Community investment means providing capital (usually a loan) to people without access to traditional financial services, such as low-income individuals, small businesses and vital community services. By loaning your money to an independent grocery store in Chicago, a woman weaver collective in Peru or a day-care center in Oakland, you help these projects to get on their feet or weather difficult financial times. Community investment can be done by investing in just one project, but is more often done through a community investment fund that spreads out the default risk. The interest you receive can range from 0% (for charitable projects) to 10% or more, depending on the economy.

Right now is an ideal time to invest in communities. The stock market is not doing well and the fundamentals of the world economy do not make it seem like a stable turnaround is in the near future. At the same time, interest rates are extremely low. For example, a 10 year US bond is currently offering less than 3% return.

This all adds up to a situation in which community investment projects can actually produce better returns than stocks or bonds. The community investment world is vast and finding the right investment for you can be a challenge. A great place to start is the "Green America's Community Investment Guide" (pdf). It explains various types of community investments, from community development banks to special mutual funds. Another wonderful resource is the Community Investing Center's Database, where you can search for specific investment opportunities by geographic region and social sector.

Some specific investment opportunities that are worth considering include the Capital for Communities Fund, which offers 3-6% returns depending on time scale and amount invested. Microplace, a subsidiary of eBay, is very popular site that allows you to choose specific projects from around the world. You can search by social, financial and geographic considerations and the return rates are generally 1-4%. If you don't require a return on investments, Kiva.org is a wonderful option.

In an economy with stocks not looking great and bonds not paying much, community investments are a perfect option. It can be smart to keep a decent percentage of your money available to buy green stocks if something changes (either stock prices crash or the economy starts looking solid).

Enjoy finding great community projects.

Ambrose Desmond runs sustainablog’s green investment subdomain, and specializes in holistic financial counseling. In other words, an investment expert who works in Birkenstocks...

Image credit: Kiva