Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

FINANCING AND BUILDING URBAN ENTREPRENEURSHIP AND ECONOMIC

OPPORTUNITIES IN CITIES

NAPOLEON WALLACE

JUNE 8, 2016

MEETING OF THE MINDS

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

Source: Institute calculations from Survey of Consumer Finances (1983-2013). Note: 2013 Dollars.

WHITE WHITE

HISPANIC

$102,064

$134,230

$12,906

$11,030

$-

$50,000

$100,000

$150,000

$200,000

1983 1989 1992 1995 1998 2001 2004 2007 2010 2013

AFRICAN AMERICAN

$102,064

$134,230

$9,342

$13,730

$-

$50,000

$100,000

$150,000

$200,000

1983 1989 1992 1995 1998 2001 2004 2007 2010 2013

1983, Whites held 8x more wealth than

African Americans

1983, Whites held 11x more wealth

than Hispanics

2013

12xmore

2013

10x more

PROBLEM: FAMILY WEALTH BY RACE/ETHNICITY 1983-2013

Black and White Hispanic and White

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

OUR MISSION (our solution)To create and protect ownership

and economic opportunity for all, especially people of color, women, rural residents and low-

wealth families and communities.

OUR MISSION

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

Acquire and rehab key properties to promote community and economic development.• Retail branches• Multi-tenant office• Charter school

facilities for low-income students

• Affordable housing• Single Family homes• Senior living• Adaptive, historic

reuse

Federal and state policy research and advocacy on predatory lending and consumer issues:• Payday lending• Mortgage reform• Car title lending• Credit/debit card

lending• Student loans• Debt

consolidation

Retail Financial Services SHCU & SHFCU

(branches NC, CA & IL)

State CU est. in NC in 1984; grown through 8 mergers. • 20 branches• $650 MM assets• 60,300 members

Federal CU est. in CA 2010grown through 7 mergers.• 23 branches• $560 MM assets• 49,500 members

Impact areas:

• Access to healthy foods

• Commercial real estate

• Affordable housing development

• Small businesses• Nonprofit facilities

including Childcares• Churches• Direct home purchase• Consumer loans

Real Estate Development

Commercial LendingCenter for Responsible

Lending (CRL)

OUR APPROACH

Self-Help: 2 nonprofits (CCSH and CRL) and 3 financial institutions (SHCU, SHFCU and SH

Ventures Fund)

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

TOOLS IN THE TOOLBOX

5

Originated over $525 million in home loans.

Affordable Homeownership: # of years of homeownership explains 28% of the increasing wealth gap.

$100 million of loans to child care facilities and charter schools.

Equal access to Quality Education: Educational attainment explains 17% of the increasing wealth gap.

$200+ million of business and facility loans – including our small business lending portfolio.

Business Lending: Household income and employment explain 22% of the increasing wealth gap.

Source: Brandeis University Institute on Assets & Social Policy, “The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide”, February 2013.

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

SUMMARY OF SMALL BIZ LENDING MARKET

6

Smaller banks rely more heavily on small biz loans

Biz credit cards largest alternative segment

Marketplace lenders represent small portion of market

Source: Goldwater Institute Policy Report, “Increasing Entrepreneurship is a Key to Lowering Poverty Rates”, 2012. Association for Enterprise Opportunity (AEO), 2010.

Lender (Banks by Size) UPB in $Bil Est. Rate Floor / Ceiling

Bank: Over 50B 210 3% 10%

Bank: 10B – 50B 51 3% 10%

Bank: 1B – 10B 110 3% 10%

Bank: 500M – 1B 51 3% 10%

Bank: 100M – 500M 97 3% 10%

Bank: Under 100M 16 3% 10%

CDFIs: Banks/Loan Funds 6 4% 15%

Business Credit Card 175 12% 36%

Equipment Financing 150 6% 14%

SBA Guaranteed 70 4% 9%

Factoring Loans 55 5% 75%

Credit Unions 44 4% 12%

Merchant Cash 15 20% 60%

Marketplace Lenders 5 10% 120%

0

50

100

150

200

250

Banks are primary provider of business credit credit to “prime credit” borrowers

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

ACCESS TO CREDIT CAN BE DIFFICULT

7

Credit Quality Gaps

Reason for Denials in 2013 – Insufficient Collateral (38%), Low Credit Score (35%), Weak Business Performance (29%), Poor Financial Reporting (9%) and Other Factors (28%).

Demographic Gaps

Minority and Women Owned Firms are 33% less likely to pursue a loan, are 13% less likely to receive approval, and receive only 43% of loan amount received by similar non-minority borrowers.

Lower net worth borrowers; Businesses with insufficient collateral; Start-up and expanding businesses; Borrowers with prior credit issues; and Smaller loan sizes.

Target Market for Small Business Borrower

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org 8

Risk for small, non-bank loans to borrowers with slightly blemished credit is greatly overpriced.

Community Development Financial Institutions (CDFIs) like Self-Help help to fill this gap.

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

Interest Rate

Market overcharges many creditworthy borrowers

ACCESS TO CREDIT CAN BE EXPENSIVE

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

Kinston United Services

Thanks!

Napoleon Wallace

napoleon.wallace@self-help.org

919-956-4400

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

• Co-founded in 1980 in Durham, NC by Bonnie Wright and Martin Eakes.

• Originally created to encourage and support worker-owned cooperative businesses (like the New Bern Bakery).

• First capital in Self-Help Credit Union was $77 donation from a bake sale in late 1983

Humble Beginning

OUR HISTORY

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

CORE VALUES

11

Mission before Self

Service with Excellence

Results, Not Credit

Diversity as Strength

Embracing and Promoting Change

Financial Sustainability for Mission Impact

Our CoreValues

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

OUR FOCUS ON SMALL BUSINESS LENDING

12

Why? Because it works.

1% percentage point increase in the average entrepreneurship rate corresponds to a 2 percent decrease in the poverty rate.

Female-headed family households in which at least one person owns a microbusiness generates $8,000 to $13,000 more in annual household revenue.

Source: Goldwater Institute Policy Report, “Increasing Entrepreneurship is a Key to Lowering Poverty Rates”, 2012. Association for Enterprise Opportunity (AEO), 2010.

$200+ million of business and facility loans – including our small business lending portfolio.

Business Lending: Household income and employment explain 22% of the increasing wealth gap.

Creating and Protecting Ownership and Economic Opportunity | www.self-help.org

ABOUT US

13

Community Development Lending

Corporate and Investment Banking

ESG + Social Investing Consultant

3 small biz ventures … so far: legal, financial and food service industries

Napoleon WallaceExec Staff at Self-Help