This forthcoming research aims to understand how partnerships between cities and CDFIs can further inclusive lending to better direct resources to minoritized and disadvantaged communities. Findings from this study will provide a policy roadmap and Model City to help localities improve lending equity for residents through CDFIs.

Research Abstract

How do local governments facilitate, enhance, or inhibit inclusive CDFI lending? This research aligns with priorities to expand the knowledge of CDFI collaborations with local agencies to better direct resources to disadvantaged communities. Federal interest and investment in CDFIs have scaled up the industry for the last 30 years, accelerated during the pandemic, yet most transactions happen at the community level. The role of CDFIs in revitalizing cities requires partnerships between lenders and local leaders. A mixed-methods approach will pair a survey of national trends with a case study of one intervention. In-depth interviews will evaluate the CDFI Friendly America (CFA) model bridging the gap between cities and CDFIs to increase deal flow. Cities provide start-up resources and local knowledge, while CFA supplies industry expertise and relationships. CFA satellites act as a matchmaker to connect under-resourced individuals and businesses with mission-driven lenders looking for new markets. The primary research team benefits from insider access, having partnered with CFA founders to launch CDFI Friendly South Bend (CFSB). A survey distributed to industry contacts will aggregate a typology of local policies and actions that support or challenge CDFI lending. Survey questions will build upon CDFI literature on state and local policy (Theodos et al., 2017), cross-sector collaboration (Smith, 2008), social impact investing (Eldridge et al., 2019) and financial inclusion (Darity et al., 2018; Finsel et al., 2022; Mosley, 2019). The survey will probe lending challenges and opportunities from pandemic-originated relief programs. This baseline survey maps local interventions to identify future case studies and analysis with borrower trends. Empirical findings from methodological approaches will provide a policy roadmap and Model CDFI Friendly City to help localities improve lending equity for residents through CDFIs.

Project funding was provided by the CDFI Research Consortium at the Carsey School of Public Policy, University of New Hampshire.