In August 2023, Future of Good featured an article on Fond l’ampli, a community bonds initiative helping finance Quebec social purpose organizations. For every dollar raised in the community, the Chagnon Foundation invests a dollar. 

We then published a story on Raven Indigenous Outcomes Fund in January earlier this year, which targets Indigenous-led projects in health and climate across Canada.

Both articles relate to community finance, which involves raising funds from a group of people through donations, loans, investments, or pre-sales for a specific project or initiative.

New Brunswick Kaleidoscope MicroWorks is another example of community finance, providing low-interest loans of up to $7,500 to help start a business or return to work. 

Manitoba’s Jubilee Fund also qualifies as community finance. Individuals or organizations can purchase Jubilee Investments Certificates for three to five years. The Fund estimates that every dollar invested creates an average social and economic return of $5 in Manitoba.

Community finance closes the investment gaps for projects or initiatives carried out by social-purpose organizations, which often find it difficult to access bank financing. 

So then the question is: how can more money be raised for community finance?

As part of the 2025 federal pre-budget submissions, Catalyst Community Finance Initiative presented recommendations to build on the Social Finance Fund’s impact launched 2.5 years ago.

Here are four of them, as explained by Adam Spence, Founder and CEO at SVX, a Catalyst Community Finance Initiative member.

1. A $500 million national fund dedicated to community finance organizations

This Fund would be modelled on the Community Development Financial Institutions Fund (CDFI Fund), which has operated in the U.S. since 1994 and has provided more than $7,4 billion to community finance organizations in the country’s most distressed and underserved areas.

The Fund combines federal funding with private capital, using the former to derisk and incentivize the latter. 

CFDI Fund invests in community finance organizations (CDFIs), which invest in certified social purpose organizations. There are more than 1,000 CDFIs in the U.S. including banks, credit unions, loans, and venture capital funds. 

The Renaissance Community Loan Fund is one of those CDFIs. As its website states, it “empowers people with the skills, information, and lending services they need to become successful home and business owners,” serving the citizens of Mississippi and Alabama.

“The CDFI fund we envision for Canada should include operating capital alongside investment capital,” said Adam Spence, adding both the operating dollars and the investement dollars are needed to have a positive impact on a community.

In the north, Canadian territories are vast, and funding and accompanying social purpose enterprises in Whitehorse is more expensive than funding Ottawa. 

“The funds would be allocated based on regional needs and community needs, and there would be a certification or a vetting process where you meet certain standards around your impact, your management and governance, your finance, as well as how you are connected and operating within your community,” said Spence.

This future Canadian fund would be government-funded at the federal and provincial levels. In the U.S., CDFI funds are state-level funds. 

Quebec has invested in its financial intermediaries, and Ontario has previously done the same, said Spence.

“The fund would allow stability of operations,” said the SVX CEO. Financial intermediaries will not only be able to leverage the government capital, but they will be more capable of scaling and receiving other private capital to grow their impact in their communities.

2. A tax credit for equity investors in community finance organizations 

The Catalyst Community Finance Initiative suggests implementing a non-refundable 39 per cent tax credit for institutional investors like foundations, corporations, and financial institutions investing in social or community finance intermediaries.  

“It would be a small incentive to tactically encourage these big investors to put more money toward impact investing,” said Spence. 

The credit would be distributed over seven years and capped at $300 million annually. Canada Revenue Authority could manage the new tax credit, he said.

The inspiration is the U.S. New Markets Tax Credit, which was created to encourage private investments in low-income communities. Since its inception, the program has leveraged more thanr USD $60 billion in capital for businesses and revitalization projects. 

3. A Community Reinvestment Act (CRA)

Since 1977, the U.S. CRA says they require “the Federal Reserve and other federal banking regulators to encourage financial institutions to help meet the credit needs of the communities in which they do business, including low- and moderate-income neighbourhoods.” 

The Federal Reserve evaluates how well state member banks have helped meet the needs of their communities using an evaluation method tailored to a bank’s size or business strategy.

Instead of being submitted to a Federal  Reserve evaluation, banks can develop their own strategic plan with the community’s input. 

The community may submit comments on the draft plan for up to 30 days during the process. From there, the bank’s regulator approves strategic plans in advance, and measurable performance goals must be sufficient for a satisfactory rating.

“The big Canadian banks operating in the U.S. put hundreds of millions of dollars into affordable housing projects and community finance intermediaries in America, but almost nothing in Canada. We think having something like a Canadian CRA is key,” said Spence.

Implementing a Canadian version of the CRA is the flip side of the tax credit for institutional investors. Canadian banks would be required to invest in community finance and would have the incentive to do so. 

“You mix the carrot and the stick; it all makes sense,” said Spence. 

However,  banks would not be forced into bad deals or bad investments, he added. Butthey would have to show on their balance sheet that they are investing in the community.

“So Thrive Impact Fund, Verge Capital or Kaleidoscope will find it easier to build a case and go to a financial institution or a large investor,” said Spence.

4. A national tax relief program

“Let’s help folks like you and me invest for good,” said Spence. That is the idea behind a 25 per cent non-refundable tax credit for individual investors. 

This tax credit would be available to companies, but individuals would be more more likely users.

In the UK, the Community Investement Tax Relief serves that purpose. It offers an up to 25 per cent tax credit to people and companies investing in an accredited community finance development institution (CDFI). There are 24 CDFIs in the UK.

Catalyst Community Finance Initiative suggests an annual limit of $200 million for total Canadian tax relief claims, with periodic reviews to assess effectiveness and adjust allocations as needed.

Some provinces already offer these kinds of tax credits, said Spence. 

Nova Scotians have been investing in Community Economic-Development Funds (CEDIFs) since 1999. The Nova Scotia Ministry of Economic and Rural Development and Tourism oversees CEDIFs, which offer investors a 35 per cent equity tax credit.

Words count

“Now, we have some activation to do,” said Spence. 

Catalyst Community Finance Initiative plans to meet with representatives from across political parties, write letters, and encourage Canadians to contact their local MP.

Social finance competes against multiple priorities and lobbies as the country creeps closer to elections.

“Language is super important, and our words have an impact. From right to left to the middle, everyone wants to invest back in their community,” said Spence.

“UK community investment tax relief was first labelled social investment tax relief. Social finance is valuable, but community finance is strong and resonant for all.”

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