THE BLOG
07/31/2013 06:24 pm ET Updated Sep 30, 2013

Charitable Donations Critical Piece of Funding for Hope's Mission

I read with interest Peter Buffet's Op-Ed piece in The New York Times decrying the inexorable growth of "The Charitable-Industrial Complex." In my position as CEO of Hope Credit Union, I fall squarely in the category Buffet is writing about. At Hope, we provide financial services -- for individuals and small businesses -- in the banking deserts of the Deep South.

We rely on philanthropy to do our work, which gives low-income people access to bank accounts, financial counseling, consumer loans, and business loans at reasonable rates. This year, about 15 percent of our budget will come from foundations and individuals who believe in our work.

And, we are part of the nonprofit growth trend. Buffet quotes Urban Institute figures, noting that the growth rate in the nonprofit sector is now outpacing both business and government sectors.

In our case, we've grown from $4 million and 4,000 members in 2004 to $171 million and 28,000 member-owners today.

I agree wholeheartedly with Buffet that there are conflicts inherent in the philanthropy model. He notes the paradox of being in meetings where "heads of state, investment managers and corporate leaders" are "searching for answers with their right hand to problems that others in the room have created with their left."

This week, at the Aspen Leadership Action Forum, where I am joining leading figures from around the world to pledge action on the problems of poverty, access to health care, education, etc., there is much talk about making sure philanthropy is effective.

Right now, I have to acknowledge that I need the foundation dollars, and so do my members. Though Buffet questions whether facilitating poor people's access to credit doesn't just "kick the can down the road," it is the reality in which our members live.

They don't have the option of sitting on the sidelines of our market society. While many of the areas we serve are banking deserts, there are businesses who will gladly serve the credit needs of the poor -- at an exorbitant price. They are the payday lenders, the cash for title lenders, and the pawn shops.

So, the person who borrows $500 to fix a car or to pay a medical bill faces an annual cost of $1,335, compared to $160 for a similar loan at Hope.

Without Hope, people like Gloria (see her story on YouTube here) couldn't use the money she earns to pay her bills because of excessive interest charged by a pay day lender. Amy couldn't get to work (see her story here). And, Erin wouldn't have the capitol to grow her small business in New Orleans (see her story here).

I don't disagree with Peter Buffett, really. All of us know that it will take change on a scale well beyond each of our individual organizations' efforts to break the cycle of rising inequality.

I hope the other people on the foundation side of the table will listen to his plea that "Foundation dollars should be the best 'risk capital' out there."