Here’s how to invest in Baltimore’s neglected neighborhoods | COMMENTARY

Vegetation takes over a row of vacant homes in the Sandtown neighborhood in West Baltimore, one of the  many places in the city where financial investment could help create opportunities for residents.

While the current focus in Baltimore is rightly on ending the endemic violence in our city as a way to foster sustainable change, there needs to be opportunities for citizens to make a decent living and to live in a safe home. That will only come when there is investment in the city’s most undeveloped areas.

Prior to deindustrialization and the block busting that led residents to flee city neighborhoods, Baltimore was home to many innovative mid-sized businesses that allowed residents to find decent work, build wealth and provide for their children. The pattern of disinvestment and decay has manifested in today’s cycle of increased crime, reduced business activity and fewer opportunities for remaining residents.


While Baltimore’s tax base and deposits at financial institutions are increasing, inequality is increasing and large areas of the city remain unable to access desperately needed investment.

The obstacle for city leaders, universities and businesses vested in Baltimore’s success is how to break that cycle. Perhaps, they should consider the model of the European Bank for Reconstruction and Development (EBRD), a bank owned by 69 nations, the European Union and the European Investment Bank, which invest in private enterprises with commercial partners. The EBRD offers a variety of financial products, including loan and equity financing, guarantees, leasing services and trade finance. More importantly, unlike a traditional bank, the EBRD provides professional development through support programs where the cost of consulting services is subsidized by the bank.


Baltimore’s institutions should band together and look at forming a similar bank to connect private capital investment to neighborhoods that need it the most. By partnering with impact investment funds and other sources of capital, the bank has the potential to induce the billions needed in certain neighborhoods of Baltimore that have survived decades of disinvestment and malinvestment that can lead to economic losses rather than financial growth.

Only intentional focus on these neighborhoods and their residents can break the cycle of poverty and create a virtuous cycle of prosperity and opportunity that will make a stronger Baltimore for everyone. A reconstruction and development bank could be founded by government and institutional partners who take equity stakes in a public-private venture.

Through equity contributed by Baltimore, the state of Maryland, university endowments, foundations and impact investment funds, Baltimore’s bank could get government, foundation and commercial buy-in. Moreover, the number of institutions with divergent interests would provide oversight and sound governance in a checks and balances system that would shelter against scandals like the ones our city has recently seen. By leveraging the bank’s equity and a partnership model, the bank could drive billions into Baltimore’s communities.

Major financial institutions have a genuine desire, motivated by regulations as well as competitive market pressure, to do more in Baltimore, but there are clear reasons why they do not. Moreover, major financial institutions and their regulators are looking at how they can better fulfill their obligations under the Community Reinvestment Act, which encourages financial institutions to meet the credit needs of the communities in which they do business, particularly the needs of low and moderate income neighborhoods. The problem that many banks subject to the CRA face is a lack of investment opportunities that meet the banks’ specific requirements for risk versus return. This gap is where the Baltimore’s redevelopment bank can step in to work closely with economic development groups within the city, such as the Baltimore Development Corporation.

Furthermore, Baltimore’s redevelopment bank can work with existing community development financial institutions, such as Harbor Bank CDC, to provide increased financing opportunities, better rates and more options for Baltimore’s small and micro businesses. This investment would have a multiplier effect, just as those with EBRD funding, that would increase the reach of the bank to the smallest enterprises in the city in communities where options for affordable capital are rare.

The reconstruction and development bank can get city and state agencies, local universities and philanthropic foundations going in the same direction. Entrepreneurship support programs in Denmark and elsewhere have shown that creating low-cos business services solutions for small and micro enterprises reduces the risk of failure and leads to the creation of more of these enterprises. With several schools of business and two law schools, Baltimore has a pool of intellectual talent that can be better engaged.

While public banks and community development banks exist in the United States, the concept of a public-private bank aimed at comprehensive redevelopment of a city has never been employed in the United States. This is an opportunity for Baltimore to take the lead.

Eric K. Hontz (eric.hontz is a senior program officer at The Center for International Private Enterprise.