resource or finance professional who would serve all their organizations. In a more advanced variation of this theme, groups that might be seeking to develop a more formal relationship with decision makers in local government, might come together to share the costs of hiring an advocate who could better position their causes or clients when and where political decisions are made.
But what I suggested to them that afternoon, in that accordion walled hotel conference center room that was packed with concerned colleagues was that, if we were really smart, we’d open our own bank and merge our money.
And if we did—we’d be bigger than Bank of America.
In this current economic crisis, America has multiple opportunities to redesign our systems. As governments and businesses go about determining what new laws and policies need to be enacted to stem the current crisis, mitigate its impact or avoid future catastrophes, nonprofits are once again sitting on the sidelines, waiting to see how it will affect our sector. Worse still, we are reacting to this crisis not from a potential position of strength, but from a historic and unwarranted notion of weakness and inferiority. This must finally come to an end.
If we opened our own bank, and pooled our money….we could loan each other money, build affordable housing, issue credit cards, establish micro-credit as a force in America, reopen a million boarded up businesses, fund college education, make grants….in fact—-we could change the face of commerce in the world and finally eradicate many of the problems we now beg for money to semi-address.
THAT’S the kind of merger I’m interested in.
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November 1st, 2008 at 2:02 pm
[...] Robert Egger´s Piece of Mind » The First National Nonprofit Bank Robert Egger suggests that nonprofits pool their financial assets in a common "nonprofit bank" and allow the deposits to fund loans to other nonprofits. Interesting idea and another example of social capital markets at work. (tags: philanthropy) [...]
November 3rd, 2008 at 4:27 am
This is perhaps one of the brightest ideas post recession that makes sense. I have been lobbying for this concept for yeards with area leadership in Jacksonville, Florida – Non-profit haven. I am interested in developing a similar model here to engage non-profits in the black community from overlapping time, resources and money. This plan is feasible and necessary. Please let us know how we can help.
November 3rd, 2008 at 3:52 pm
I read with great interest “The First National Nonprofit Bank.” While certainly not on the scale of what you are proposing, we at FJC have long recognized the need for capital in the nonprofit sector.
FJC manages the unique FJC Agency Loan Fund (ALF) which provides secured loans to charitable organizations. Often these organizations have limited access to other credit sources. The loans are made at prime rate plus 3 percent. There are no fees or pre-payment penalties to the borrower.
Decisions about whether to provide a loan are made by FJC‘s Loan Committee. The Committee generally meets with a loan applicant’s representatives to review the application, including the organization’s financial statements, staff and board of directors, description of available collateral, and to discuss the structure of the potential loan. Applicants must be able to convince FJC that:
· The cost and viability of the project are logical and achievable;
· The applicant can both pay the loan’s debt service and maintain operations;
· The loan can be repaid in full;
· The applicant has in-house or outside expertise to manage the project.
The net return on the FJC Agency Loan Fund is credited to FJC accounts that selected this investment option and will ultimately be directed to a worthwhile charitable organization. The return varies with changes in market interest rates and utilization ratios.
The interest earned by the FJC Agency Loan Fund is credited to the donors’ accounts, thereby increasing the funds available for grants. FJC manages the liquidity of the ALF to ensure that account holdings invested in the FJC Agency Loan Fund are available for grants at any time.
The loans are frequently made to provide bridge financing for agencies awaiting government and other funding and to address short-term needs. Some of the loans have helped finance the establishment of group homes for the disabled, classes for special needs children, programs at community centers for the aged, adult literacy programs and support for young recovering drug addicts.
The loans provide critical, timely financing that enables charities to accomplish their missions.
Since FJC began making loans to nonprofits in 1995, we have advanced loans to more than 125 different charitable agencies.
November 14th, 2008 at 12:02 pm
The idea of using the power of deposits from community focused, mission driven nonprofits for good use is terrific. There is an existing structure that offers some opportunity for tis – Community Development Financial Institutions (CDFIs). Most CDFIs are nonprofits that gather capital (including deposits, in some cases) and lend to nonprofuts, small businesses and individuals to build healthier communities. Nonprofits Assistance Fund, for example, has made over $60 million in loans to about 1400 nonprofit organizations.
November 19th, 2008 at 2:39 pm
My friend,
I met Alessandra DalColle at a Social Innovation meeting this summer. Banca Prossima has a fantastic model and would be a *very* cool thing to have here. It’s gotten some interest in the funding community too…maybe a push is needed?
Slides from her presentation.
http://www.slideshare.net/sixslides/alessandra-dalcolle
Be well, rabblerouser!
December 25th, 2008 at 12:42 am
Thanks for the interesting article.
February 18th, 2009 at 6:29 pm
This is a wonderful idea one that I shared myself. I created a website at http://www.BankSerf.com were we can exchange ideas and debate on solutions for potential problems. I encourage everyone to take a look at it at share a comment. Lets make trickle down economy into raging rivers of prosperity! I am a person with a name, Em hotep. Peace.
March 16th, 2009 at 9:38 pm
I found your post in a search I did in response to my own idea that there should be banks that operate on a not for profit basis in order to eliminate one sector of corporate greed. Today, as bank bailouts reach epic proportions, with CEOs floating away on golden parachutes right in plain sight of the angry mob, we must realign values with investments to nip this criminal greed here and now.
This is a fine idea, thank you.
May 6th, 2009 at 1:36 pm
I think non-profits should merge in order to be profitable……….right decision..
May 16th, 2009 at 11:02 am
I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.
June 11th, 2009 at 5:43 am
Nice site! thanks for the great post…%d%a%d%aPeople should read this.