TRUST. TRANSPARENCY. PRACTICE. This quarter for our Summer 2023 Investor Update, we sat down with members of our Investment Committee.
The Ujima Fund Investment Committee consists of experienced and like-minded individuals representing diverse backgrounds. These members share a common dedication to Boston’s growing solidarity ecosystem, bridging both traditional and alternative financial approaches. This committee takes on the crucial responsibilities of conducting thorough evaluations of each business, lending their feedback to the Ujima Fund Management Team and assisting our members in making informed investment choices.
Julia Parker expresses her passion for community investing through financing and supporting Black and brown-owned enterprises through debt capital and equity financing. She is focused on justice, equity, diversity and inclusion (JEDI) investing for mission aligned endowed institutions. She is a community based lender, and is currently the Chief Lending and Impact Officer at Appalachian Community Capital.
How did you first learn about Ujima and get involved in our work?
Julia Parker: I was working at a CDFI (community development financial institution) in Boston, and I ran into Johnny Charles, who worked at Ujima at the time. He mentioned the Ujima loan review committee and asked me if I wanted to join. I said, “Well, let me do some due diligence first,” because that’s my thing. I looked into what Ujima had going on, and I was just blown away. I was really excited for the possibility of having some hand in creating such a community-focused investment fund.
What strategies do you use as a committee to mitigate financial risk while still achieving the fund’s investment objectives?
I came up with the risk rating system that we currently use for the Ujima Fund. So Ujima uses what’s called the “risk framework and methodology matrix,” and it covers several areas of due diligence, including business owners, community engagement, business model, our portfolio composition, as well as legal compliance.
Each of these factors can be categorized as either low, medium, or high risk. So an example of low risk in the business owner’s category would be having neighborhood-based hands-on experience in a particular business area. The medium risk would mean having hands-on experience from the Greater Boston area [but not within the particular] business area. The high risk might mean they have limited experience in and around this business area or managed but never performed well in this business area.
These factors work together to allow us to assess the risk associated with an investment in a particular firm or company. So the overall risk rating is anywhere from one to five; a risk level of five is an investment that we would not recommend for the investment committee. On the credit memos for each investment, you’ll find these risk ratings. To date, our Ujima Fund portfolio does skew heavily toward the food service industry. But that’s partly because those are the most difficult loans to get approved. The Investment Committee chooses to make these conventionally “difficult” loans because no one else in the community is doing that for Black and brown people. Restaurants are one of the most expensive businesses to get off the ground, particularly in Boston, and some of the hardest to secure funding for. We see community-focused restaurants come to Ujima because there is no other place for them to go.
What inspired you to pursue a career in investment management and focus on socially responsible investing?
So I call myself a community-based lender. I started out at a small community development enterprise, making loans anywhere from $1,000 to $50,000. I was able to really see the impact of those microloans. It sort of felt like being a dreamcatcher because you literally make people’s dreams come true by providing access to capital. Particularly for Black and brown people, capital has always been a hurdle to success in the business field.
Access to fair credit is another hurdle. But access to capital especially is a key feature that prevents us from starting and growing our businesses. To be able to put capital in the hands of Black and Brown people and get that money into the community is extremely impactful. I take that very seriously. I went to business school in order to make larger loans and make more impact among small business owners and entrepreneurs. I love that in my day job, I can lend up to $10 million, but I can be on the Ujima Investment Committee and lend, you know, between $10,000 and $250,000 to UGBA members. I appreciate that scale and the level of impact that you can have on one business owner.
Based on your long career in the field, what do you consider to be your investment philosophy?
I used to believe in the “Five C’s of Credit,” which are: capacity, collateral, conditions, capital, and character. Lately, I tend to lead with ‘character,’ which I think makes all the difference in terms of how funds are used, how they’ll impact the community, and the chances of repayment. Every dollar we lend out is one that can’t go to another business, so we take repayment very seriously, and the borrower needs to take that very seriously as well.
What do you envision for the future of the Ujima Fund?
I hope that the fund becomes evergreen, continues to grow, and help members of the Boston community.
To that end, are there any new strategies or tactics that you’re thinking about employing in service of that future?
I think our loan conditions are pretty innovative; we do not take the collateral. And that’s a good thing, I think. Because collateral is another factor used against Black and brown businesses. Most bankers will only lend based on the “Five C’s of Credit,” but these factors can be extremely skewed and biased against Black and brown people because of systemic racism. So, when you do an uncollateralized loan, you really are lending on character and faith that the business will use those funds as intended and that they will repay that loan.
What is the most fulfilling part of the investment committee’s work for you?
There’s nothing better than being able to sign a check for an entrepreneur. When we operated in person, we had what was called “check day,” where you shake the business owner’s hand and give them the physical check for the loan. There’s nothing better than handing over that check or clicking the button on that ACH payment, which is what we do now. Wow, I love that.
Read more interviews from the Summer 2023 Investor Update here.