Using Impact Investments to Boost Economic Growth in Latino Communities

Those with expertise, lived experience, and cultural and social understanding can drive progress that helps more Latino communities thrive.

Our country is stronger when every child, every family, and every community has a real chance to prosper. Latino communities are a vital backbone of the U.S. economy: Measured by GDP, the U.S. Latino economy alone would rank as the fifth-largest in the world. Yet deeply entrenched systemic barriers to economic opportunity and a lack of investment hampers their ability to thrive.

For instance, Latino-owned businesses are 50 percent more likely to seek financing than White-owned businesses. But lenders are less likely to approve them for loans exceeding $50,000. Lenders are also more likely to deny financing to prospective Latino homebuyers than to their non-Hispanic counterparts, according to a National Association of Hispanic Real Estate Professionals report.

From individual philanthropists to foundations, Fortune 500 companies, and government bodies, both the public and the private sectors have roles to play when it comes to increasing investments to help break down the economic barriers Latino communities face.

CDFIs improve stability, housing and health

As economic engines, community development financial institutions (CDFIs) are already starting to break down economic barriers by building neighborhood assets, such as providing financing and credit services in local communities that have experienced a lack of investment. Strengthening the community development systems that are already embedded in Latino communities, such as through lending and small business loan guarantees, can help improve residents’ financial stability and access to affordable housing, good jobs, and other factors that influence health and wellbeing.

Impact investing presents a unique and critical strategy for philanthropy and financial institutions to increase Latino communities’ access to capital and, in turn, their ability to open small businesses, purchase homes, and economically prosper. As funders with the National Association for Latino Community Asset Builders (NALCAB) and the Robert Wood Johnson Foundation (RWJF), we invest in organizations whose leaders have the expertise, lived experience, and cultural and social understanding that make them best positioned to understand the needs of their communities and shape the most effective solutions. There are only so many organizations fitting this bill: Of the more than 1,400 CDFIs operating in the United States, fewer than 200 are Latino-led or focused on Latino communities.

The philanthropic community needs to be investing in the mission and vision of these 200 organizations.

Bringing progress to Puerto Rico

Consider the nonprofit Centro para la Reconstrucción del Hábitat (CRH) in Puerto Rico, for example. A decades-long recession, fiscal collapse, and devastating hurricanes leave Puerto Rico with the highest vacancy and property abandonment rates in the United States. CRH is the only on-the-ground organization there dedicated exclusively to addressing the problem of deteriorated and abandoned properties. Through RWJF’s $4 million investment, NALCAB provides funding to CRH to assess opportunities for vacant property development in Puerto Rico with the goal of catalyzing economic development in areas currently deteriorated by derelict properties.

For an organization like CRH—one that understands what the island needs in order for local residents to thrive—broadscale impact investments are key to creating lasting economic security.

Role for government

In order to support economic growth in Latino communities, investment also needs to come from the public sector—not just private-sector investors. The federal government’s Investing in America agenda has been a step in the right direction. The U.S. Small Business Administration reports that it raised federally backed loans to Latino-owned small businesses to a record $3 billion in Fiscal Year 2023.

The U.S. economy will not thrive if Latino communities—one-fifth of the U.S. population—is starting from behind. Financial institutions and philanthropies must redouble their efforts to invest in the economic growth of Latino communities. Supporting CDFIs, particularly those led by people with lived experience and an understanding of their communities’ needs, should be central to any effort to address racial bias in lending and grantmaking.