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What is Community Investing?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 July 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Community investing is a strategy that allows investors to provide a broad range of financial services to communities where those services are not already offered in abundance. The idea behind community investing is to tap into the market of consumers who need access to credit, healthcare options, housing that is affordable, and other financial services that are less available in low-income areas. By investing capital to establish businesses that provide these different services, investors help to improve the standard of living within the community while also earning a return from their efforts.

One of the main vehicles used in community investing efforts is the community development financial institution. Also known simply as a CII, this type of organization helps low-income families to obtain the credit they need to secure affordable housing, as well as establish bank accounts that carry reasonable schedules of fees. As part of the support to the community, it is not unusual for a CII to offer incentives that encourage the establishment of a solid credit score, regular contributions to savings accounts, and in helping to support the opening of local small business. Childcare facilities and health care facilities such as clinics may also be part of the overall plan. All these efforts help to stimulate the local economy, and allow investors to earn a return as the conditions in the community improve.

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There are several benefits to community investing. For those living in the community, the improved living conditions in terms of housing that is both comfortable and affordable go a long way in forging greater ties to the community. Since many of the strategies used in this type of investment model also allow residents to invest in projects that earn a return while benefiting the community at large, this also helps to build civic pride and a sense of belonging. For investors who put up the funds to launch these community projects, the monetary profits are often substantial. At the same time, investors who are also interested in the well-being of other people can gain a great deal of personal satisfaction from their involvement in this sort of venture.

While rewarding on several levels, community investing is not usually a short-term venture. In many cases, it takes years to earn a return from the effort. For this reason, investors who are attracted to this type of activity should make sure they can reasonably afford to wait over the long-term to begin earning a return.

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