Kwanzaa Meets Capital: Meet Boston’s New Democratic Investment Fund
Democracy is a dearly beloved concept in the United States when it comes to politics. But what about capital?
Most capital is allocated by dictatorship — or perhaps at best, a plutocracy. Many people contribute capital to a fund or institution, which then has a relatively tiny team making decisions about the allocation of capital (for instance, across companies in the public markets). This means that often their decision-making is narrowly defined as serving the financial interest of their investors and institutions — rather than addressing the societal impact of the actual investments placed.
But what happens when hundreds of people come together to decide how capital can best serve their community? What would look different?
This is precisely what the Ujima Project set out to create. Recently, this economic development and community-organizing collective launched its first fund, a $5 million vehicle co-designed, governed by, and grounded in working-class communities of color in Boston. This interview with leaders Aaron Tanaka, Nia Evans, and Lucas Turner Owens provides a roadmap to the democratization of capital.
Q: How does capital — or the lack thereof — impact low-income communities? What is the problem the Ujima Project was looking to solve?
There’s this myth that capitalism is democratic because regular people can “vote with our money.” But if the 1% owns most of the money, then their vote is unfairly powerful in shaping our economy. As a small segment of society directs the flow of capital, communities who are left out of these choices are often forced to accept the consequences.
In Boston, the average net worth of a white family is $247,500, compared to just $8 for African American and $0 for Dominican families. For communities of color, a generational lack of financial wealth not only diminishes the quality of life — it also makes businesses and housing dependent on outside capital.
Practically, this means entrepreneurs of color struggle to access conventional financing, while alternative higher cost commercial and home loans fill the market. Further, outside developers are buying up land, raising costs, and selecting commercial tenants that propel gentrificationand threaten entire neighborhoods.
The Boston Ujima Project was started in 2015 by community organizers, small business owners and impact investors who all saw the pathologies of unaccountable capital in our communities. “Ujima” is a Kwanzaa principle and the Swahili word for “collective work and responsibility.” Rather than depending on historically negligent financial institutions, Ujima Project invites residents to forge our own futures by pooling our assets and meeting our own needs.
Ujima was inspired by CERO Co-op, an employee-owned composting company, started in 2013 by local activists of color who sought to create new inclusive jobs in the growing “green economy.” When turned away by local banks and lenders, they turned to their community and raised over $340,000 in small preferred shares through a Direct Public Offering. Leveraging this equity, they raised another $425,000 in patient debt from local impact investors and the City of Boston. To date, 8 worker-owners earning $20/hr have diverted over 5,000 tons of food waste — worth 1,400 cars in greenhouse gas emissions — from landfills to compost. As CERO Co-op’s DPO proved the power of local investing, the founders of Ujima sought to create a permanent community vehicle to pool funds and invest in dozens of “CEROs” over time.
After years of design, we launched the Ujima Fund this December as the latest democratic investment fund in the country. In our small way, we’re creating a living, breathing alternative to a system of the top-down control of finance. With Ujima, every investor has an equal voice in the governance of our fund, whether investing $50 or $50,000. Rather than “voting with our money,” we literally just vote.
Q: Ujima worked with over 550 local residents to determine its work plan. That’s a lot of input! What did that process look like? How did you manage to bring together disperse ideas into one ultimate plan?
Since the summer of 2016, we’ve recruited 400 members and over 60 small businesses, nonprofits, faith institutions, and impact investors as formal partners in our project. To help manifest this vision, we’ve embarked on a year-long planning process organized through weekly member meetings, online polling, and 5 major Community Assemblies.
We’ve grappled with complex questions across three main themes. First, what ESG-like “Community Standards” should we use to screen local investments? Second, what fund terms and deal structures best achieve equity between stakeholders? Third, which companies, sectors, and strategies should we promote through a collective “Investment Plan”?
A year later at Ujima’s fall assembly, over 150 participants helped ratify 36 “Community Standards” that set eligibility screens for the Ujima Fund. Popular guidelines include maintaining majority People of Color ownership, signing a “Sanctuary Business Pledge” in support of immigrant workers, and activating retail spaces to help Get Out the Vote.
To form these standards, voting members elected a Community Standards Committee to refine over 90 member-generated ideas for potential impact screens. Comprised of grassroots activists and local business owners, the Committee elevated the most meaningful standards that were also achievable by small businesses within the confines of the market. As the standards are intended to be dynamic and responsive to the community, Ujima members can propose amendments at future assemblies.
While privileging resident engagement, Ujima will continue to incorporate the specialized and sometimes conflicting views of activists, business owners, and other local stakeholders. These internal negotiations represent the hard work of community self-governance, and help grow the democratic roots for a “People’s Economy” in Boston.
Q: What is the structure that Ujima has set up? How does it exemplify democratic values?
As an entity, the Ujima Project is a fiscally sponsored project of the Center for Economic Democracy, a national nonprofit incubating alternatives to capitalist economics in the US. As a project, Ujima is governed by its voting members who make major decisions at our Community Assemblies. Voting membership is restricted to Boston residents and is intended for those who live in or identify with our working-class neighborhoods of color. Residents of wealthier neighborhoods or supporters from outside of Boston are invited to join as non-voting Solidarity Members.
To ensure meaningful engagement, we require that at least 51% of eligible voters participate in any major decision to be valid. Our processes are facilitated by the Community Standards Committee, Investment Committee, and staff team, who help surface and synthesize the values and insights of our members to construct a community governed impact portfolio.
As of December, Ujima Fund is issuing $50 minimum “Kujichagulia Notes” to local non-accredited investors, as well as 3 and 7 year “Umoja Notes” with a $250,000 cap to accredited investors anywhere in the US. To maximize community inclusion, the Fund also seeks philanthropic capital (Nia Notes) and donations (Imani Gifts) to reduce the downside exposure of non-accredited investors within the cap table. The Fund’s multi-tranche capital stack is inspired by the Boston Impact Initiative, a sister fund that has pioneered local investing in Boston, and has helped launch Ujima Project as an extension of their mission.
In naming each Ujima note after a Kwanzaa principle — Kujichagulia meaning Self-Determination, Umoja for Unity, Nia for Purpose, and Imani for Faith — the Fund collectively invokes the diversity of roles and approaches needed to build a resilient and fully empowered community.
Q: What types of businesses will the Ujima Project invest in? How do these businesses serve the community?
Ujima’s Collective Investment Plan guides our Fund Manager and Investment Committee in sourcing our deal flow. In these Plans, members name and rank our most beloved local businesses that we should help stabilize or support. They also identify market opportunities like neighborhood arts venues to fill or predatory actors like payday lenders to replace.
Examples from Ujima’s list of beloved businesses include Dudley Cafe and Haley House, both local coffee shops that hosts frequent community events, Fresh Food Generation, a farm-to-plate food truck and catering company that brings healthy Caribbean inspired food to the community, and Spokehouse, a local “pop and pop” bicycle shop that engages neighborhood youth and families to find health and freedom in cycling.
By pre-validating product-market fit for our pipeline of investments, Ujima views the democratic allocation of capital as both ethically essential and financially efficient. If a resident vocalizes a need for a grocery store, then votes to invest in one, not only will they shop there, but they’ll likely organize their friends and family to support the store as well.
As we raise our first $5 million, Ujima will make investments of $25,000 – $250,000 to advance our Investment Plan. For our first deals, we’ll offer working credit and growth capital to popular food, retail, and service providers, already identified by members as essential to the fabric of our neighborhoods. In the longer term, we’ll address the needs most frequently voiced in our assemblies, including capital for locally-owned renewable energy, quality affordable childcare, arts, and makers spaces, and community-owned broadband, just to name a few.
With an “integrated capital” approach that offers debt, equity and other blended products, the Ujima Fund will offer custom terms to fit the diverse enterprise stages and sectors present in our communities. This flexibility in vehicles enables Ujima to finance the diverse enterprises and sectors ripe for transitioning towards local and community ownership.
In all cases, Ujima’s Community Standards process will ensure that invested companies generate good jobs, green and healthy workplaces, and quality, affordable services for our communities.
Q: What are some lessons learned through this process for other communities interested in making capital better serve their needs?
By providing access to financing, we’re creating a long-term relationship with the businesses we want to support. While access to capital is a major challenge, it’s far from the only barrier that small People of Color-owned enterprises face. Hence we at Ujima Project look for other ways beyond capital to support local businesses and would encourage other communities to do so as well.
For example, Ujima is exploring the creation of a local currency to incentivize consumer spending within its portfolio companies. Given Boston’s concentration of hospitals and universities, we’re also advocating for large procurement contracts to be directed towards Ujima businesses. Finally, we leverage our political power and work with grassroots networks like the Right to the City and the Climate Justice Alliance to advance public policies that shift capital toward local enterprises and de-risk community investing. While a “race to the bottom” market inevitably shapes us, we can also organize to shape it back.
As we build this complex ecosystem to rewire the form and flow of local capital, we’re also focusing on the cultural shifts we’ll need to make to successfully govern together. Through our #BlackTrust Arts and Lecture Series, we’ve interrogated the places where trust may be lost and regained, whether in ourselves, our community entrepreneurs, or in our collective ability to experiment and take risks.
We believe that the “heart learns what the hands do,” and overcoming our well-worn skepticism required us to show, not just tell that change was possible. In 2016, after raising $20,000 in three days from 175 people, Ujima hosted our Solidarity Summit as a collective proof of concept. Over 150 community lenders came together to hear pitches from five Black and immigrant business owners and vote on which ones should receive funding. While the loan sizes were nominal, the three-day experiment resulted in a wave of enthusiasm that has carried us to our Fund launch over two years later. We would encourage other communities to also consider what pilot actions they can take — to not only assess feasibility but also to build community trust.
Today when members and supporters reflect on what draws them to Ujima, a term that is often used is “action-oriented.” In a time when many of us can feel like problems are too big or complex, a paralysis of powerlessness can take hold. To actually try something bold, transparently learn and iterate together, can change that.
Q: You’re starting with a $5 million “pilot” fund — what do you see as appropriate scale for community investments?
For most of us, $5 million is a lot of money. But in the world of finance, it is fairly negligible. If successful in proving our model over the next several years, we may target a larger $25 million raise, closer to the forecasted fund size needed to cover Ujima’s complex operating costs.
More broadly, Ujima views scale not only through the replication of our model across cities and towns but also through the democratization of larger and more significant sources of capital. As we learn to control our investments through Ujima, we hope to spark a grassroots appetite for more community control of capital. Rather than paying big banks to invest our city funds in Wall Street, we could democratically invest in Main Street through a municipal public bank. With over $20 trillion held by US pension funds, everyday pensioners could have a say in the “dos and don’ts” for our collective savings.
In Ujima, we view the concentrated control of finance capital as a root cause of the social and ecological crises we face as a species. When seeking only its accumulation, finance capital wreaks havoc on vulnerable communities in its path. But if communities of color and working-class people controlled our capital, we believe financing for destructive industries like fossil fuels and private prison companies would become scarce, regardless of their quarterly reported earnings.
Q: How can people get involved?
You can learn more about Ujima and a growing movement of related projects by searching for content on “Community Capital,” “Just Transition,” “Solidarity Economy,” “Economic Democracy,” “Restorative Economics” and the “New Economy” on the Ujima website. Supporters across the US can also become non-voting Solidarity Members, and receive regular updates and member content to help us promote our growing movement.
Margaret Thatcher famously asserted that “there is no alternative” to capitalism. With Ujima, however, we believe that another world is possible — and that we can help build it today.
This article originally appeared in Forbes.
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