The link between economic equity and financial and economic inclusion has long been the focus of community development financial institutions (CDFIs). CDFIs provide financial products and services to low-income, low-wealth, and underserved communities. This brief examines what scale means for CDFIs, distinguishing size from impact. It looks at how CDFIs deepen their impact through development and technical assistance services. Finally, the brief highlights the important role funding and balance-sheet management play in determining the type of future growth the industry can achieve. These questions are especially relevant given today’s ongoing public debate about economic growth and equity.
In the wake of the Great Recession, the public conversation on economic growth has increasingly focused on how the benefits of growth are distributed. Wage stagnation, elevated consumer debt, rising income inequality, and demographic changes have all led to questions about how to generate growth in ways that also cultivate stronger families and communities. Regulatory and technological shifts in the financial services industry offer new opportunities to promote financial and economic inclusion but also raise concerns that new underserved markets could emerge.
Over the past 35 years, the CDFI industry has become a leading partner for banks, foundations and other social investors, and governments engaged in community economic development. The success of the industry stems largely from CDFIs’ ability to use business discipline to earn a financial return for their investors while delivering social benefits to low-income and disadvantaged communities.
As demand for CDFI services is likely to expand in today’s economic climate, how can CDFIs continue to scale their ability to promote economic inclusion and economic equity? To better understand this question, the Urban Institute, with support from the JPMorgan Chase Foundation, convened leading small and midsize CDFI loan funds, banks and credit unions. This brief summarizes how participants perceived and managed the complex balancing act of growing their financial strength while achieving both margin and mission.
Contents
Different Approaches to Scaling Impact: CDFI Roles
How CDFIs Deepen Their Impact: The Role of Technical Assistance and Development Services
Lessons from CDFIs Expanding Their Footprints
Conclusion: How to Finance the Scaling of Impact
