The Urban Institute published a new fact sheet yesterday on the impact of community development financial institutions (CDFIs) in economically distressed and underserved communities. The analysis uses data f between 2011 and 2015, which includes almost 215,000 loans totaling $34.3 billion.
The way that the Urban Institute measured the level of investment by CDFIs in a census tract was by calculating the dollar amount invested per every person below 200 percent of the federal poverty level. In total, 64 percent of CDFI lending in those years went to census tracts that had one more indicator of economic distress or being underserved. These indicators are based on the unemployment rate, poverty rate, income, and minority population.
Drilling down showed a bit more of the variability in how CDFI investments are distributed. Not surprisingly, urban areas saw a greater level of investment, while many rural areas saw little or no investment. While some counties (10 percent) received over $100 in loans for every person under 200 percent of the poverty level, about half of US counties saw less than $7.
The fact sheet makes the point that while CDFIs have shown that they are able to serve distressed and underserved communities, we can and should do more to expand our reach. This is a challenge that the CDFI industry, and individual CDFIs, must wrestle with.
Recent blog posts (see here and here) discuss the challenges that some of our regions, particularly eastern NC, face. Population loss, lack of job growth, and persistent poverty are the result of deep seated structural inequalities that persist. We know that CDFI investment will not solve these problems; however, CDFIs must be a part of the solution.
At Carolina Small Business, we have worked to deepen our reach by expanding our physical presence across the state. By putting boots on the ground in each region, we hope to expand access to our loans and services, as well as develop partnerships with local community members and leaders to be a part of the solution each region faces.
Next week several of our staff will be attending the Opportunity Finance Network’s Annual Conference, where CDFIs from across the country will gather to discuss issues like this, which are facing our industry. Make sure to follow us on Twitter (@CarolinaSmBiz) for updates and follow the hashtag #OFNConf to find out what CDFIs are talking about during the conference.