Starbucks wants to create some jobs. But the coffee behemoth isn’t planning to hire a battalion of new baristas, instead it is launching a plan to dabble in microfinance. Starting today, customers at the roughly 7,000 company-owned cafes will be able to donate to a community finance fund that will give low-interest loans to job-creating projects at the local level.
The Starbucks Foundation has seeded the Create Jobs For USA fund with a $5 million donation to the Opportunity Finance Network, an umbrella group of community development financial institutions (CDFIs), the oft-overlooked good guys at the bottom of the banking sector. These are microfinance agencies, community banks, credit unions, and other small, locally focused organizations that lend within their community and keep the profits there, too.
“We’re asking people who have $5 to share to give it to people who don’t have $5 to spare,” says Lina Page of OFN, which will administer the fund, granting it out within their network of 180 CDFIs. Five dollars will be the minimum Starbucks customers can donate. That will earn them a red, white, and blue wristband with the word, “indivisible” on it, and enable $35 dollars in loans.
Because of the way these CDFIs work, the money loaned out gets put back into the community over and over as it is paid back, typically at an extremely high repayment rate. The money gets leveraged at a rate of 7 to 1 (which is why your $5 means $35). So $3,000 in latte charity will create one job through $21,000 in lending to a small business or community organization to invest in expansion, according to OFN projections.
One hundred percent of the donations will go to community businesses, Page promises. The nebulous term “community businesses” includes small businesses, microenterprises, nonprofits, commercial real estate, and affordable housing developers. “These are the kinds of local businesses that help create and maintain community jobs. From teachers at charter schools, to short term construction jobs, to nonprofit administrators… the types of jobs this initiative will create span the realm,” Page tells Co.Exist.
For now, only nonprofit CDFIs can get these grants: It is essentially free money to them on the condition they lend to projects that meet OFN’s requirements of job creation. But that could evolve depending on how the project grows.
Besides small business owners who turn to these groups for financing, most Americans don’t even know CDFIs exist as a class, or that they can support CDFIs through donations or by moving your money to accounts with some of them. These include groups like some local credit unions, Accion, the microfinance network, or the The Reinvestment Fund that lends to farmers’ markets and food co-ops to fight food deserts in Philadelphia.
Putting CDFIs at Starbucks counters amidst the breath mints and Ethos Water will be a big coming out party for the sector, no matter how many people donate with their Frappuccino change. “This initiative has and will cause unprecedented awareness of for CDFIs, a little known industry that yields big social and financial impact,” Page says.