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Enhancing, Impacting, and Improving Bottom Lines for CDFIs

Money Four BHA new report from the Urban Institute highlights that as demand increases for community development financial institutions, there must be something done to build the finances needed to fund the services they provide.

Specifically, the report emphasizes the importance of attracting more equity funding saying, “Like all financial institutions, CDFIs have two primary financial needs: debt capital to lend and invest and equity funding to support the organization and the investment activities. Lending and investing are at the core of their mission, but CDFIs can’t be successful without a strong underlying operation.”

Without sufficient funding, the report says that CDFIs cannot acquire debt funds to lend, they cannot meet reserve and regulatory requirements, they cannot weather difficult times, and will experience difficulty to do timely research and innovation when needed.

“While we heard concerns about the changing, more expensive, and restrictive terms of debt capital, CDFI representatives at our convening said what they need most to scale their impact is more equity,” say the authors of the report. “Director Annie Donovan’s pledge that the CDFI Fund would continue to ‘maintain flexible equity funding’ is welcome. But CDFI Fund dollars alone will not be sufficient to support the increasing demand for CDFI services and impact.”

The report also emphasizes the importance of attracting nontraditional investors such as individuals, foundation endowments, potential new partners, development finance agencies, and even health care providers.

In gaining these nontraditional partners, Urban Institute says that CDFIs will be enabled “to enhance impact, improve its bottom line, and add to its reserves.”

In total the authors of the report suggest four ways to strengthen CDFI finances and say that each of the ideas are worthy of exploration to increase CDFIs “impact and reach.”

To read the full report from Urban Institute, click HERE.

About Author: Kendall Baer

Kendall Baer is a Baylor University graduate with a degree in news editorial journalism and a minor in marketing. She is fluent in both English and Italian, and studied abroad in Florence, Italy. Apart from her work as a journalist, she has also managed professional associations such as Association of Corporate Counsel, Commercial Real Estate Women, American Immigration Lawyers Association, and Project Management Institute for Association Management Consultants in Houston, Texas. Born and raised in Texas, Baer now works as the online editor for DS News.
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