A community development financial institution (CDFI) is a financial institution that provides credit and financial services to underserved markets and populations in the U.S. At the 2014 OFN annual conference that took place last week in Denver, there was a robust discussion about the many ideological struggles identified within the CDFI industry since its inception. Chief among them: identifying whether CDFIs are a movement or an industry.
Are we a community loan fund or a community development loan fund? The distinction was laid out as “those from within the community lending to their own community” vs. “outsiders coming in and lending to communities in need.” At PCV, we’ve been defined as the latter, though we’re making a conscious movement to move towards the former. We believe that having an employee base of people from a variety of backgrounds, ethnicities, genders, ages, etc. adds to the organizations ability to delivery results, foresee problems and grow fluidly.
In my own opinion, CDFIs started as a movement and evolved into an industry. The tools developed to support the movement: SBA loans; CRA credits; etc; are outdated and hampering the growth potential of our organizations. While worthwhile and well-intentioned programs, their constraints force organizations like PCV to think from a short-term perspective instead of a long-term, impact-maximizing perspective. In order for the CDFI industry to thrive, we need to develop leaders and models that can evolve and develop with capacity to move the industry as a whole forward for the maximum benefit of everyone.
Who Are We At Our Core?
The theme of the conference this year was Diversity And Inclusion, and it hearkened back to the movement-founding of CDFIs. It also raised some very powerful questions among the mostly-white attendees.
For example, the importance of focusing on diversity and inclusion was poignantly brought to life by an OFN employee who shared a conversation she had had with one of her colleagues the night before. The woman she was speaking with was a Latino mom who has two kids. As can be the case (I’m told) in the Latin culture, one of her children is a blond haired and blue eyed girl and the other is, for all intents and purposes, a black boy. She’s going to have to teach her black son, that if he is ever stopped by a police officer, that he must look down, put his hands up and speak in a low voice. She’s literally going to have a conversation with her son about how to behave in this situation to keep him safe. This is not a conversation she will have to have with her daughter, not because she is a girl, but because she is blond haired and blue eyed.
The conversation about diversity and inclusion is uncomfortable, and that fact doesn’t make you racist or judgmental, it makes you human. But we need to have the conversation.
Can The CDFI Model Scale?
I ask this question, because the CDFI business model as a whole is flawed. It’s too dependent on funding from the CDFI fund. To scale and sustain themselves, CDFIs need to create economic models of self-sufficiency. But what does this mean in an age of CRA and foundations, which have a vested interest in helping to support the CDFI field? Should there be a sincere effort to make philanthropic subsidy a thing of the past for CDFIs? What would the implications of that be for banks and for CDFI’s?
One way that the industry as a whole can begin to change and scale is to stop seeing ourselves as competing for scarce resources, and instead see ourselves as a collaborative. There was a lot of talk about how CDFI’s can collaborate and share technical assistance, of which (I’m proud to say) our BusinessAdvising.org program was cited as a great example of.
The parts of CDFIs that can scale should (collecting and analyzing data to help inform direction so as to have more impact) — and the parts that can’t (like rural, tribal) should be celebrated for the unique skills and opportunities they bring to the parts of the country that the scaled models can’t reach effectively. No one should be left behind.
What These Questions Mean For PCV
I left the OFN conference this year, asking myself “How can we bring economic justice to PCV?” That could mean a number of things, from changing our location, to the composition of our staff and board. I want our CDFI to be a better example of the community that we represent. So for starters, we here at PCV need to re-tackle the question of who we represent — and who should we be representing? What does economic justice mean to us? What does it mean to me? Through its mission, PCV can enable further economic justice in my community, and that starts by getting our CDFI more in touch with its founding roots.