Cooperative Fund of the Northeast: How a CDFI is Investing in New York State’s Food Co-Ops to Improve Food Security

— Monday, April 24, 2023

Julie Hanash

As part of our work on FoodMap NY, the Invest NYC SDG team is interviewing stakeholders from a range of sectors across New York State whose work may address food insecurity. These conversations will inform different strategies to address issues of food insecurity, with the eventual goal of developing 4–6 pilot projects ready for investment. Highlights from selected interviews will be published here.

Access to capital is critical for food-related businesses, especially smaller ones, to grow. These food-related businesses, however, often have trouble accessing private capital and cannot take on conventional financing. For instance, farmers typically cannot afford the interest rates that banks require. Additionally, due to the variety of the food system models, traditional bank lenders are often reluctant to invest in “riskier” investments. Therefore, many disparities have emerged in traditional lending practices(1) and the impact of projects on the local community is not usually considered(2). As a result, stakeholders commonly acknowledge the need for forms of gap financing for farmers and food-related businesses.

Community development financial institutions (CDFIs) are private financial institutions with a primary mission of promoting community development in low-income and economically distressed communities through individual and small business lending and outreach programs(3). CDFIs provide these communities with credit (loans), capital (grants), and financial services often unavailable from traditional financial institutions. They seek to develop local projects that will improve the economic and social wellbeing of the community. CDFIs lend to a wide range of users, including organizations; business owners and real estate developers; and individuals(4). CDFIs often use public funding to attract private market capital, then blend the streams together and offer appropriate financing packages to their lending area and clients (5). CDFIs are therefore valuable potential partners to food-related businesses as they are flexible in how they provide financial services.

Over 1,300 CDFIs operate nationwide and 80 in New York State. One of these CDFIs is the Cooperative Fund of the Northeast (CFNE), “a community development loan fund that facilitates socially responsible investing in cooperatives, community-oriented nonprofits, and worker-owned businesses in New England and New York” (6) CFNE offers development loans and technical assistance to a variety of co-ops and nonprofits that share CFNE’s vision of “economic justice for all through thriving cooperative enterprise” (7). Additionally, CFNE has set a goal to ensure that BIPOC communities have equitable co-op development opportunities, with 73% of their technical assistance hours directed to BIPOC-led co-ops (8). CFNE’s borrowers include co-ops across all sectors and types of cooperative, such as food co-ops, worker co-ops, and housing co-ops. In 2021, food co-op borrowers represented 37% of CFNE’s loan portfolio (9).

Since it was founded in 1975, CFNE has disbursed more than $70 million in over 1,000 loans to co-ops and community organizations without losing any investor funds (10). These investors are primarily individuals, making up 44% of investor capital in 2021, who are currently receiving a 2% return and making a positive impact. Other capital comes from trusts (22%), foundations (13%), faith-based organizations (7%), government (5%), banks (3%), nonprofits (3%), and co-ops (3%) (11). CFNE uses its investor funds to provide affordable loans with a standard low interest rate, regardless of the co-op, to allow for more equitable lending.

We spoke with Joe Marraffino, Loan & Outreach Officer at CFNE, about their food co-op lending in New York State. He noted that they are working to expand their portfolio in New York, in response to the lack of existing lenders supporting cooperative development throughout the State. Food co-ops in New York already supported by CFNE include the Chatham Real Food Market Co-op in Chatham, Greenstar Natural Foods Market in Ithaca, North Country Food Co-op in Plattsburgh, and Syracuse Cooperative Market in Syracuse (12).

Chatham Real Food Market Co-op storefront

Based in the Hudson Valley, the Chatham Real Food Market Co-op is a community-owned outlet for local farm and kitchen products. The Co-op aims to “provide education about Columbia County agriculture and to promote a more localized food system.” Its key objective is to strengthen its local rural community, develop food security, and help build a healthy local economy in the county (13). Before its 2010 launch, the Co-op was provided a revolving line of credit by CFNE in 2008. The Co-op has seen steady and now accelerating sales growth. Sales are expected to remain high at a “new normal” level, as demographic changes from the pandemic appear to be lasting. In 2021, CFNE helped the Co-op purchase their building, further securing their connection to the community (14).

CFNE exemplifies how a CDFI can provide place-based organizations in New York State, such as the Chatham Real Food Market Co-op, with low-cost capital to support economic justice and build thriving businesses that support food security. It provides a model for other CDFIs in New York State to focus on financing small to medium size farm and food-related businesses and join a common mission to combat food insecurity.

Julie Hanash is a second-year MBA student at the New York University Stern School of Business. She serves as a Graduate Research Assistant on the Invest NYC SDG Initiative’s FoodMap NY project.

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