News

Nov 23, 2023

Democratic, community

In April, JRF and a group of other funders and organisations attended the second

In April, JRF and a group of other funders and organisations attended the second part of a Learning Journey on Community and Ecological Wealth Building. In this blog, Jonathan Levy gives his reflections.

This latest session follows on from the first sessions in March, where we heard from Justice Funders on the work they are doing in the US, advocating for institutional philanthropy to redistribute wealth from the dominant financial system to community-controlled initiatives that build economic power and self-determination.

In the latest session we learnt from Nia Evans, Executive Director of the Boston Ujima Project, a democratic, member-run organisation building cooperative economic infrastructure in Boston, with a mission to return wealth to working-class communities of colour. We also had the opportunity to hear and learn from Brendan Martin, Co-Director of the Seed Commons, a network of place-based, non-extractive loan funds in the US.

Boston is a city with a vast racial wealth divide. This reflects the exclusion of people of colour from public policies aimed at asset development in the twentieth century, such as the G.I. Bill, alongside persistent discriminatory housing and lending practises.i

As we learnt from Nia, Ujima launched in 2017 as a grassroots initiative aiming to develop an ecosystem approach to tackling the racial wealth inequality, poverty, and displacement prevalent in the city. It is a membership organisation seeking to build a community-driven economy, with the word ‘Ujima’ being a Swahili term meaning ‘collective work and responsibility’.

A core component of the ecosystem is the Ujima Fund, which was created in 2018. The fund raises capital from community members, supporters, and foundations, and makes loans and equity investments in local businesses. In 2021 Ujima achieved its goal of raising $4.5 million of investment capital and has since invested around $1 million across six businesses.

Investors in the fund comprise Voting Members, who are current and displaced working-class Boston residents, grassroots partner organisations, community business owners and their employees. These investors all have one vote on new investment proposals irrespective of the size of their investment, which can be as little as $50. All other investors, known as Solidarity Members, do not have any voting power (out of a current membership base of over 900, around half are Voting Members and half are Solidarity Members).

The Ujima Fund is structured so that lower-income investors take on the least risk and have the highest expected returns, more so than philanthropic investors and those able to invest larger amounts. The risk taken on by lower-income investors is mitigated by a loan loss reserve, which has been raised through grant funding in addition to the investment capital.

The structure of the Ujima Fund is designed to facilitate both individual and community wealth building, helping working class members both invest in local businesses and build assets from the returns, while making financing available to small businesses led by people from groups that have historically lacked access to capital.

Consistent with the ecosystem approach, the investment priorities of the fund are guided by a planning process comprising Neighbourhood Assemblies, where members and residents identify local businesses that they would like to be considered for investment. Members have also approved a set of business standards, such as paying a living wage and providing retirement benefits, to ensure investments align with their values.

We also learnt from Nia how Ujima goes beyond developing these new structures to foster community-led change in Boston for working class communities of colour. For instance, Ujima is also an arts and political organisation, seeking to organise members around themes such as public finance, community care, and participatory budgeting.

Ujima is a member of the Seed Commons, a network of place-based, non-extractive loan funds across the US that are investing community-controlled capital in local cooperative businesses.

The Seed Commons network was launched in 2015 following the successes of similar models of non-extractive finance over the previous decade in Argentina and Nicaragua. The Seed Commons acts as a pooled fund, channelling investment capital it raises to the now 37 peer members in its network, including Ujima. The network itself is a cooperative, with decisions made by a Board comprising representatives from the peer members.

To date the fund has deployed around $25 million of capital, with around $12 million of new loans made in the last year alone. An explicit focus of the fund on racial and economic justice means that the vast majority of the portfolio is invested in communities of colour.

As Brendan Martin, Co-Director of the Seed Commons, stressed to us on the Learning Journey, the principle of non-extraction is embedded in the terms of all the Seed Commons’ loans and investments. In practise, what non-extraction means in this context is that the returns to the lender must never exceed the profits generated by the borrower using the capital.

Typically, loans are structured so that no interest or principal repayments are required until borrowers can cover operating costs, including market rate wages, and at least 50% of returns stays with the borrower. Also, no personal guarantees are required, security is only ever taken over project assets purchased with the Seed Common's financing, and rather than credit scores, relationships between loan officers and potential borrowers are used to establish reliability.

Collectively, these terms ensure that the finance is only ever used to benefit communities by increasing worker and community ownership. However, the fund also has a strong track record of returning capital to investors, reflecting the quality control on loans made and technical support provided to borrowers.

Ujima and the Seed Commons exemplify new innovations that are reimagining the way capital and finance work in society. The infrastructure these organisations have created focuses on wealth creation and community self-determination as crucial building blocks needed to tackle historic and enduring injustices and inequalities.

In the UK, as highlighted by Tom Clark in his current blog series on asset ownership, the wealth divide is also vast, and wealth is unequally distributed by gender and race, with women and people of colour owning significantly less than the typical white male.

In the group discussion among the participants in the Learning Journey, we spoke about how we can pool our resources to catalyse the development of similar infrastructure in the UK to build community wealth and economic democracy. Participants discussed what a potential pilot project inspired by Ujima and the Seed Commons could look like, and what networks and community leaders are already present in this space in the UK that we could work with and support.

In the next instalment of this Learning Journey, we will be hearing from the Kataly Foundation. This will further our thinking on ways in which we might be able to help collectively develop practises and initiatives that ensure wealth, resources, and other assets flow though regenerative, reparative, and distributive economic principles.

These themes of funding, philanthropy and investment will be explored further at our conference, Next Frontiers, which will be taking place on Tuesday 11 July. You can learn more about the event and register.

iMunoz, Ana Patricia and Kim, Marlene and Chang, Mariko and Jackson, Regine and Hamilton, Darrick and Darity, William A., The Color of Wealth in Boston (March 26, 2015).

View the discussion thread.