A Chicago bank will try to invigorate Willapa Bay

 

Note: This article is a sidebar to this issue's feature story.

After spending nearly two years in the early 1990s scouting Washington's Willapa Bay for entrepreneurs with plausible ideas for sustainable businesses, Alana Probst of Ecotrust found more than a dozen. But few local financial institutions were willing to make high-risk loans, and the chances of turning those ideas into reality seemed dim.

It would take an unusual bank, Probst realized, to jump-start a sustainable economy in Willapa Bay.

The bank that came to mind was Chicago's Shorebank Corp. Founded in 1972 by four socially minded bankers - two black and two white - Shorebank was the nation's first community development bank. Although it had never focused before on what Ecotrust calls "nature-based lending," it had transformed Chicago's South Shore neighborhood from a depressed black neighborhood to one with a thriving middle class. Even better, the bank was profitable.

Shorebank's genius lies in its structure, says Ted Wolf of Ecotrust. "Shorebank realized it wasn't enough to open just a bank," he says. "It needed other credit resources."

The corporation's structure is that of a bank holding company, with affiliates such as a venture capital fund, a for-profit real estate company and a community development nonprofit.

Most of the bank's loans in Chicago go to local "ma and pa rehabbers" such as ambitious janitors who dream of owning and managing their own apartment building, says Susan Grosky of Shorebank. Such clients might not have enough collateral for a standard bank loan, she says, but they do have talent and energy. And if a particular venture is still too risky for the bank, its affiliates can step in to offer nonbank credit or advice.

Though bank managers warn it won't work everywhere, Shorebank's model has since been duplicated in places as diverse as Russia, Kansas City, Cleveland, Detroit and Michigan's rural upper peninsula. Now, the innovative bank has come to northwestern Washington.

In 1992, Ecotrust teamed up with the Chicago bank to form Willapa Bay's ShoreTrust, "the First Environmental Bancorporation." Its first affiliate was a nonprofit trading group based in Ilwaco, Wash., that offers both marketing help and nonbank credit from a $2.5 million revolving loan fund.

Much of that money is already in circulation. One loan went to a family-operated sawmill that mills sustainably logged red alder. Another loan helps a company in Oregon's Willamette Valley turn that red alder into furniture marketed as a "green" product. Other loans have focused on seafood businesses or environmental cleanups.

Wolf says that, unlike socially responsible investment funds, the trading group doesn't require the companies to which it loans money to meet strict environmental guidelines known as a "screen." Instead, ShoreTrust tries to brainstorm with companies to find sustainable solutions. "It's not about separating the good from the bad from the ugly," says Wolf. "It's more about beginning a conversation. We say, "Let's work together to get over these hurdles." "

The next affiliate scheduled to open is a for-profit bank, which will start lending this summer. Chicago's Shorebank has already raised $7 million for the bank through a special investment fund called "EcoDeposits." Willapa Bay's ShoreTrust expects to raise an additional $12 million in capital for the bank, the trading group and a for-profit real estate company through a public stock offering.

The final affiliate will be the real estate group. Wolf says it will combine the nonprofit functions of a land trust with the for-profit motivations of a responsible commercial real estate company.

Although Ecotrust is pleased by the fit between Shorebank and Willapa Bay's needs, Wolf says it's too soon to tell whether the Chicago model will work for nature-based lending in rural Washington.

If the company does succeed, it could change the way rural banks view lending opportunities. "ShoreTrust is trying to demonstrate an idea that's off the charts," says Wolf.

For more information about ShoreTrust, contact Ted Wolf, president of Ecotrust, at 503/227-6225.

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