How Shared Interest Works
U.S. Loan Capital
Shared Interest raises capital by borrowing from U.S. individuals and organizations. Shared Interest is responsible for the management of funds it raises, which are invested in securities that comply with socially responsible investment guidelines developed by its board of directors.
Guarantees of South African bank loans to Community Development Financial Institutions (CDFIs)
Shared Interest deposits these securities in a pooled fund in a U.S. bank. This capital is then used to secure stand-by letters of credit that the U.S. bank issues in favor of South African banks for their loans to CDFIs on-lending in South Africa’s most marginalized rural, township and urban areas. These institutions are identified and connected to the banks by our South African partner, the Thembani International Guarantee Fund, as viable vehicles for lending to economically marginalized communities of color.
As Shared Interest’s guarantees take part of the risk of the South African banks’ loans to the CDFIs, they encourage banks otherwise reluctant to lend to these communities because of their residents’ color, income levels, health status, or because they are women. With the additional capital and technical assistance from Thembani, the CDFIs in turn are able to extend credit to many more low-income borrowers, strengthen their systems, and enhance their own self-sufficiency in the process. Shared Interest’s and Thembani’s primary objective is to develop the relationships between the country’s own commercial banks and CDFIs, so that such loans will not require guarantees in the future. In so doing they are connecting the community lenders to South Africa’s own plentiful sources of commercial capital, and introducing the nation’s banks to the communities they have historically failed to serve.
Community Development in South Africa
Access to credit helps South Africans previously denied productive land, remunerative jobs, education and capital sustain their families and establish their economic independence. Some borrowers use their loans to build safe and permanent houses. Some start small businesses to build homes and infrastructure in their communities. Others launch small businesses that range from growing and selling vegetables and harvesting honey to making and selling clothes and organizing community child care centers. South Africa’s CDFIs typically provide their borrowers with technical assistance in addition to credit and often savings programs, enabling them to build successful and sustainable businesses as well as viable communities.