People Trust and ARCF helping nonprofits, organizations and businesses survive COVID-19 pandemic
January 18-24, 2021
By Victoria Mays
According to John Hopkins Center for Civil Society Studies, as of November 2020, the nonprofit workforce remained down by nearly 878,000 jobs compared to February 2020, representing a 7% decline from its pre-pandemic level. The primary areas hit were nonprofit educational organizations, health care institutions, social assistance organizations, and nonprofit arts and culture organizations.
While job losses would automatically suggest a decline in the financial assets of a nonprofit organization, People Trust and the Arkansas Community Foundation (ARCF) are still thriving due to their mission of serving populations and communities in need around the state of Arkansas by providing access to financial capital to help nonprofits, organizations and businesses stay afloat amidst the COVID-19 pandemic.
People Trust originally started as a nonprofit in 2009 and expanded into a Community Development Financial Institution (CDFI) that was certified by the U.S. Department of the Treasury in 2016. Pulaski and Saline County are currently the target markets they serve where communities may have 30,000 people, but no bank branch in sight.
“We named our organization People Trust because we felt like there has been a lot of previous crises, inequalities and economic disparities that have caused a lack of trust in lower income and minority communities. They don’t trust the financial institutions,” said Arlo D. Washington, president of People Trust. “We thought if we could provide a valuable product and build trust by treating people with dignity and respect that they are probably not used to when they go into a financial institution, we would be able to provide them the resources and tools so that they can go out and repair, rebuild and restore their lives and achieve economic mobility to be sustainable.”
Currently, there are not a lot of consumer lenders out there due to lack of data and the fear that unsecured consumer loans are not profitable enough. According to Washington, unsecured consumer loans were a sweet spot for People Trust because it was a minimum viable product that all lower income and minority communities needed due to lack of access to credit.
“Seventeen million people or more are credit invisibles or don’t have a credit score. It takes credit to get credit. If I don’t have a good credit score, it’s hard for me to go out and establish credit,” said Washington. “We’re a grassroots organization, so we really didn’t have the resources and deposits that banks have, so we had to leverage the profits. We organized our board and changed all of our bylaws around and all of a sudden, we had a financial institution that’s mission driven, that’s focused on providing access to capital to low- and moderate-income communities who would not otherwise receive those opportunities. That has been our mission since 2015 and it still is today.”
When COVID-19 hit in the early spring, many nonprofits, organizations, businesses and communities were hit hard due to the state mandated shutdown and multiple changes that had to be made in a limited timeframe. COVID-19 presented not only a health crisis, but also an economic crisis to low- and moderate-income communities who were already struggling with limited access to capital. People in these communities have been affected adversely by the pandemic because of the loss of jobs.
“If I’m hurting economically, then my health is going to be affected. That’s why we have diabetes, high blood pressure, and all of the other illnesses that plague the lower to moderate income communities,” said Washington. “If you have an underlying health issue, then COVID-19 isn’t a good thing for you to get because it will only magnify whatever you’re dealing with. The pandemic raised the awareness of the greater community because everyone across the globe has been affected by it. It has shined a light on inequalities and disparities that lower income communities were dealing with from previous crises.”
Unlike many nonprofits, organizations and businesses who had to terminate some of their staff, People Trust had to bring on additional staff due to the demand for capital. “We felt obligated to meet the demand because we are the financial first responders on the financial frontline to make sure the communities we serve have access to capital equitably.”
Since COVID-19, People Trust has seen an uptick in requests for their products. Like some financial institutions, People Trust had already developed a mobile-friendly loan management software that clients were using prior to the pandemic.
“They [clients] can do everything over their phone. When everything got shut down, we were still moving money during the whole time,” said Washington. “The first week in March when everyone found out it was a crisis, we received at least 300-400 applications and after that week it just went crazy. This let us know how essential our organization is to the community.”
In addition to providing unsecured consumer loans, small business loans and technical assistance to disadvantaged small business owners, People Trust has also created an Emergency Solutions Plan that allows them to help individuals with homeless prevention and rapid rehousing.
As the only census tract level CDFI in Arkansas, with their loan management software, they have the capability to expand across all 50 states. “Right now, our system is just locked for Arkansas because as a small emergency CDFI, we have restrictions to where we can’t go over 40% outside of our target market. With laws, changing, especially due to the COVID-19 pandemic, the department of the treasury’s CDFI fund is saying they want to lift those restrictions to allow CDFIs not to be limited by a geographical restriction. If a CDFI wants to offer their products across the country, they can do it,” said Washington. “At that point, we will open our system up to display all 50 states. If you know about our organization and need access to capital that’s safe and won’t hit you with a high interest rate we’re here. I challenge people to look at our interest rates because we have the lowest in the country.”
“COVID-19 shift” causes nonprofit ramp-up work in 2021
The biggest challenge for People Trust coming into the new year, is competing for funding with other 30-40 year CDFIs who have grown in asset over the years and have a longer track record. “Our biggest concern is making sure we can meet the demand. The need is so great right now, so we want to make sure we have access to capital so that we can provide those financial services products that can benefit our constituents.”
The Opportunity Finance Network (OFN) has been instrumental to People Trust because when Grow with Google made a $100 million pledge to OFN, the OFN distributed those funds available to their CDFIs. People Trust was awarded a $150,000 Grow with Google grant in 2020 to help cover their operating budget, loan loss reserves, and other needs. They also received a $500,000 low cost low with them as well.
“The pandemic is not over and we still have small business owners and individuals hurting. With the Grow with Google funds, we are now able to provide funds to those small business owners who may need anywhere from $2,500-25,000,” said Washington.
Like People Trust, the pandemic caused the Arkansas Community Foundation to ramp up its mission to serve communities across the state. “The nonprofits in Arkansas are facing what we call a perfect storm because they are having increased demand for their services, they have more clients than they have ever seen, and a whole new set of people needing assistance,” said Jessica Ford, chief communications officers at ARCF.
Due to COVID-19, many people need utility and food assistance and many other resources that nonprofits offer. “While nonprofits have this increase in demand, most organizations depend on events as part of their fundraising efforts. So, when an event is cancelled, they are losing that revenue that would have been generated by that event,” said Ford.
With the decrease in jobs that is evident in the report by the John Hopkins Center for Civil Society Studies, people are simply giving less to nonprofits. “Nonprofits are seeing an increase in demand and decrease in donations coupled with the new requirements that they have to maintain safety for their staff and for the clients they serve with regards to COVID-19. Simply put, they are struggling,” Ford said.
The CARES Act and Paycheck Protection Program (PPP) has provided many nonprofits and organizations with a safety net to cover many financial obligations and needs. ARCF has also been able to support several nonprofits across the state due to their generous donor base.
“Our donors have shown generosity this year like we have never seen before. When the pandemic hit in the spring, we had donors proactively reach out and say ‘restrict some of my funds and point them towards the areas that need it most,’” said Ford.
“Following the Gov. Hutchinson’s endorsement of the COVID-19 Relief Fund, we saw generosity pour in from across the state. Not just from our funders, but from people brand new to the foundation,” continued Ford . “We raised $3.5 million after the governor’s endorsement into our COVID-19 Relief Fund to distribute money. From a donations’ perspective and from our fundholders stepping up, we’ve seen generosity like we’ve never seen before.”
Like People Trust, ARCF has the challenge of making sure there are enough capital resources to address the needs that have arose since COVID-19.
“It’s really important that we don’t stop giving. While everyone feels generous and hopeful right now with the vaccine on its way and giving being pretty good, there is still going to be a great need early 2021 and maybe into the summer,” said Ford. “We have to keep turning our wheels and people have to keep giving and volunteering as much as possible until we can get on the other side of this. It’s those with means providing for those without that’s going to get us through this.”
For more information on how nonprofits are being affected in Arkansas, view the Arkansas Nonprofit COVID-19 Impact Survey that ACF, the University of Arkansas at Little Rock (UALR) and the Clinton School of Public Service compiled earlier in 2020 here:
https://www.clintonschool.uasys.edu/assets/uploads/2020/08/20200820064718-covid-impact-survey-summary-report-final-2pdf.pdf
