Donor Loan Facilitates Emergency Resettlement of Afghan Allies
An FJC donor has provided a 0%-interest philanthropic loan to help kick-start a $10 million initiative to help newly arrived Afghans rebuild their lives in the United States. The loan program is a component of Support for Afghan Financial Empowerment (SAFE), an initiative launched by the International Rescue Committee (IRC) and their Center for Economic Opportunity (CEO) to empower Afghan families as they begin their journey to financial stability and economic security in their new homes across the U.S.
More than 70,000 Afghans have arrived through Operations Allies Welcome, a federal effort to support vulnerable Afghans, including those who worked alongside us in Afghanistan for the past two decades, as they safely resettle in the United States. These families have had to endure a challenging, emergency resettlement experience in the midst of a pandemic and an economy still reeling from COVID-19 impacts.
“Unlike newcomers with refugee status, Afghans are humanitarian parolees, meaning they have official permission to enter and remain temporarily in the United States,” explains Kasra Movahedi, the Executive Director of IRC’s Center for Economic Opportunity. “This status poses unique challenges for building credit, making it harder for them to apply for rental housing, finance a car, and in some cases may limit access to certain jobs.”
SAFE fills this gap by providing small, 0%-interest credit-building auto, education, immigration and personal loans, coupled with financial education and counselling. IRC has trained a team of financial coaches, native to Afghanistan, to offer these services to any Afghan who arrived through Operations Allies Welcome.
The 0%-interest immigration loans will help reunify families separated by the chaotic military withdrawal. Immigration services are costly, and time is of the essence. Few Afghans have the funds necessary to pay for immigration services, and access to a 0%-interest, no fee immigration loan can be the difference between life and death for separated family members.
FJC has a long history of making loans to the nonprofit sector. The majority of FJC’s loans are made from the organization’s Agency Loan Fund, a pool of donor capital that is actively managed by FJC staff and is invested in loans to nonprofits earning a floating interest rate of the prime rate plus 3 percent (currently 6.5%). Donors may also recommend below-market rate loans (also known as program-related investments) using funds in their donor advised fund accounts, on customized terms of their choosing.
“We are honored to use FJC’s boutique philanthropic platform to galvanize support for Afghan humanitarian parolees at this historic moment,” said the donor, who wishes to remain anonymous. “Having resources set aside in our FJC account enabled us to provide CEO exactly the 0%-interest capital source they needed to launch this critical economic empowerment initiative.”
Investing in Skill Building: The Career Impact Bond
An FJC donor is putting philanthropic dollars to work by investing in economic mobility for low-income workers. The initiative is called the UP Fund, a $50 million pool of catalytic capital raised by the national impact investing nonprofit Social Finance. The goal of the UP Fund is to help low-wage earners secure good jobs in a changing economy, using a model called the Career Impact Bond (CIB).
Through the CIB, impact investors fund training programs that enable students to enroll free of charge. Students complete their training with the aid of wraparound supports, like an option to finance living expenses. If their salary after the program exceeds a certain threshold, they repay program costs as a fixed percentage of their income, capped at a set dollar amount and fixed number of months. Those who don’t obtain meaningful employment following graduation pay nothing.
Social Finance partners with high-quality training programs that upskill workers and help place them into good-paying jobs. One such program is American Diesel Training Centers, a for-profit training company based in Columbus, Ohio, that offers a short, intensive course to train entry-level diesel technicians, mostly for trucking companies and dealerships. (See the New York Times story featuring this partner here). Another partner is Alchemy Code Lab, which increases access to software development careers for those who have traditionally been locked out. The program also aims to increase diversity in the technology sector, particularly for people of color, women, and LGBTQIA+ individuals.
Longtime FJC donor Ted Huber invested in the UP Fund through his Donor Advised Fund account at FJC. “I like how the UP Fund aligns incentives to give people a leg up,” explains Huber. “Workers looking for better skills and higher paying work, the schools that can train them, and us funding the education are all pulling in the same direction. The UP Fund is helping people who otherwise couldn’t afford these training programs.”
A longtime investment professional, Huber has been interested in supporting initiatives that anticipate recycling philanthropic dollars, providing both social and financial returns. Huber recommended an investment in the Fund via his DAF account, and following approval by FJC’s board committee, the staff at FJC worked with him to execute the investment through Social Finance’s recoverable grant structure. This approach allows DAF account holders to participate in the UP Fund with the same terms as institutional impact investing foundations like Blue Meridian Partners, The John D. and Catherine T. MacArthur Foundation, the W.K. Kellogg Foundation, and many others.
“The DAF market represents a significant pool of assets already earmarked for charitable purposes—currently more than $170 billion—that largely remain in traditional market-rate investments without a mandate to generate social and/or environmental outcomes,” says Tracy Palandjian, CEO and co-founder of Social Finance. “We’re proud to work with creative DAF sponsors like FJC, who make it easy for their donors to invest for measurable social impact.”
For students looking to sharpen their skills and earn more, the time and expense of training programs can be risky. One of the critical aspects of the UP Fund is that it shares risk among the participants: students, training program providers, and impact investors. As Devon, a participant in the Alchemy Code Lab program, explains, “I was looking for places that had really generous scholarships—something where the funding was significant because there was no way I was going to make that choice without a clear financial path for myself. What was really heartening about the Career Impact Bond was…the safety net. If this all goes wrong, I’m protected.”
Innovative, Revolving Uses of DAFs Featured in Webinar
Leaders of two nonprofit organizations whose urgent financial needs were met by innovative FJC donors were featured on a webinar hosted by the Estate Planning Council of NYC (EPCNYC), titled “Multiplying your Impact: Innovative Approaches to Revolving Philanthropic Dollars”. The nonprofit Executive Directors, Annie Polland of The Tenement Museum and Dolores Kordon of Brighter Tomorrows, were joined by members of FJC’s leadership, CEO Sam Marks and Chief Legal Officer Mark Cohen, who described the foundation’s role executing the transactions. The event was moderated by Henry Snyder, Executive Director of JP Morgan’s Private Bank, and a member of EPCNYC.
While most holders of Donor Advised Fund (DAF) accounts use their philanthropic funds for grants, the webinar highlighted cases where donors identified financing gaps in the organizations that could be addressed with solutions that combined philanthropic intent with investment strategies.
In the case of Brighter Tomorrows, a domestic violence nonprofit serving women and families on Long Island, the donor was solving for a cash flow problem. As Ms. Kordon explained, the majority of the organization’s work is funded with government contracts. These contracts, typically administered through the state or county, are notoriously slow to pay even during normal times and are typically paid on a reimbursement basis. During the pandemic, when the needs of clients for shelter, food, and emergency assistance were at an all-time high, the public agency offices administering payments on the contracts were also facing major capacity issues. “Payments slowed to a snail’s pace,” Ms. Kordon lamented. “With the pandemic came all sorts of additional emergency costs, and we had to still keep the lights on and pay rent.”
Enter Sandy Wheeler, one of Brighter Tomorrows’ most steadfast donors. Ms. Wheeler worked with FJC to deploy $100,000 in her DAF account as a 0% interest revolving line of credit. This cash resource allowed Brighter Tomorrows to continue meeting the urgent needs of clients, even in the face of slower contract payments. In the year since the loan was closed, the funds have been fully drawn, repaid, and drawn again. “I can’t say enough about the importance of having a donor provide this resource,” says Ms. Kordon. “It was a godsend for us.”
FJC facilitated a more complex transaction with The Tenement Museum, a vital organization that has been researching and telling the stories of immigrant New Yorkers for the past 25 years. In the early days of the pandemic, the organization faced significant financial distress, as documented in an New York Times article, “A Museum Devoted to Survivors Faces Its Own Fight for Survival” (April 24, 2020). The article noted that 75% of the museum’s revenue came from earned income, reflecting admissions and gift shop revenue of its 285,000 annual visitors. As a result of the pandemic their visitors (and attendant revenue) had dried up, but the museum carried significant fixed costs due to its mortgage, which cost the museum $585,000 per year.
One of FJC’s donors read the New York Times article and reached out to inquire whether he could refinance the museum’s mortgage with funds in his DAF account. Upon further conversation with the Museum’s leadership, it was revealed that the mortgage was in the form of a tax-exempt bond, issued by the City of New York through its Build NYC Resource Corporation, a division of the NYC Economic Development Corporation. In coordination with the donor, FJC purchased the bond from the bondholder, and amended the terms to interest-only at 1% per year, reducing the museum’s annual debt service payment from $585,000 per year to $80,000. “We are paying $2.5 million less out of pocket for debt service over these five years,” explains Ms. Polland. “This has bought us time to figure out how we manage through this pandemic year, but it also freed us up to think of creative ways to operate.” Ms. Polland noted that the museum has been able to develop distance learning modules that have engaged students virtually from as far away as California. She also noted its new exhibit focusing on a Black family and a walking tour called “Reclaiming Black Spaces,” which explores sites connected with nearly 400 years of African-American presence on the Lower East Side. “The Museum is not just pausing,” she said. “We’re taking on new and addressing the questions important to this country. How does learning our history help us move forward?” The Museum’s new programs and strong emergence from the pandemic were featured again in the New York Times this month, a story that Ms. Polland describes as a “bookend” to the previous year’s story on the organization’s distressed financial picture.
Mr. Cohen explained that after five years, FJC intends to sell the bond back to the bond market, and will aim to recoup the $9.5 million face value of the bond for the donor’s account. These funds can then be recycled as grants or additional loans or impact investments.
The moderator Mr. Snyder noted that customized transactions like these do not appear to be standard offerings at most DAF sponsors. Mr. Marks noted that philanthropic lending and impact investing are more common at the more sophisticated, professionalized foundations and that FJC had a long history of applying best practices from philanthropy more broadly to their DAF account holders. “We’re trying to inspire more of our donors to approach philanthropy in this way,” says Mr. Marks, “and work with new donors that are inspired by examples like these.”
FJC Facilitates Donor Loan to Support Families Facing Domestic Violence
It took the collective efforts of a number of people to get it done: a committed donor, a philanthropic advisor, and the staff at FJC. All parties worked together this spring to close a $100,000 cash flow loan to Brighter Tomorrows, a nonprofit working with victims of domestic violence to provide shelter, counseling and legal advocacy to New York’s Suffolk and Nassau counties as well as New York City and the Tri-State area.
The process began with Sandy Wheeler, a longtime donor to Brighter Tomorrows. Over time, Ms. Wheeler developed a trusted relationship with Dolores Kordon, the organization’s Executive Director, who often lamented the difficulties she faced running an organization that relied heavily on state contracts that were typically slow to pay. “It seemed like the chronic cash flow challenges of Brighter Tomorrow could be creatively addressed with philanthropy,” said Ms. Wheeler.
The Wheelers spoke to their philanthropic advisor at a large financial institution, who made the introduction to FJC. “The Wheelers already had a Donor Advised Fund account, but the sponsor wasn’t really set up to originate loans,” their advisor explained. “We appreciated that FJC had the track record and infrastructure to make this proposed loan happen, and quickly.”
Within a few weeks, staff at FJC worked with the Wheelers to open and fund a new DAF account, review Brighter Tomorrow’s financials, and prepare the legal documents with terms customized according to the Wheelers’ wishes. Among other features, the loan carries no interest.
“Brighter Tomorrows is so grateful for this intervention by FJC and the Wheelers,” says Ms. Kordon. “Particularly during the COVID-19 pandemic, when cash was tight due to many competing programmatic demands, having the Wheeler’s loan to bridge our day-to-day expenses provided us the flexibility to be responsive to the families we were serving, like distributing food cards and helping clients pay rent.”
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