Wall Street without Walls Opens the Door to Capital Markets: In the Face of Cutbacks in Federal, State and Local Funding, Foundation Portfolio Shrinkage and Generally Tough Times Economically, Demand for Services from Community-Based Organizations Is Increasing

Article excerpt

Facing challenging conditions in the disadvantaged urban and rural areas they serve, community development leaders have fewer available resources than ever to maintain essential services, build affordable housing, lend money to small businesses and revitalize impoverished areas.

Community development corporations (CDCs) and community development financial institutions (CDFIs) are all looking for innovative ways to finance their projects and programs, and the Wall Street Without Walls ([W.sup.3]) program is designed to help them.

At first glance, it might seem unlikely that Wall Street investment bankers would be a potential funding source for community development projects. But increasingly, nonprofits across the country are recognizing that their assets and projects can attract traditional, structured finance mechanisms. The challenge is how to overcome barriers to capital markets that impede capital flows to needy communities.

Identifying barriers to capital markets

Most CDCs and CDFIs capitalize their activities through traditional sources of public, private and philanthropic investments and contributions. "Unblocking Obstacles to Capital Markets for Community Development Lenders," a paper by Gregory Stanton, director of the Capital Markets Access Program and the Wall Street Without Walls Initiative, offers insight. He says the major hurdle facing community development practitioners nationwide is that grant and concessionary-rate capital from philanthropy and government sources is declining and likely to decline more, while the need for community and economic development (CED) projects, such as affordable housing, is increasing.

Finding a solution to this "capital gap" will require the collaborative efforts of practitioners, philanthropists, social investors and capital market financiers to create debt instruments that can attract institutional investors into the CED marketplace. Facilitating discussions about how to bridge the "capital gap" is part of the work being done by [W.sup.3]]

Connecting Wall Street with CBDOs

The objective of [W.sup.3] is to connect traditional institutions with community-based development organizations (CBDOs) in both and urban and rural low-and moderate-wealth communities, thus giving them access to the financial products of the capital markets. The program links finance professionals with local economic development organizations to offer expertise in addressing the concerns of disadvantaged small businesses, individuals and families.

By encouraging and facilitating volunteer investment banking, and ultimately capital markets services, Wall Street Without Walls aims to improve economic conditions in low-wealth communities by aiding the nonprofits that serve them. This crucial technical assistance harnesses Wall Street expertise in real estate finance as well as structured, public and nonprofit bond finance in order to make markets accessible. …