making an impact

Impact lending: How philanthropic capital can do good before it’s distributed in grants

In Short

Impact lending through donor-advised funds provides a new opportunity to combine Jewish values and philanthropy

How can Jewish funders amplify our impact on the world? At the Jewish Community Federation and Endowment Fund (The Federation), we challenged ourselves three years ago to think beyond our traditional model of providing grants to Jewish and other nonprofit organizations. Most of all, we wanted to leverage our potential to affect our entire community in new and different ways. We see and feel the needs of people every day trying to make ends meet, to overcome hardships, to support their families. Luckily, we live in a region where smart, passionate and dedicated people come together to experiment, problem-solve and overcome challenges to help improve lives.

In fact, there are few places in the world that speak to Jewish culture the way the Bay Area does, with its long history of openness, acceptance and innovation. People from around the globe and from all walks of life come here to find and express their true selves and to pursue their dreams.

With Jewish tradition celebrating every day as a chance to start anew, you could say innovation is part of our DNA. The federation is guided by the Jewish values of building community (kehilla); taking care of the needy (tzedakah); pursuing justice (tzedek); and repairing the world (tikkun olam). Looking to act on these values, and armed with fresh ideas, a pipeline of visionary leaders and passionate philanthropists, we set out to complement our traditional grantmaking with a way for people to loan money from their donor-advised funds (DAF). We call this impact lending, and it is another way we are addressing many of the same issues our donors prioritize in their grantmaking portfolios.

Investments focused on impact first

Because the federation expects to be repaid, often with some interest, these loans are considered investments. However, they are investments focused on “impact first,” rather than maximizing financial return. Leading with impact enables our significant philanthropic capital to do good – in the form of providing fair, affordable credit to those who need it – while it is waiting to be given out in grants. We source “impact-first deals” that serve marginalized communities by bringing low-rate loan capital to “financial deserts,” in which only unaffordable, inflexible predatory lending options exist. Access to capital is critical for communities to thrive because it enables small businesses to start and grow, which in turn provides essential goods and services as well as local jobs. This is what the collaborative model looks like:

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Our Jewish community cares deeply about social and racial equity, economic opportunity and the alleviation of poverty – all issues that impact lending can address. Access to fair and affordable credit is a largely unmet need across all marginalized communities. Whether it’s a female organic farmer in Chowchilla, Calif., purchasing a new truck for more reliable transportation to wider markets; a Black business owner in Oakland seeking to expand his coworking social enterprise and event space business; or a Jewish music school owner in the Bay Area needing support to survive the pandemic, low-cost loans are essential to job creation, strong communities and wealth-building for disadvantaged populations. Our recently published Impact Investing Report shows that community lenders across the United States are at the forefront of fostering a stronger, more inclusive economy. In just three years, our $25 million was pooled with capital from many other investors to support essential services and provide nearly 5,000 small business and nonprofit loans. These loans created or retained 24,600 jobs and enabled the building of 4,240 new homes as well as the purchase of seven sustainable farmlands. Tangible outcomes like these show the power of pooling assets to create impact far greater than any one single person or foundation could on their own. Bay Area Jews, like most around the country, are impacted by what happens in the broader community. Our values not only compel us to support marginalized individuals; this support ultimately strengthens our own community and those who live in it.

Laura Lauder, the federation’s former endowment committee chair and impact lending pioneer, put it well: “Giving with a Jewish lens for me means expansive and inclusive philanthropy.”  In this spirit, impact lending is a tool in our toolkit because it aligns deeply with the federation’s values. Importantly, since people are often willing to loan more than they will grant – because they know the money will be returned to their DAF to be used again – this approach amplifies and accelerates our impact. The mission-driven financial institutions that we loan to are often able to loan out every dollar more than once, sometimes several times during the loan term. Our loans also enable these financial institutions to attract even more capital, and more capital means more money for borrowers. Then, when the loan is repaid to the federation (often with some nominal financial return), those assets are used to support another charitable cause.

Thankfully, we see a healthy appetite for impact lending among our DAF holders and supporting foundations. Since 2020, 96 trailblazing funds and supporting foundations have collectively invested and deployed over $25 million. Federation’s impact investing gives people a way to contribute to all that the Jewish experience stands for — not just to preserve it, but to move it forward — and to feel a sense of pride and belonging from those contributions. It allows people to make that Jewish connection — in a very meaningful, effective way — and be inspired by how they’re doing it. 

We hope many others join our efforts and leverage impact lending as a way to demonstrate compassion, relevance and vision for the future. Looking ahead, we envision the magnitude of our impact lending activity being on par with our grantmaking; where we scale to hundreds of participating donor-advised funds and supporting foundations; and where we employ this complementing philanthropy to attract people of all ages and backgrounds from across the community to partner with us. Just as the Bay Area is a hub for forward thinking, the same is true for our federation as the center of Jewish philanthropy.  It is a region of possibility and optimism, where boundaries are pushed, paradigms shifted and where new ideas emerge that can and will change the world.

Joy Sisisky is chief executive officer of the San Francisco Bay Area-based Jewish Community Federation and Endowment Fund.