At first blush, investment banking doesn't seem to have a lot to do with social justice practice. At second and third blush too, for that matter. Really the two practices are about as ideologically opposed as any two things can be, yet Napoleon Wallace of Durham's Self-Help
has been working to bridge this dichotomy by bringing his expertise in investment banking into the realm of social equity.
"I come from rural Eastern Carolina from African American families that have always been involved in community development work," Wallace says. Generations of his forefathers worked in sawmills, made moonshine, and were preachers and pig farmers. "In a lot of ways that's what you have to do in Eastern Carolina, especially if you're Black in a place that historically lack opportunities for individual economic development."
Wallace worked in investment banking for five years in the energy market – oil and gas, propane, coal…"really all the gross stuff with the small bright spot that once in a while I was able to work on alternative energy."
It was the occasional alternative energy deal that led Wallace back to graduate school at University of North Carolina, where he was a full-time student, but spent his off time working at the Natural Capital Investment Fund
and SJF Institute
, that was focused on the development of clean tech companies. For Wallace, this was a way for him to create positive change with capital while in Research Triangle…which was just going to be a temporary thing, since he planned on moving out to Silicon Valley to work in clean tech after completing his graduate degree.
And then he heard about Martin Eakes, co-founder and CEO of Self-Help.
A friend at the Center for Sustainable Enterprises at UNC
encouraged Wallace to apply to a position working directly for Eakes in a "special role." He laughs as he remembers her telling him, "The CEO is a little crazy but it's a great organization and I think you would really like it."
After a few rounds of interview, Wallace and Eakes sat down and at the end of the interview Eakes asked him, "Do you consider yourself a social entrepreneur?"
At the time, Wallace was working on his second startup, and it seemed to him like a strange question for a potential employer to be asking a potential employee. Eakes explained, "We want people here who are really trying to change things and the best way to see that is to see what someone already has going on."
In May 2010, Wallace began working for Self-Help in Durham, leaving California dreams and clean-tech behind.
Self-Help is a national family of member-owned, mission-driven credit unions; a nonprofit loan fund; and a policy advocacy organization that works to expand ownership and economic opportunities for all.
Wallace's "special role" is Executive Staff, and in this role he does a little bit of everything. And that means everything
– database management, buying portfolios, internal management consulting.
After his first year, Wallace was enjoying the work but wanted management experience, which he knew he needed if he was ever going to be CEO of his own community development financial institution (CDFI), which he still intended to do. He expressed this desire to Eakes but it seemed to fall on deaf ears…or so he thought.
Soon after he was called into a meeting about a troubled credit union near the area where Wallace grew up, and was informed that he’d been tapped to become the incoming CEO / Manager charged with returning the credit union to solvency.
The Greater Kinston Credit Union
was going to be shut down; there was simply no way around that. It had $20 million in assets with 6,000 members and served 20,000 people in the area, half of which were African American.
"It was really a power center for the folks in that community," Wallace explains. "Being a part of this credit union really gave folks the power to speak to the city about issues going on in this community, and it was going to go away."
For a year and a half Wallace, staff, the board and other community partners worked to save the institution, and succeeded – it's still open and things are going well there now. "I jumped in the water," he says. "I realized that some stuff I learned in business school was useful, but people don't want to know how much you know or how smart you are in the real world. They want to know, 'What are you doing for me? What are you doing for my community?' They want to see you roll your sleeves up."
He laughs and adds, "I also learned I really
don't want to be the CEO of CDFI."
Right after finishing his "deployment" in Kinston, he was brought into another African American financial institution in Charlotte with a similar situation on the brink of being shut down. First Legacy Community Credit Union
was a much larger institution in a much larger city with $50 million in assets, and it was also serving one of the major Black communities in Charlotte. Yet, because of operational and lending deficiencies, it was doomed to be liquidated or merged.
"That institution was the single most important financial institution in that area. In Kinston it was less about the business side but more the social pull. In Charlotte we needed to save that institution because we needed to ensure that the community maintained a community development financial institution to responsibly serve the low-moderate income community." He pauses. "There, I doubled down on not wanting to be CEO of CDFI!"
Now Wallace is back at Self-Help on the Executive Staff, still doing a little bit of everything, including real estate purchases within the credit unions, locating branches, and policy work.
The Executive Staff is comprised of a handful of people working directly for Eakes, all hailing from widely different backgrounds – a union organizer, an independent magazine publisher, and an investment banker from the mortgage industry among them.
"Our job is to face outward and fix stuff for partner institutions or break stuff at bad institutions. Our roles are somewhat vague so we can easily jump into and out of different teams and projects," Wallace explains.
At its base, Self-Help is a social justice organization. You could even say it is a civil rights advocacy organization around specific predatory lending issues.
Self-Help is a loan fund with a strong social justice mission. They have two credit unions with $600 million in assets each based in North Carolina and California. They also have a loan fund based in Durham with around $1 billion in assets that focuses on higher risk projects the credit unions can't fund. For example, Self-Help issued the primary loan for the 1 million square foot American Tobacco Campus
redevelopment project in downtown Durham in partnership with the developers and owners of the property.
"That project helped downtown Durham really turn the corner," says Wallace. "With that sort of project we were able to take on risks that other financial institutions didn’t want to take or couldn't take. In that kind of space we can take a risk the banks won’t on places and projects we feel we can do some real good."
The loan fund does lending across the country for childcare facilities, small businesses, real estate development projects, and schools. "[Self-Help] is a national player in development lending," he says, and adds, "We are a traditional nonprofit. All the good that we do and the value we create financially stays in the institutions so we can continue doing the work we do. We're all trying to promote the interest of social justice. Even though we're all bankers," he laughs.
Self-Help also has a "secondary markets" program, through which they have partnered with large banks that did not want to take certain credit risks – "subprime" but not in a negative way, typically just lower-wealth communities.
"We'll effectively put up capital as a guarantee of those loans," Wallace explains. "These banks had a physical footprint to reach borrowers and loans we couldn't reach and this program encouraged many of these banks to expand service into low-moderate communities."
In addition to the credit unions in North Carolina and California, they have a presence in a predominantly Latino neighborhood in Chicago and just merged with a credit union in Florida in a small town outside of Orlando in a community with a high-population of low-income migrant farmers. "We feel like it's one of those places we have to be if we're trying to drive change in low-income communities."
The Center for Responsible Lending
is a national nonprofit, nonpartisan research and policy affiliate of Self-Help, focused on advocacy in responsible lending. "We were one of the first to fight against predatory lending practices," says Wallace.
In North Carolina there was the North Carolina Coalition for Responsible Lending comprised of bankers, credit unions, and other advocates. "That is the only time you'll get credit unions, bankers and advocates to agree on anything!" jokes Wallace. "We got the predatory mortgage bill passed here and it was one of the first such state-level bills passed in America.
'What we like to say is there are a lot of CDFIs doing great work, but policy work is where you can really make the high level impact. The only leverage we have is on the policy side. We're able to translate our work as operators into policy efforts – on payday lending, responsible mortgages, etc. That's where we're able to have the most impact."
Self-Help CEO Eakes likes to say, "If you see a problem, you have a responsibility to address it." Self-Help has made its mission to fight those problems; those "ways that financial services can either empower people or prey on people," as Wallace notes.
"They're such a basic part of everyday life. The way you spend money, the way you budget and save, the loans you take out – that's such a big part of folks' everyday lives in low- and moderate-income communities. It's important to have parameters around what lenders can do, and have low-income borrower protections. Self-Help is one of those success stories of what's possible when you make really great loans to borrowers who are really committed to being a part of the community."