Economy Remix: What Will Community Finance’s Next Stage Look Like?
|
|
Welcome to the Remix, as we take our latest spin around the economy. For this Remix column, we review the state of community development financial institutions, better known as CDFIs.
This past October, Opportunity Finance Network (OFN), the leading industry trade association, held its 40th annual conference in Los Angeles. As well, it was the 30th anniversary of the creation of the CDFI Fund, the US Treasury Department program that has played a significant role in supporting the rapid growth of the CDFI field.
The conference theme of “Made by History. Made for this Moment” both honored this history while inviting discussion of what a new stage of community development finance might look like.
Harold Pettigrew, CEO of OFN, argued that the movement was entering a new period that would involve “unprecedented opportunities and unthinkable challenges.” On the opportunity side, CDFIs have clearly benefitted from unprecedented federal support in the past few years, even if it is now, post-election, at risk. On the challenge side, beyond the question of maintaining political support, there are operational challenges.
One of the more astute observations was made by Oswaldo Acosta, the CEO of City First Enterprises—a CDFI based in Washington, DC. Speaking about $6 billion in recently allocated (and therefore difficult to rescind) climate funds, he warned that the money won’t “be transformational if we don’t change our business models.” This could be a broader commentary on the state of the field overall.
Indeed, this gets to a rarely spoken but poorly kept secret behind the success of CDFIs—and that is that many CDFIs succeed financially by being conservative in their lending. While not universally true, the fact remains that, more than not, loan fund performance has been prioritized over equity. This has been very good for growth in scale. But if we look at core questions, such as whether CDFIs are contributing to closing the racial wealth gap—well, evidently, movement on indicators such as that one is far less evident than growth in lending numbers.
As conference speakers acknowledged, this tendency goes back to the 1990s and early 2000s when the CDFI Fund favored larger, whiter CDFIs over smaller BIPOC-led funds because reducing risk was seen as necessary to preserve the Fund’s existence.
As you read this article, I encourage you to reflect on CDFI history and its present path, and how, amid a difficult environment, they can measurably advance the movement for economic and racial justice. Until the next Remix column, I remain,
Your Remix Man:
Steve Dubb
|
|
|
Sponsored Content
A/B Split Testing for Email Marketing
Founder and CEO, Jeanne Jennings provides you a guide to boosting bottom-line performance. With 10+ years of experience, she shows you what she has learned in improving in performance testing. Learn more through the complimentary guide.
Download the guide here.
|
|
|
Sponsored Content
Order The Nicholson Foundation’s book, free!
The Nicholson Foundation addressed the needs of vulnerable populations in New Jersey's underserved communities. Learn how timely ideas and nonprofit alliances helped government retool. Changing Systems, Changing Lives, Reflecting on 20 years recounts stories and lessons about improving New Jersey’s social and human services.
Visit their blog and order the free book HERE!
|
|
|
|
|
|
|
