Ever wonder how Community Development Financial Institutions (CDFIs) can really make a difference?
CDFIs seeking to expand their small business lending in underserved communities nationally and wishing to ensure that their work is meeting community needs locally should follow these five simple steps:
- Work with those in the community that are connected to small business, such as chambers of commerce and merchant associations.
- Work with local lenders and assess borrower needs, including startups, loan sizes, and credit needs.
- Seek out referral relationships for denials from commercial banks who will get CRA service test credit.
- Determine issues, obstacles, and challenges by getting involved with local government and working with elected officials and staff, as well as local economic development agencies that may be looking for lending and capital vehicles.
- Design programs that address community needs, not funders and/or government needs. If you do this successfully, those needs will be satisfied as well.
There is an increasing emphasis on small businesses and entrepreneurship in the community development space. Historically, there has been much investment in small business technical assistance providers – with some of it in underserved communities – and much talk about incubators and accelerators in the entrepreneur space. This is great progress, but many small business lenders still lack the deep understanding of their respective underserved communities that’s necessary to truly effect change.
- Increasingly, CDFIs have sought out partnerships with banks to create new and expand existing efforts to lend to small businesses in African American and Latino communities.
- Government, however, has been slow to move from real estate oriented efforts like downtown redevelopment and transit-oriented development to support small business creation. In fact, they continue to sacrifice small business to transportation priorities and the re-makings of downtowns nationally.
Many of the CDFI industry leaders who helped found and develop the field are moving on and opening opportunities for the next cadre. It is now critical to attract diverse, high caliber talent to both the field and boards of directors.
- Funders, including foundations and financial institutions, need to invest in minority-led CDFIs and Community Development Corporations.
- After 30 years in this business, I continue to look for nonminority-led organizations or initiatives that are 100% committed to serving African American and Latino small and micro businesses as a primary goal. It’s not a matter of bias but of commitment. Organizations that are not about AA and Latino but attempt to serve AA and Latino do so either out of a genuine desire to help or to gather financial support. AA- and Latino-led and focused organizations do it as a matter of existence.
- Non-minorities should support efforts to increase commitments to AA and Latino small business and the CDFIs that serve them, as funders and supporters and board members.
- Non-minorities should find the lack of diversity on boards and in the CDFI field as unacceptable. And the excuse that there is no one available is tired and fake news. Organizations seeking diversity must have agendas that are diverse and committed to creating change for those communities, not issue platitudes and same old stories of trying.
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