Community Development Financial Institutions
Woodstock Institute has played a leadership role in advocating for expanding resources for Community Development Financial Institutions and encouraging the dissemination of best practices since CDFIs' inception in the 1980s.
In this first part of our Theory of Change series of blog posts and images, Woodstock President Dory Rand explains the ways in which Woodstock Institute is working to achieve our mission of creating a just financial system in which lower-wealth people and communities, and people and communities of color, can achieve economic security and community prosperity. In this series, our research and policy staff will discuss the strategies we use to effect positive, lasting financial systems change.
For more than 20 years, the Chicago Community Loan Fund (CCLF) has been providing responsible financing and technical assistance for community development projects in the Chicago area.
As the end of the year approaches, several thinkers around the Web are reflecting on the meaning of an event that deeply impacted the Chicago region and beyond: the closure of ShoreBank and its rebirth under a new management team as Urban Partnership Bank. We released a statement after ShoreBank’s closure commending the bank for playing a crucial role in supporting affordable housing in Chicago and expressing our hopes that Urban Partnership will carry on that legacy. Here’s what others are saying:
In the current economic environment, one of the most significant challenges for a new financial institution is raising the substantial level of capital required to begin operations. Currently, a financial institution must be operating to receive certification and be eligible for funding from the Community Development Financial Institution (CDFI) Fund. A recent Woodstock Institute request to Treasury asked to change this policy and allow financial institutions planning to operate as a CDFI to qualify for funding.
The foreclosure crisis shows no signs of stopping—in the Chicago region, new filings rose by over 20 percent in 2009. Every foreclosure leaves behind a property that stays vacant for a period of time. Such vacant properties can drain municipal resources, lower property values, and raise crime rates. Since real estate demand remains weak despite record low interest rates and government incentives, it is likely that these vacant homes will remain a burden on neighborhoods—and on lenders’ books—for a significant period of time. Woodstock research has found that lender-owned properties in Chicago take, on average, close to 16 months to be purchased by new owners and are disproportionately concentrated in communities of color.
Momentum continues to build in Washington around expanding small business access to sustainable credit, despite the postponement of the hearing to consider the state of small business lending in local markets in the House Small Business and Financial Services Committees. Keeping credit flowing to small businesses is critical, especially in times of recession and high unemployment. Small businesses are engines for job creation, creating roughly 80 percent of new jobs and employing over half of private sector employees. Ensuring that small businesses are equipped to grow through productive, sustainable credit and create new jobs will be a vital component of economic recovery.
Community development financial institutions (CDFIs), a critical source of credit in lower-wealth communities, need more stable and consistent sources of lending capital to have an impact on the recovery of markets most impacted by the economic crisis, says a report from Woodstock Institute published by the Federal Reserve Bank of San Francisco’s Center for Community Development Investments.
President Obama said in his inaugural speech today that “a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended … on the reach of our prosperity; on our ability to extend opportunity to every willing heart….” As we “begin again the work of remaking America,” we need to remember and apply some key messages from the speech to address the economic crisis.
As banks and other lenders across the country tighten credit requirements and close down lending facilities, community development financial institutions (CDFIs) continue to make quality investments in underserved neighborhoods.