The Future Role of Community Development Financial InstitutionsNovember 2, 2015
Annie Donovan, director of the Community Development Financial Institutions Fund (CDFI Fund), discusses a recent listening tour and the future of the CDFI sector with Ariel Cisneros, senior advisor with responsibility for Community Development Investments for the Tenth District.
You have been conducting listening sessions across the country. Are there early takeaways you can share with our readers? Any surprises so far?
We had a great turnout for our listening session stops, the conference calls we held and response to our online survey. We’re still reviewing all of the comments received, but there were some common themes that we heard: that there needs to be greater incentives for expanding access in underserved areas; that the website could be more user friendly; and that the CDFI Fund can continue to improve in how we educate potential applicants about our programs. And while it wasn’t a surprise, it was very gratifying to hear positive comments about how flexible our Financial Assistance awards are.
CDFIs play a significant role serving low- and moderate-income communities and people, but CDFIs do not have the funding and market resources of other lenders. What needs to happen to bring more dollars to CDFIs that provide alternatives to short term lenders?
CDFIs have a viable and successful model, but there isn’t enough knowledge outside of the CDFI industry about what CDFIs can do and their excellent performance generally. We’ve seen with the New Markets Tax Credit Program and with the CDFI Bond Guarantee Program that when the opportunity is there for CDFIs to scale their operations they step up and are able to meet the challenge. We need to bring more exposure to the great work that CDFIs do to enable more of those opportunities to present themselves and for CDFIs to be able to continue to scale their capacity.
What is the most common misconception about CDFIs?
I don’t believe the problem is any misconception about CDFIs or what they do, but the fact that not enough people know that CDFIs exist in the first place. We need to continue to raise the profiles of CDFIs with government at the federal, state, and local levels, and with philanthropies and impact investors to help them to grow.
Do you see the role of CDFIs changing in the next five to 10 years? Any recommendations to CDFIs and their funders on staying relevant and growing their market?
Yes, absolutely. CDFIs are more and more becoming aggregators of capital and the quarterbacks of broader initiatives and partnerships that energize local community development. As they become more involved in integrated health, housing and small business strategies with other public and private organizations they’ll continue to become more effective. My number one recommendation would be to tell CDFIs to remain innovative and keep creating new partnerships. I believe the CDFI Fund encourages that—our awards fund CDFIs at the organizational level, which helps them to innovate, keeps them growing and keeps them relevant.
About the CDFI Fund
The CDFI Fund’s mission is to increase economic opportunity and promote community development investments for underserved populations and in distressed communities in the United States. To learn more about the CDFI Fund, visit www.cdfifund.gov.
About Annie Donovan, director, CDFI Fund
Annie Donovan has deep roots in community development and finance. Prior to the CDFI Fund, she was chief executive officer of CoMetrics (formerly CoopMetrics), a social enterprise that provides business intelligence tools to small businesses and nonprofits seeking to improve financial management, better measure social impact and increase their capacity for innovation. Prior to CoMetrics, Donovan was senior policy advisor to the White House, working collaboratively with the Office of Social Innovation and the Council on Environmental Quality. She was part of a team focused on advancing impact investing, social enterprise and impact data as key strategies for improving the social sector. Donovan has been chief operating officer of Capital Impact Partners, a certified CDFI, where she helped create teams and strategic plans that positioned Capital Impact as a market leader in education, healthcare, long-term care and affordable homeownership finance.