Citi Foundation Senior Program Officer Kristen Scheyder sat down with the University of New Hampshire Center for Impact Finance Director Michael Swack for a conversation on the impact of CDFIs and the opportunities that lie ahead.
Kristen Scheyder: What are the opportunities you are most excited about when it comes to the future of CDFIs in the field of community finance?
Michael Swack: The CDFI field is growing and serving more people – that’s exciting because CDFIs fill a huge capital gap. But beyond that, CDFIs can attract more capital to the field, including many more private investors – both institutional and individual investors. New tools, like secondary markets and new types of equity, will give CDFIs more opportunities to serve their communities by increasing the flow of capital. Additionally, CDFIs are increasingly financing clean energy projects and companies and have the potential to play a key role in advancing the transition to a low-carbon economy. Of course, the challenge will be to grow in size and scope while maintaining their historical commitment to underserved communities and those excluded from mainstream markets. This can be a delicate balance.
Kristen Scheyder: How can CDFIs work with other community-based organizations and each other to achieve their goals?
Michael Swack: CDFIs rely on partnerships with community-based organizations to understand local markets, identify needs and reach potential borrowers. CDFIs often work together with local leaders and community groups to design programs, products and services. State and local loan funds regularly seek to collaborate with CDFIs and vice versa to leverage capital and other resources. Likewise, CDFIs often collaborate with each other to share market information, best practices and split deals. The Consortium will help amplify information-sharing and forge new partnerships.
Kristen Scheyder: In October 2023, you announced the first round of projects in the new CDFI Research Consortium. What kinds of challenges do these projects address and what will this work contribute to the field?
Michael Swack: CDFIs are constantly trying to raise funds to lend out as well as to cover the cost of the technical assistance and training they provide. Over the past 30 years, CDFIs have been remarkably successful in making loans, getting them repaid and building their financial strength – notwithstanding the risk of lending to borrowers that can’t access capital otherwise. This is where the Consortium comes into play. We know a lot about CDFI outputs – how many loans have been made, repayment rates and leverage rates. We know less about outcomes. That is, we don’t know why and how much better off borrowers are because they got a CDFI loan. Not much funding has gone into research; CDFIs don’t have the resources. The new Consortium will support research projects that help answer questions like: What direct role does access to capital play in supporting wealth building? How does access to capital support local employment, housing, and public health needs? Insights like this will help drive more public and impact investment into CDFIs and, ultimately, the disadvantaged communities they serve.
Learn more about the Citi Foundation’s Community Finance Innovation Fund. The University of New Hampshire’s CDFI Research Consortium is now accepting submissions for its second open Request for Proposals (RFP). The deadline to apply is May 31, 2024.
Source: citigroup.com
