In 2022, The Fintech Times posed the question: ‘what sets a ‘fintech for good’ company apart from the rest?’. This year, we wanted to hear directly from global fintechs that align themselves with the ‘fintech for good’ ethos. Why do these companies perceive themselves as agents of positive change in the industry?
SmallChange.co is on a mission is to enable real estate developers to raise capital through crowdfunding for projects that have a positive social impact, explains Eve Picker, founder and CEO.
Tell us about your company and what it does
SmallChange.co is an equity crowdfunding platform for real estate development with social impact. Small Change democratises real estate investment by leveraging regulation crowdfunding (Reg CF), introduced by the Securities and Exchange Commission in 2016.
Reg CF allows anyone 18 or older – accredited or not, to invest in projects for profit and for purpose. It enables developers to secure funding from their own networks and neighbors. The investors, meanwhile, can start to reap returns from real estate investing.
As of early 2023 Small Change has listed 43 real estate and proptech projects with social impact, which have raised over $12million and yielded respectable returns for investors on projects that have gone full cycle.
Why do you think your company is a ‘fintech for good’?
There are three reasons. First, we make a concerted effort to embrace developers who are minorities and/or women – groups who often struggle to attract investors. As a result, more than 60 per cent of projects lifted on the platform are led by developers who fall into either or both categories.
Second, Small Change allows only projects with impact to list on it.The proprietary Small Change Index measures impact, requiring scores to exceed 60 per cent. This vetting process has led to a project portfolio that hardly resembles the investments of banks and traditional real estate investors.
In addition to the large number of projects that are minority and/or women-owned, over 80 per cent are in neighbourhoods that haven’t benefited from investment in a long time. Finally, through crowdfunding we are also opening doors for everyone to invest – not just the wealthy.
How do you measure your impact?
The proprietary Small Change Index uses a range of variables to evaluate impact. These include the diversity of project leadership, the impact of the project on the place, community engagement, economic vitality, sustainability, and environmental issues, amongst others.
What more can be done to make finance more ethical, transparent and accessible?
Equitable access to capital is the missing link in much of the real estate industry. It is a well-known fact that many minority or woman developers struggle to find capital, whether from financial institutions or from investors.
Crowdfunding provides a path for developers to reach a pool of investors who are in their own circles, connected to them or the neighborhood they are building in. These potential investors have a greater understanding of a project’s value. But crowdfunding alone can’t address all the imbalances in real estate; there is far more progress to be made.
Emerging developers do not necessarily have circles with a great deal of wealth. Banks and other financial institutions need to set their goals higher. This is not about meeting in-house diversity goals – this is about providing a path to an equitable landscape, and banks and financials hold that path in their hands. Without a shift in lending and investing practices, it will be difficult to effect significant change.
Transparency could be accomplished if leadership put their minds to it. Banks and institutions could share statistics on lending practices and agree on industry changes needed to reach impact goals. Openly evaluating and sharing such statistics will tell stakeholders whether a bank or institution is truly trying to do good or is just talking a good game.
