A MESSAGE FROM JORGE
What exactly is a nonprofit community development financial institution (CDFI) – and why do they exist? Since I happen to work for a CDFI – and the nation’s largest CDFI by the way – this is a question often posed to me by colleagues, friends and family alike. In short, CDFIs are mission-driven financial institutions that take a market-based approach to supporting communities that have historically lacked access to capital – places that the financial markets, when left to their own devices – have failed to reach. High-capacity, high-caliber community CDFIs are a collaborative force that brings together diverse private and public sector investors to create economic opportunity in communities. There are now over 1,200 CDFIs certified by US Treasury that exist in all 50 states, DC and the territories. Collectively, CDFIs hold over $150 billion in assets on their balance sheets, and about $250 billion in assets under management. The healthiest community development ecosystems support multiple CDFIs that can provide a wide range of products, services and strategies to a local market. This is based on:
Who CDFIs serve: According to the Opportunity Finance Network (OFN)--the nation’s primary CDFI trade association--84% of CDFI loans made by their members are in low-income communities; 60% are to people of color; 50% are to women; and 28% are in rural areas.
Market Adaptability: Broadening appeal due to the CDFI model’s viability, resilience and versatility in performing in rural markets along with small, medium and large urban centers.
Market Performance: CDFIs perform on par with regulated financial institutions when it comes to managing risk, despite the fact that they serve what many consider “higher risk” markets. Data from OFN shows that in 2020, surveyed CDFIs had an average delinquency ratio of only 1.2% and a charge-off rate of a mere one-half of one percent – and this includes performance through the height of the pandemic.
Market Response: CDFIs are countercyclical, meaning that even in the most dire market conditions--inclusive of market chaos and disaster--CDFIs accelerate their activity given their deep experience in times of crisis. In the aftermath of natural disasters, 9/11, the Great Recession, and the COVID-19 pandemic, CDFIs were financial first responders helping individuals, businesses, and communities. During the pandemic true to form, CDFIs stepped up when the federal Paycheck Protection Program failed in its initial roll out to protect those most vulnerable, especially BIPOC-owned businesses. CDFIs lobbied hard to make changes to the program that would allow better access to PPP resources by the communities we serve, and as a result, more than $34 billion in PPP loans were deployed in a far more protracted time. During the pandemic-induced economic downturn, CDFIs here in New Jersey demonstrated the ability to deploy capital at a much higher volume and at a far more accelerated pace, particularly in the most underserved communities who absorbed the brunt of the pandemic’s impacts.
A Community of Practice: To confront market challenges, this is why LISC applies a peer-to-peer approach in collaborating with our CDFI partners. This affords the ability to bring different strengths, resources and geographic understandings to truly support needs across diverse and complex markets & systems. LISC offices have been and will continue to be in the forefront in supporting capacity building cohorts of CDFIs. In functioning as ‘communities of practice’ – given our shared values and shared footprint – stay tuned as LISC will roll out specific programs and initiatives later this year designed to expand the work with our sister CDFIs along with our many stakeholders to form shared, collective pathways to reach our mutual equity agendas. For now, my note not only intends to stress the importance of CDFIs, but to celebrate the impactful, timely and important work of the CDFI community.
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Upcoming Content:
COMMUNITY CAPACITY BUILDING
RESIDENT LEADERS
IN ACTION
RESOURCES SECTION
Newark's Housing Development
Training Institute
LISC has been running its Housing Development Training Institute programs for more than 30 years, helping emerging affordable housing professionals hone their skills and make connections. Now LISC Newark has launched its own HDTI to grow the pool of developers of color and reinvigorate industry networks that are imperative to accessing capital and creating the quality affordable housing that New Jersey communities desperately need.
Affordable Housing
Ecosystem-Building Fund
LISC is eliciting interest in our newly formed “AHEB” Fund, a predevelopment fund offering a blend of recoverable grants and/or loans to support the predevelopment process related to eligible projects located in the Cities of Newark, Orange, East Orange, Irvington and Jersey City, with a special interest in our most opportunity-challenged neighborhoods. Anyone interested in involvement, please visit:
UPCOMING EVENTS
SAVE THE DATE!
LISC Greater Newark is honored to announce our Holiday Party!
Please join us in celebrating the upcoming holiday season on Wednesday, December 14th, 2022!
Details: TBD
