As more community development intermediaries develop lending programs with a lens of racial equity, many have been challenged by longstanding barriers including underwriting guidelines and risk parameters that fail to consider the full impact systemic racism and redlining have had on BIPOC (Black, Indigenous, and people of color) communities. Some of these intermediaries have found the Community Investment Guarantee Pool (CIGP) to be a useful tool for testing and exploring these barriers. Launched in December 2019 and managed by Locus, formerly LOCUS Impact Investing, CIGP partners with intermediaries to structure financial guarantees that allow for new ways of assessing perceived risk and financing community development initiatives. Specifically, CIGP focuses on solutions for climate change, affordable housing, and small business financing, all while centering equity and fostering innovation in the community development marketplace. As of May 2022, CIGP has issued 8 guarantees totaling nearly $18M across all three thematic areas with $3M of that total directed to BlueHub Capital.

Case Study: BlueHub Capital

BlueHub Capital is a community development financial institution (CDFI) that lends in low-income communities throughout the US. The guarantee made to BlueHub provided loss protection for a loan product that supported high loan-to-value (LTV) projects, as well as well as the critical but difficult to finance early-phases of large-scale projects. The guarantee enabled BlueHub to relax internal limits on the percentage of its lending that support these kinds of projects.

In describing her organization’s use of the guarantee, BlueHub’s Senior Vice President of Learning and Impact Management Catherine Dun Rappaport stated, “CIGP’s guarantee allowed BlueHub to stretch its credit box and to finance more mission-driven, high-impact early-stage and high-LTV projects than we could absent a guarantee. The vast majority of the loans backed by CIGP supported borrowers that were led by people of color and/or women; over three-quarters of the loans supported projects in communities of color, and all of our CIGP loans addressed critical unmet needs for affordable housing. BlueHub has deep expertise in making these kinds of loans with terms that support (rather than hamstring) borrowers and in getting repaid, however loans like these often are perceived as risky. The guarantee alleviates that challenge. It also lets us test our internal policies regarding risk in a way that is comparatively safe. If stretching our credit box as we have with the guarantee does not result in our needing to use the guarantee, that informs our perception of risk. Perhaps we can relax some of the internal guidelines that limit the number of these loans. In fact, perhaps some of our peers can do the same. For BlueHub, a primary impact associated with the guarantee is this kind of internal (and potentially field-wide) systems change. BlueHub prides itself on providing flexible, patient capital to projects that support racially- and economically-marginalized communities; if the guarantee helps BlueHub to be even more flexible and encourages the field to do the same, that’s a win for everyone.”

An Emergent Learning Approach

As demonstrated by the BlueHub guarantee, CIGP was intended to showcase the potential for unfunded guarantees to catalyze the capital needed to launch community development initiatives that could advance racial equity. The pool’s guarantors also wanted to explore how a syndicate of mission-driven investors could share resources and risks to jointly issue unfunded guarantees while generating learnings that could encourage other investors to add this versatile but under-utilized tool to their impact investing portfolio. Given these priorities, CIGP’s guarantors and Locus adopted a collaborative and emergent learning approach to evaluating the pool’s impact. This developmental evaluation is happening now even as the pool is being piloted, with data regularly collected, synthesized, and discussed to inform ongoing decisions that will affect programmatic and strategic elements.

The evaluation team meets regularly with the CIGP program team and has set up a peer learning community with the intermediaries using the guarantees to ensure that learning is transparent and bi-directional. This type of evaluation is well suited for addressing complex initiatives that address intransient problems such as wealth gaps across race.

The pool’s Executive Director, Jim Baek noted, “The opportunity that the evaluation has surfaced is that the intermediaries that are participating in CIGP view the guarantee as a lever to further explore systems change that can illuminate real versus perceived risk in their underwriting criteria. For instance, in one case, the intermediary viewed our guarantee as downside protection allowing them to ‘test’ a more streamlined underwriting process for small business owners who had been turned down by their pre-pandemic bank creditors, knowing that the intermediary was able to offload some of their risk to CIGP.” Through this use-case and others, the community development finance marketplace can learn about practices that allow for success in both financial and impact performance with a focus on innovations that help the sector better align with racial equity.

Baek continued, “Through this emergent learning approach, we’d also like to give the guarantors an opportunity to strengthen their own guarantee management capacities and perhaps grow their own portfolio of unfunded guarantees – or even scale CIGP’s model to other pooled guarantee arrangements in their regions or sectors.”


Ultimately, this program is about a collaborative approach to deploying an innovative tool in community development finance which allows for exploration and discovery. After all, a key to innovation is trial and error; learning from processes and partnerships leads to best practices in pursuit of shared missions. In this case, we at Locus and CIGP are committed to carefully examining the ripple effect created by the Pool so we can maximize its impact and scale this model. To learn more about how you can partner with CIGP, check out our website or get in touch.

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