Investing: Beautiful, Relational Ministry – Part 1

A friend recently said to me, “Investing is beautiful ministry.” 

I heartily agree. I wonder, though, how common this sentiment is among Christian investors. “Beautiful ministry” implies joy, delight, and service. It assumes relationship: we minister to others. ‘Ministry’ often involves encouraging others, helping them, giving them new opportunities, dignifying them, or supporting them. It always — or should always — involve loving others. If investing is beautiful ministry, then investing is highly relational. 

But is that how most of us understand and practice investing? From my observations, it seems many people consider investing as something rather abstract, distanced, mathematical, even rote or automatic. It seems rare that we first think ‘people’ when we think ‘investment;’ more often the initial word associations are ‘money’ or ‘retirement.’ Which raises the question, when we think about investing, are we principally thinking about ourselves or others? 

In an earlier post, I argued that investing is one of the ways we human beings take up God’s charge to ‘develop’ his creation. From a biblical perspective, investing is a ministry focused more on the good that one’s deployed capital can do in the world — i.e., for its recipients and their associated stakeholders — than on the return it brings back to the investor.

Making the Other the Center

In trying to live out this principle practically with my own investing over the past 30 years, I’ve found it helpful to look for various investment opportunities that connect me relationally to two sets of ‘others’ — borrowers and neighbors. To serve these two groups, I’ve used five vehicles: loans, real estate investments, individual stock purchases, investing in mutual funds, and equity crowdfunding. In this and the following post, I describe these in the hopes that my experience might spark fresh ideas for my fellow Christian investors. 

The greatest sense of personal connection I’ve had through the ministry of investing has come through loans that have tied me, in some fashion, with specific borrowers. For example, for nearly 20 years I’ve been able to connect with microentrepreneurs — especially women — in the developing world who need access to affordable credit. I’ve done so by investing through Calvert Impact Capital’s Community Notes. These are promissory notes with concessionary interest rates and typically 3-5 year terms. I’ve been happy with my returns, and of those returns I’ve received, I’ve been able to put them back to work in new investments that help more microentrepreneurs. Plus I’ve had the joy of knowing that I’ve used money God entrusted to me to help women and their families move out of poverty through entrepreneurial endeavors.

More recently I’ve been exploring an investment opportunity through a crowdfunding platform I belong to called Honeycomb Credit. On it, I can make fixed income investments into small businesses run by grassroots entrepreneurs here in the U.S. I’m specifically looking for opportunities to make loans to minority entrepreneurs because those borrowers (as a class) often face difficulty accessing capital. Roughly 11% of the founders on the platform are African Americans. By selecting one, I can play a small part in addressing the racial wealth gap in America. The investment minimum is only $100 and the interest rates on offer range from 5-12%. The particular investments I’ve been exploring have offered about 10% interest on 5-year loans. 

Like all investments, these carry risk — more risk than others, really, since many small businesses fail. That’s one big reason why these entrepreneurs usually can’t access credit from traditional sources like their local bank. Another is the simple reality that the number of community banks in the U.S. has been shrinking: the U.S. Conference of State Bank Supervisors has reported that in 2018 there were about 5400 such banks, down from around 8000 in 2004.https://www.csbs.org/newsroom/data-corner-community-bank-consolidation Moreover, data from the 2019 survey of Community Development Financial Institutions (CDFIs) — a critical source of capital for entrepreneurs of modest means — indicates that less than half of CDFI loans (41%) are with small businesses.https://www.csbs.org/newsroom/data-corner-community-bank-consolidation Simply put, there is a gap between entrepreneurs’ need for small business loans and the supply of affordable credit. Is the God who sometimes calls his people to “foolish investments” (see my post on Jeremiah 32) calling Christ-followers to step into this gap?

Worthy Bonds have afforded me another avenue to be connected with “Main Street” business lending. This platform is paying me 5% interest on 36-month bonds. Worthy uses that capital to make asset-backed loans to small business owners in the U.S. for whom that particular type of credit makes good financial sense. I love that the bonds begin at $10. It’s been great to introduce this opportunity to young friends and to folks I know who’ve believed that investing is only for the rich.

Several years ago, I learned about another investing avenue that could connect me personally to borrowers: peer-to-peer lending. I joined Lending Club. At the time, it offered opportunities for investors to create a portfolio of loans comprised of hand-picked borrowers. (That part of their program no longer exists.) In this instance, I didn’t know the actual name or face of the borrower. But I could review specific loans filtered by several variables (purpose of the loan, whether the borrower was employed, prior delinquencies, and other items). This gave me a chance to create a portfolio of the borrowers I was most interested in serving: working people of modest salary who’d turned to Lending Club in an effort to get out of debt. They had consolidated their debt into a single loan from Lending Club at a more favorable rate. During the four years I was active in Lending Club, only a couple of “my” borrowers defaulted. On the whole, my returns were positive, and I had the satisfaction of knowing that I had played a small part in helping a few dozen people to get out of debt. 

In just the last couple months I’ve had the opportunity for another kind of relational investing. Urban Lazarus is a small real estate company in San Antonio led by Ram Gonzalez. A former city government official, he currently heads a local community development corporation for the city’s west side. Gonzalez wants to help Hispanic small business owners who have been unable to access mainstream credit become first-time home buyers. He does so by finding the right kind of starter houses, matching them with buyers and providing owner-financing arrangements. Investors like me join Ram in holding the property notes while these buyers develop a solid mortgage repayment history. We earn some income through our secured promissory note while the buyer (who typically has been slowly improving their property) establishes the track record allowing him or her to eventually refinance with a “real bank” at a lower interest rate. At that time, we investors get our capital returned. 

Modern Day Gleaning

Over the years I have found that longstanding ministry relationships have also afforded opportunities for impact investing with a personal touch. For example, in 2013 I contacted the head of Belay Enterprises in Denver. I asked him if, alongside my charitable gifts, I could make an investment in any of the ventures with which he was connected. It turned out he had been thinking of integrating that approach. Ultimately, the ministry issued me a promissory note at 3% interest on a $20,000 loan to help some social entrepreneurs launch a new coffee shop employing homeless youth. Admittedly, for many nonprofit ministries this kind of thinking beyond charitable donations is foreign. But there are entrepreneurial ministry leaders out there. There are also nonprofits that have created for-profit social businesses or are training and coaching minority, “second chance,” and immigrant entrepreneurs (e.g., Hustle PHX, Minority Entrepreneurship Institute, Prison Entrepreneurship Program, and Rising Tide Capital). Through these organizations it is possible to get connected to grassroots business leaders eager for affordable investment capital.  

Investments of this sort typically offer concessionary returns (e.g., one to three percent).  Accepting this is a way of practically applying God’s gleaning regulation (see Leviticus 19:9-10). This was God’s charge to those who owned land (a form of capital) to leave the edges of their fields unharvested. Those sections were to be left for the able-bodied poor who didn’t own land. Concessionary loans “leave some margin in the field” so our neighbors can benefit. They provide high relational dividends with modest financial reward. In Part 2, I will describe some other strategies that are a bit less directly personal yet still reflect the principle of other-centered investing.