by Erin Shackelford
Rebuilding disinvested communities takes more than money. Rather, as research done by the Initiative for Responsible Investment (IRI) at the Harvard Kennedy School has shown, places that have been starved of resources for extended periods of time often lack the policies, practices, or relationships they need to effectively leverage existing or new resources.
IRI's capital absorption framework not only recognizes that there is a complex system that governs how resources flow into communities, it also provides a way to think beyond individual transactions to identify changes at a system level so that investment is used more effectively to achieve community goals. Potential system-level interventions can include bringing new partners to the table, identifying new resources that can be provided by existing partners, creating different ways of doing business, and changing the policies and relationships that determine the allocation of money and other resources.
Many of these approaches are central to strategies used in collaborative initiatives carried out by Community Development Financial Institutions (CDFIs) that have been funded by JPMorgan Chase & Co.'s PRO Neighborhoods program. The growing collaboration among CDFIs—which can be banks, credit unions, or other financial institutions that have a primary mission to provide access to financial services in low-income communities—have included the development of joint products and services, efforts to share risk and expertise, jointly developed new technologies, and the development of larger scale projects which could attract additional investors.
A new case study, which uses this "capital absorption" framework to examine many of the collaborative efforts funded by the PRO Neighborhoods initiative, finds that the funding spurred three types of collaborations that together increased the CDFIs' ability to respond more effectively to key needs and concerns.... Read more about Collaboration by Design: CDFIs, Capital Absorption, and the Creation of Community Investment Systems
“What can communities do to make it easier to attract and deploy capital and leverage other assets to achieve their social goals?” This question, central to the concept of capital absorption, is addressed in a new report which applies the concept to hospitals and health systems. Released today, “
Returning HKS students with an interest in impacting investing and related efforts may wish to consider IRI Director Dr. David Wood's popular course “
