Social Impact Heroes: How Andy Posner of the Capital Good Fund is using small loans to combat the predatory lending industry
You can’t solve everything; pick the things you can improve and be obsessive about improving them. The world is complex, and social and environmental issues such as predatory lending even more complex. It is tempting as a nonprofit founder to want to solve everything — poverty, climate change, income inequality. But it’s just not possible, philosophically, logistically, financially, or practically. Instead, I’ve worked to achieve an intense focus on one thing: using affordable small-dollar personal loans to uplift individuals and families.
As part of my series about “individuals and organizations making an important social impact”, I had the pleasure of interviewing Andy Posner, founder and CEO of Capital Good Fund. He is taking on the $200 billion predatory lending industry and trying to put poverty out of business one loan at a time. Capital Good Fund is a nonprofit, U.S. Treasury-certified Community Development Financial Institution (CDFI) that offers personal loans ranging in size from $300-$25,000 to help their clients cover a variety of key needs. In its first ten years, Capital Good Fund has financed loans worth an estimated $9.3 million to 4,500 families in Rhode Island, Illinois, Massachusetts, Florida and Delaware. More than 1,600 people have graduated their Financial & Health Coaching programs. Posner founded Good Fund in 2009 when he was working towards his Master of Arts in environmental studies at Brown University with a focus on financing mechanisms for clean energy. Posner was inspired by reading Banker to the Poor by Nobel Prize Winner and Father of Microfinance Dr. Muhammad Yunus. He is also a published poet and essayist, including a nomination for the 2019 Pushcart Poetry Prize.
Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?
My path to running the fastest-growing nonprofit lender in America is rather unconventional. My goal in high school was to drop out and become a professional tennis player. When injuries made that impossible, I went to college and majored in Spanish Language and Culture. Around that time, I became interested in two inter-related issues: poverty and climate change. I decided to seek an advanced degree that would enable me to pursue those topics, and in 2007 I moved to Rhode Island to begin an MA in Environmental Studies program at Brown University.
Early on I got interested in financing mechanisms for clean energy; having no background in financial services, I was fascinated that how one structures a solar loan can mean the difference millions of people putting panels on their rooftops and the technology being limited to the wealthy. At the same time, I was reading about Dr. Muhammad Yunus, the 2006 Nobel Peace Prize winner and so-called Father of Microfinance: another example of how financial services could unlock potential and serve the greater good. Then the 2008 financial collapse erupted, and I saw how the financial system could also destroy lives, communities, and entire economies.
The realization that financial services — loans, credit cards, checking and savings accounts, insurance — could be a tool of uplift or oppression led me to dive deeper into the system. Along the way, I came across the issue of predatory lenders such as payday lenders who charge triple-digit interest rates and rake in billions of dollars by trapping lower-income families in a debt cycle. Outraged, I looked around for organizations providing an alternative to these abominable products; finding none, I decided to start Capital Good Fund in 2009 to combat the problem and, as I like to say, put poverty out of business — that is, the business of making unseemly profits off the poor and marginalized.
Can you share the most interesting story that happened to you since you began leading your company or organization?
As I mentioned before, I didn’t have a background in financial services when I started the organization. Not only that, but I was only 23 and never really had a job before! So, I had a lot to learn. I remember at one of our kickoff events, this would’ve been in March of 2009, I had brought together a bunch of potential funders, including bankers and grant officers. During the Q & A portion, someone asked me what our underwriting standards were. I don’t remember what my answer was, but it couldn’t have been good because…I didn’t know what underwriting was! I hadn’t even heard the term before, and here I was, talking about this new lender I had started.
The lesson was clear and stark: if I was going to start and grow a successful nonprofit, good intentions would not be enough. In fact, it didn’t take long to see that good intentions give you the why for running an organization, but once you have that, it’s the how that really matters — how are you going to fund the work? Measure impact? Acquire clients? Deliver an excellent service. After I came home from that disastrous presentation, I undertook a lengthy process of educating myself — I needed to master the issues we would be addressing — as well as of developing a clear business plan and business model for fulfilling our mission.
It would be disingenuous to draw a straight line from that presentation to where we are today, nearly eleven-years later. But a lot of the progress we’ve made was made possible by the lessons I drew from that embarrassing and (in retrospect) humorous disaster of a presentation!
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
The first loan we ever made was on April 1, 2009. At the same, I was still a graduate student and Capital Good Fund was a group of volunteers operating out of the basement of the Urban Environmental Lab — a rickety old building on the campus of Brown University. It had taken a year of work to set up the organization, establish the policies and procedures, and market our products to get to this point. Our first borrower, Eva, was about to sign the documents for a $1,000 loan which would enable her to come a U.S. citizen, something she had been seeking to do for over 10 years but had been unable to for lack of money.
Because we didn’t have an office near a bus stop, we decided to meet to sign the loan paperwork at the Providence Public Library. I spent hours making sure I had everything right: the loan contract, checklist of documents I would need to scan, loan check, and so on. I was so nervous that I could barely hold the pen, but everything went smoothly until I had to sign the loan check: I wrote the wrong amount, misspelled her name, and then wasn’t happy with my signature, resulting in my crossing it out and re-signing it. By the time I was done, it was clear that there was no way Eva would be able to deposit that check, the way it looked, at her bank. Unfortunately, I had only brought one check…So I had to run back to our office while she waited nearly two hours…
The story had a very happy ending, however. Within six months, Eva had become a citizen. She quickly become active in local politics and proved herself to be a leader. She also leveraged her increased confident to attempt to publish her first children’s book — which she did successfully! Over the years, we gave her several other high-impact loans, including for a security deposit and to purchase a vehicle!
Can you describe how you or your organization is making a significant social impact?
We think of three categories of impact: the use of the loans themselves; improvements in credit score; and savings on interest fees relative to predatory loans. Imagine, for instance, a survivor of domestic violence who has found a safe and affordable apartment but who cannot also afford the moving expenses and security deposit. Absent Capital Good Fund, she would either have to stay in her dangerous situation or take out a loan at 300 percent APR — putting her in the position of choosing between interest payments and rent / food. With our loan, she can move into the apartment without drowning in debt. We also do loans for other critical needs — buying or repairing a car; applying for citizenship or a green card; catching up on rent or utilities; investing in energy-efficiency upgrades; or buying a laptop for school.
Because we report all loan payments to all three credit bureaus, the average FICO score increase for our borrowers is 90 points, which is essential for upward mobility: credit is considered when applying for loans, insurance, credit cards, apartments, and even jobs. Finally, our clients save hundreds-to-thousands of dollars in interest compared to a predatory lender. Our alternative to a payday loan of $300 — $500 carries an interest rate of just 10 percent. On a $300 loan, our borrower will pay just $22 of comparison, compared to $700 with a payday lender. An average family making $25,000 per year will spend as much on interest and fees as on food — 10 percent of income. By saving our clients so much money, they are able to re-allocate that to other essentials, including food, rent, utilities, and school supplies.
Can you tell me a story about a particular individual who was impacted by your cause?
We had a woman — we’ll call her Jane to protect her identity — who was in a very abusive relationship that had been putting her and her son’s life in danger. Working with a domestic violence agency, she had found a place to live that was affordable and near an excellent public school. Unfortunately, she could not come up with the $1,000 in moving expenses and a security deposit. The situation was urgent: her husband had become increasingly violent. Thanks to our $1,000 loan, within a year she had significantly improved her credit score, established a life in her new apartment, and had established a savings account with $1,500 in it. Most importantly, she no longer worried about her and her son’s physical safety, nor did she have to skip meals for lack of money to buy food
Are there three things the community/society/politicians can do help you address the root of the problem you are trying to solve?
The fundamental problem is that people don’t make enough money to cover their expenses without having to resort to a loan when something unexpected comes up. Nearly forty percent of Americans don’t have access to $400 to cover an unexpected cost, such as a car repair, household appliance emergency, or medical emergency, according to a 2018 Fed survey. There are a number of policies than can help, starting with an increase in the federal minimum wage. Second, it is imperative that predatory loan practices be reined in. The maximum rate lenders may charge active duty military personnel is 36 percent, and there is already proposed that would extend the same protection to all Americans: Senate bill S.2833, The Veterans and Consumers Fair Credit Act. Finally, Capital Good Fund is a Community Development Financial Institution (CDFI), which is a U.S. Treasury certification. CDFIs provide all manner of equitable financial services — for affordable housing, small businesses, community health centers, etc. — but our challenge is raising the money to expand out footprints. Specifically, Capital Good Fund seeks to raise $60 million in loan capital to fund the growth of our loan portfolio. What’s especially powerful about our Direct Public Offering-based model is that we can pay our investors — those who lend us money — an average of 5.5% while using the funds to change lives!
To summarize: increase the minimum wage; advocate for reforms to predatory lending; and encourage investment in mission-driven lenders like us
How do you define “Leadership”? Can you explain what you mean or give an example?
My job is to find good people to work on my team but, most importantly, to give them a reason to keep doing the job — by inspiring them with our mission and consistently reminding them of the importance of the work. A good leader knows she cannot get things done on her own; instead, she empowers those around her to rise to their fullest potential. Fighting for justice is difficult, tiring work. We know how to solve many of the problems in the world, what we lack is the funding, the will, and the people to carry out the work. As a leader, I seek to raise the funding to hire the people and create an environment in which they can thrive.
What are your “5 things I wish someone told me when I first started” and why. Please share a story or example for each.
- Experts can be blinded by their expertise. It’s important to remember that the people who, for instance, who caused the financial collapse were all experts in their field: highly educated and with decades of experience. When I was getting started, the experts told me that Capital Good Fund wouldn’t be able to raise money; that low-income folks wouldn’t pay us back; and that we wouldn’t be able to compete with publicly traded predatory lenders. Wrong! Our repayment rate is 96 percent.
- Just because a nonprofit’s goal is to better the world, not generate a profit, doesn’t mean that it isn’t a business. Nonprofits are not owned by investors and in fact are not allowed to generate a profit — any “net income” must be re-invested in the mission. But a nonprofit is still a business: it has revenue and it has expenses (payroll, insurance, rent), customers, and so on. Far too often, though, we think of nonprofits as magical do-good entities that can function without the aforementioned elements of a business. By neglecting those elements, we severely impair our ability to fulfill our missions. It is one thing to deliver a life-changing loan; it’s another thing to build an organization that can sustainably make tens of thousands of life-changing loans.
- You can’t solve everything; pick the things you can improve and be obsessive about improving them. The world is complex, and social and environmental issues such as predatory lending even more complex. It is tempting as a nonprofit founder to want to solve everything — poverty, climate change, income inequality. But it’s just not possible, philosophically, logistically, financially, or practically. Instead, I’ve worked to achieve an intense focus on one thing: using affordable small-dollar personal loans to uplift individuals and families.
- Sometimes the best answer to an opportunity is no. It is tempting to take on every new project, partnership, or grant. But ultimately, if the opportunity isn’t the right one at the right time, the correct answer is “no.” I’ve taken on many such ill-fated projects, including a brief expansion into Connecticut with just $15,000 in grant money, and the opening of a micro-branch in a community with nowhere near enough residents to justify a physical office.
- The only way to make things happen is to be bold and persistent. In a meeting with a potential donor, if you don’t ask for money, they’re not going to just offer it. No one needs to donate to you as much as you need them to make the donation; if you don’t call, email, meet and follow up with prospects, you will never raise the funds to sustain and grow your organization.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
There’s no getting around the fact that these are scary times. Climate change is the existential threat to humanity that keeps me up at night and haunts me during the day. I believe that the single most important thing humanity can do to meaningfully tackle the problem before it’s too late is to implement an aggressive carbon tax, with extremely strong protections in place to ensure affordability for poor and low-income families: that is, the implementation of the carbon tax must be centered on the principles of environmental justice. A carbon tax will send immediately change the economics of the global economy, incentivizing clean energy and energy-efficiency. Of course, I would also call for an elimination of all fossil-fuel subsidizes. We absolutely must take drastic and radical action to stop the climate crisis, and a carbon tax is an essential cornerstone in the fight for an equitable planet.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
Businesses don’t do business with businesses; people do business with people.” This is something my dad taught me after many decades working in the corporate sector, and it’s especially true in the nonprofit sector, where the competition for scarce grant dollars is fierce. It can be hard to stand out in a crowd of 100 applicants for a grant pool that will only have 5 awardees; even Shakespearian grant writing ability is no guarantee of success. The key is to build relationships with grant officers, Trustees, and other stakeholders. But my dad also made clear that it wasn’t enough to shake the hand of these stakeholders: the relationships must be genuine. Achieving that sincerity is hard because of the inherent imbalance in the interaction — I need a grant and they hold the purse-strings.
What my dad really meant was that if you are authentic and you make a concerted effort to meet with people — whether they are potential funders, investors, employees, volunteers, board members, or community partners — you can build the relationships without which your work would be impossible. Our tremendous success over the years is in many ways directly attributable to the work I have put into establishing Capital Good Fund as an authentic, trustworthy organization that doesn’t just ask for money or make loans, but builds relationships with all our stakeholders and does do with integrity and complete dedication to our mission.
Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might just see this, especially if we tag them. :-)
I would like to have a private meeting with someone like Bill Gates, but not to ask him to donate to or invest in Capital Good Fund. Rather, I want to talk to him about my perspective on how he can more effectively deploy his philanthropic and political capital toward achieving the goals he and I share. Specifically, I believe that he should be far more involved in advocating for public policies that can really move the needle, some of which I have already mentioned here: the minimum wage, a carbon tax, and predatory loan reform. I would also strongly encourage him to allocate 100% of his endowment’s assets into impact investments — that is, investments that generate a modest return but that also achieve a direct, measurable social / environmental impact. And lastly, I would impress on him the importance of giving away more of his money more quickly, so as to meet the urgency of the challenges we face. I say this in no small part because he is significantly wealthier now than when he first dedicated himself to philanthropy; he has an opportunity to make a transformational impact on the world on a short time were he to give away nearly all his wealth — about $100 billion — in a span of one-to-two years. Think of how much progress could be made on public policy, on climate change, on hunger!
How can our readers follow you on social media?
You can follow me on twitter @aposner1984 and Capital Good Fund @cgfund.
You can find Capital Good Fund on Facebook https://www.facebook.com/capitalgoodfund/
This was very meaningful, thank you so much. We wish you only continued success on your great work!