Cooperative Fund of the Northeast

Cooperative Fund of the Northeast

Interview with Micha Josephy; Executive Director

How was the Cooperative Fund of the Northeast Created? 

Micha: During the mid-1970s, community-owned grocery stores (food co-ops) were launching and expanding healthy food access and food sovereignty across the region, but couldn’t access capital for upgrades and expansions. Banks and venture capital were more accustomed to relying on a sole proprietorship model that requires personal guarantees, individual credit checks, etc. these co-ops were left out of many opportunities.

The Cooperative Fund of the Northeast (CFNE) was founded in 1975 by supporters of the Haymarket People’s Fund and food co-op leaders in the Northeast. Their goal was to innovate a financing entity that aligned with cooperative values and the shared ownership structure of co-ops. Our solution was and still is startup friendly, flexible, and forward thinking to support all types of co-ops.

Jen: How are your investment funds catalytic in a way that is different from other funds?
Micha: CFNE differs from other funds through its focus on shifting power to low-wealth communities through developing cooperatives. We were founded to be catalytic for cooperatives and we infuse that throughout our operations in a number of ways:

  1. Governance: As a nonprofit loan fund, we are governed by a community board that represents our many stakeholders who come from diverse geographies, demographics, and economic sectors. Our loan committee, which has approval authority for all loans over $250k, is composed of community members, none of whom are conventional bankers or private equity investors, who might come with biases tied to those operations. Notably, each of our staff supervisors first encountered CFNE as borrowers, ensuring our staff leaders can empathize with clients.
  2. Financial Products: With financial products that work for shared ownership cooperatives (by not requiring personal guarantees or credit scores), we finance communities who would otherwise face major capital barriers. This provides financial support that drives wealth building in economically marginalized communities.
  3. Clients: Cooperatives transform economic relationships. They allow individuals, households, and small businesses to aggregate their economic power (which is often limited in isolation) into a shared enterprise that creates just alternatives to otherwise oppressive or inaccessible opportunities. Our clients have created solutions for their communities that, just to name a few, include childcare for working families, job security for employees that would have otherwise lost their jobs due to business closure, and healthy food options to neighborhoods in need of easier access.

Jen: How do you describe the kind of non-financial returns the fund offers?

Micha: Community Stability: CFNE’s performance, as well as national employee ownership data, show that cooperatives endure economic turbulence more than conventional businesses. Our loss rate of 1% over 47 years, including the Great Recession and the COVID Pandemic, is far lower than conventional enterprise. The resiliency of housing co-ops (a large part of our portfolio) creates stable housing for families that result in job maintenance that helps sustain surrounding businesses in the community.

Photo credit: CollectivEffort
Group photo of Co-op Navigator Fellows and staff participating in CFNE’s first Co-op Navigators Fellowship, launched in October 2022. The Fellowship builds the capacity of six economic development organizations led by Black, indigenous, and people of color (BIPOC) to develop co-ops in their communities

Community Development & Engagement: Cooperatives strengthen the practice of democracy which inspire the development of equitable solutions for themselves and their communities. While democracy looks different depending on the size of the co-op (direct vs. representative democracy), co-ops build civic engagement and a sense of shared destiny essential to a caring community.

Jen: Can you describe how you use integrated capital to do your work?

Micha: Social: developing a humane economy rooted in cooperation takes more than just CFNE. We foster cooperative ecosystems with a diverse range of business associations, development consultants, community organizations, and other economic development agencies interested in cooperative development. As an almost 50 year old lender, we have extensive connections across the co-op and economic development sectors.

  1. Technical: we focus our learning (aka technical assistance) efforts to fill ecosystem gaps. In particular, the learning team focuses on supporting co-op development efforts coming out of Black and Latinx communities.
  2. Financial: most of our portfolio are term loans and amortizing lines of credit to help co-ops meet capital needs. We also provide some predevelopment and equity-like products to support earlier stage projects that can’t (yet) support regular debt payments.

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Micha: Our primary strategic goal is to ensure that communities across the region have equitable ability to form, fund, and operate cooperatives with our most recent strategic plan prioritizing racial equity. After years of conversation and continued work to deepen and diversify our relationships in BIPOC communities we are proud of the work we’ve done thus far:

  • We offer coaching in both English and Spanish, many workshops are also bilingual
  • In 2022 we launched 3 new products and programs designed to meet the needs of racially and economically marginalized communities
  • 66% of our loans disbursed and more than 79% of our technical assistance goes to co-ops owned or controlled by women and people of color

Jen: Can you share with us an example of an investment? 

Micha: The Dorchester Food Co-op (DFC), located in one of Boston’s most racially and economically diverse neighborhoods, is a hybrid co-op building a community & worker-owned grocery store that makes healthy food accessible and advances economic opportunity through neighborhood engagement. In 2016, we made an initial predevelopment loan to help DFC fund their organizing work that included events highlighting healthy foods, starting a winter farmers market, and allocating resources to raising grant funds.

DFC’s success, dedication, and creativity with building community support (including from the City of Boston) lended positively to our decision to provide a second loan – a $500,000 term loan – to help fund the construction and outfitting of their first location. The store recently opened in the Fall of 2023.

Jen: What do you tell people who think your fund is risky?

Micha: First of all, there are risks in investing in CFNE. I would encourage anyone considering an investment to review our prospectus which explains those risks. That being said, the co-op model is revolutionary in the context of our current economic system, but only when properly capitalized. If CFNE can’t raise the capital it needs to fund its pipeline, economically marginalized communities will continue to lack adequate access to co-op development. Conventional financing sources struggle to adapt to co-op models, whereas CFNE was created as the adaption. Since 1975, we have developed and deployed products and services to fill the gaps in cooperative funding and ecosystem development that helps the co-op solution to reach the communities that need them.

As long as limiting policies and standards (like the SBA’s personal guarantee requirement) continue to exist, co-op appropriate funds, like CFNE will be needed. Otherwise far fewer workers can secure their jobs, far fewer tenants can stabilize their housing, and far fewer communities can develop food sovereignty and access.

Investment Thesis/What is your rationale for your approach to investing? Thriving cooperative enterprises (co-ops) help groups of people meet economic goals that individuals are unable to meet or sustain alone. CFNE invests in the development of these enterprises through customized financing and technical support that promotes economic justice for all.

Geography:  New England and New York

Year Founded: 1975

# of Investments: 600

# of Investors: 500 (donors, funders, supporters, investors)

Funds Raised: $50,000,000 since inception


What’s on Micha’s Mind?

Book: The Soul of America by Jon Meacham

Song: One More Dollar, Gillian Welch

Podcast: Dare to Lead, Brené Brown