August 7, 2008 | Read Time: 2 minutes
In an effort to go beyond charitable gifts and attract additional sources of capital to finance its work, Habitat for Humanity International has started a new social-investment program to speed up the construction of low-cost housing around the world.
The Americus, Ga., housing organization is working with the Calvert Social Investment Foundation, in Bethesda, Md., to offer low-interest notes, an investment product similar to a certificate of deposit.
Investors purchase the notes, and then the money is lent to Habitat for Humanity chapters at below-market interest rates to help them build more houses at a faster rate.
The chapters will be charged an interest rate of up to 3 1/2 percent.
“This represents a new tool for us,” says Jonathan Reckford, chief executive of Habitat for Humanity International. “Part of our strategic plan that we drafted three years ago was to establish additional mechanisms for financing home loans to low-income families. So we think this is an exciting new way of doing that that opens up access to individual small investors.”
Tax Deductions
The notes start at $1,000 when purchased from the Calvert Foundation or from a financial adviser, and at $100 when purchased online at MicroPlace.
The notes may be invested for one, three, five, seven, or 10 years, and investors can choose to earn an interest rate up to 2 percent.
When the notes mature, investors can collect the principal and interest accrued or reinvest the funds to continue their support.
The program also gives investors the option of making a tax-deductible gift of the accrued interest to Habitat for Humanity.
The charity hopes to raise $10-million in capital over the program’s first two years.
The new effort is part of the Calvert Foundation’s longstanding Community Investment Notes program.
Over the last 12 years, the notes program has raised $156-million, which was then lent at below-market interest rates to nonprofit organizations to finance community-development projects, home construction, microfinance, and other efforts.
The Calvert Foundation says that during the program’s first 11 years, loan losses have totaled just $300,000. The foundation holds a $4-million cushion — made up of grants from other philanthropies — and $26-million in loan guarantees and other assets, to protect investors.
While most of the notes have been bought by individual investors, purchases by foundations have totaled more than $14-million.
