Community Development Financial Institutions 101

Just Economy Conference – May 14, 2021


What does it take to become a Community Development Finance Institution (CDFI)? What does it take to raise funds for them? Would your community be well-served by having a CDFI? In this workshop, top speakers and practitioners will describe the considerations that go into creating a CDFI, with a practical approach to starting one or growing a CDFI into a larger one that will have maximal impact for your community.


NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.

Irvin Henderson 01:04

Welcome to the economy 2021 conference, we are so glad to have you here and I have an incredible panel that we’re going to share with you. First I’d like to welcome all of our members, all of the sponsors and any guests to the economy conference. My name is Irvin Henderson and this panel that we have today will deal with our subject we are doing CDF ii 101. We have an incredible panel with a incredible amount of experience. And we’ll start by introducing Lucy Arellano Baglieri, Chief Strategy Officer at the Low Income Investment Fund out of San Francisco. Previously, she served as the Chief Strategy Officer of the mission Economic Development Agency, and welcome Lucy. Next we have Maria Bilonick, President and CEO of the National Association for Latino community asset builders. Maria previously served as the Executive Director and CEO of the Latino Economic Development Center. Welcome, Maria. And a special shout out to one of our previous board members, Pete Garcia, who had so much to do with this organization coming on board.

Marla Bilonick 02:23

Absolutely. And just a quick correction. It’s actually Marla.

Irvin Henderson 02:25

Oh Marla. So sorry.

Marla Bilonick  02:28

No worries, no worries. It happens to me at least once a day every day. So I just got on with it. It’s all good.

Irvin Henderson 02:31

Well, I apologize.

Marla Bilonick 02:35

No not to worry.

Irvin Henderson 02:38

And finally, Donna Gambrell, presently CEO of the Appalachian community capital, She previously served as the director of the CDFI Fund at US Treasury, and therefore needs no introduction to the majority of this audience. She also has the distinction of being recognized as both the longest serving director and the first African American woman appointed to the position. Welcome Donna. No worries, no worries. So for everybody, our session today is conversational. And we encourage you to post your questions in the chat so that we can incorporate them into our conversation. So let’s get right to it. This past year of pandemic impact, and social and economic reckoning has catalyzed the growing interest in economic equity for communities of historic disinvestment. CDFI’s were already serving these communities and have certainly seize the moment to demonstrate how they are well positioned to serve. But for many CDFI’s, still somewhat of a mystery. So for those of us who are not familiar with CDFI within this financial services landscape, this session will help demystify what they are, how they operate, and whether and how you should consider starting one, or partnering with one. Now we realize we probably have some folks here who do have very basic questions. So we want to encourage you that there’s no such thing as a bad question, and no such thing as a question that you should not ask. We also may have some folks who are very familiar with the CDFI field. And we asked you to join in with helping us explain and illuminate this incredible resource to all of the folks that are going to be listening today. So Donna, we’ll begin with you. You’ve been the longest serving director at the CDFI Fund. And now you’re on the other side of the equation as the leader of a CDFI yourself. Can you just share with us exactly what is a CDFI? And how is it different than what most people think, as a traditional banking or institution?

Donna Gambrell 04:50

Thank you, Irvin. Again, thank you for the introduction. I am so excited to be on this panel with you and my co panelists today. And in fact, I thought when you The introduction that you were going to say, and Donna Gambrell of all the people need to be on this panel, one on one, because she has never managed to CDFI. But it’s been all great. It’s been a great opportunity as well. So, you know, what is the CDFI? I always say that this is just a unique sector of the financial services industry, because you have organizations, Irve, as you know, and Marla certainly knows, that are very mission focused, committed to underserved communities, low wealth, communities, communities of color, and are absolutely focused on providing the kinds of products and services that will help these communities help these populations achieve economic self sufficiency. And what does that mean, that could mean helping them move into the financial mainstream, that having them have the ability to buy a home, to start a business to grow their businesses, whatever that case may be, because when we think about the American dream, we know that it applies or should apply to everyone. And if you have communities that have been locked out of that dream, if you will, it’s our responsibility, our obligations of CDFI to make sure that the door is open with flexible financing, more flexible underwriting and terms that are provided for any lending that we provide, that we’re providing the kind of technical support that’s needed the wraparound services, that will make communities and populations, again, traditionally been underserved, historically, economically challenged, to make sure that those gates are open to allow a greater pathway and a much more supportive pathway to economic self sufficiency.


Irvin Henderson 07:00

Well, thank you so much, that is a great answer. And I’m going to focus on the two words flexible, and then the word support. Because these are the touchstones that I think makes sense here, Marla, and Lucy, please feel free to add to what Donna has shared. I can jump in. First of all, thank


Lucy Arellano Baglieri 07:24

you all for participating, collaborating and allowing me to participate and NCRC for putting us together. In my role at LIIF. I have the honor of working with Donna, she’s on our board. Marla has taken over such an amazing national network that I’ve had the opportunity to work across and met Marla years ago when she was at LEDC through our networks. And then anytime I’m on a panel with real leaders of color, women of color, who are you know, leading at scale, that’s really important to me, you know, have spent a lot of my time really working in the communities that Donna talked about, I’m from the communities that Donna’s talking about as a Latina, as an immigrant. And when I think about the difference between a CDFI and, you know, which is often referred to as like a nonprofit bank, I think about a really heightened sense of responsibility to the communities. You know, if someone’s thinking about CDFI, what value add are you bringing? You know, I think that that’s where there’s so much room for innovation, you talked about flexibility and support. I think we have an obligation to really lean into that, you know, as a financial institution, we’re often circling around the notion of risk, right. And so we also know that there’s perceived risk, and then there’s actual risk, and often the communities that we’re from are immediately perceived as riskier. But we know, the economic data, you know, the income, the entrepreneurship, even homeownership after a recession, who bounces back and we see that we are successful, profitable, you know, you’re much better off actually supporting and being flexible with us. But I think as a CDFI, I really have a deep obligation to not just be as flexible as possible, but being as risky as possible in terms of the traditional requirement of risk. You know, I often think again, about the risk that each of us in our communities take on every single day. And so really thinking about how CDFI has a responsibility and an obligation to respond to that to bridge those gaps that Donna was talking about.

Irvin Hernderson 09:38

Yeah, please Marla.

Marla Bilonick 09:40

No, I agree with all of the comments made also just wanted to say it’s so great to be on this panel with with friends. I Donna and I serve on the OFM board together and Lucy as she mentioned, and I had go way back actually having met at an El Cap conference so here we are full circle with me. Heading up now cab now but As you had mentioned, I actually am coming straight from leading a community based CDFI. Now I’m at an organization that lends to CDFI. So it’s kind of one step removed. And other lenders as well, not just exclusively CDFI. But I think the point that you made around support is so important, because really, what I’ve found, having relative I and having observed my colleagues in the field is that we are really coming from a positive point of view, we are wanting to get to the Yes, we are not, you know, so risk averse, that we are only leading with that fear of, you know, the potential for non repayment, we’re really wanting to help our clients achieve whatever dream they are hoping to achieve through the financing, whether it’s starting a new business, growing a new business, purchasing a home, developing affordable housing, you know, all of these uses are for the greater good of all of us. And I think that this, you know, the word support is exactly that, you know, unlike a commercial bank, most CDFI, build in technical assistance to all of their application processes. So they will work with the client, it’s not, you know, not to speak badly of banks, because, you know, they, they have their role, and they also support the work that we do. But because of their pricing structure, they’re not really able to spend that much time with the client. So it’s kind of like, if you don’t have the documents that you need, if you don’t have the credit score that you need, that’s kind of the end of the story. Well, for many of us, that’s the beginning of the story. And we’re going to help you collect those documents, get your credit score to where it needs to be not even care about credit score, in some cases, or you know, use it as one element of the underwriting process, but not the end all be all. So it’s just a very, very different approach that I think is completely centered on a positive outcome. So we’re aiming at like, how do we get to that? Yes, instead of, you know, how do we get the most profitable option for our bottom line?


Irvin Henderson 12:11

That is an excellent addition to the discussion. So now we’re seeing flexibility, support, risk, good risk. And then Getting to Yes, that is such a fantastic platform for what we’re talking about. And I so thank you all for addressing in that way, because you are different from banks. The reason this entire field was created is because we needed something different from banks, although we’re so glad for the support from our banking friends. So while we have some leaders here who are attending this session today, who are very knowledgeable, as I mentioned before, we’re sure there are some who are thinking about how CDFIs have captured this moment, and, and really are interested in what advice they can get in terms of how they can get in on it. How can you help someone considering getting a CDI going right now. So perhaps you’d like to address the time and cost to start the expertise in building out the process, how you recruit experienced staff, and how you can deal with the inevitable every day process of raising funds and building capital for your institutions. If you all could speak to that.


Donna Gambrell 13:30

Irve those are all great questions. And if you don’t mind, I’ll start. Because I’d love to hear from Mandala as well, who’s been doing this for a number of years, I came into Appalachian community capital as the second CEO. And I have always been impressed with what the first CEO Laurie glass was actually the first CEO at Appalachian community capital. always impressed with how much she had done to lay the foundation to start the CDF I so we’re still a fairly new CDFIs. Appalachian community capital was started in 2013. We began lending in 2015. I came on board in 2017. And I tell people all the time that if you’re thinking about starting a CDI of starting a CDI, start with a question for yourself, in terms of why you’re doing this in the first place, because I think you have to come not only with the passion and the commitment, but you also have to come with a certain sensibility that you’re not here to save anyone to save a community. But you really are a partner with that community, you’re actually going out into that community, finding out from them, what their major challenges are, what the market opportunities are, and then working hand in hand with them, to help them you know, certainly with the tools but in in at the bottom, at the end of the day, it’s really about the community making decisions about what those priorities are, and then running with, you know, the tools that are necessary to make sure that everything is in place. If you go in there thinking that you’ve got all the answers, and you’re coming there to, you know, quote, unquote, help the community, it never works. So I always say start with the law, my law strategy, which is the organizational assessment, figure out what the community really needs. And then, you know, there’s just a lot of layers that are needed. On top of that, you have to think through in terms of who are your partners, going to be initially, where you know, both state and national, you have to think through the foundational parts of all the policies and procedures that need to be put into place, this is paper, or digital, whatever the case may be, but what are those loan policies that are really going to allow those customers to be, you know, productive customers, but also that allows you to leak land safely and soundly as well. And so that means that your box is going to look a little shouldn’t look a little different, and maybe in a lot different from what a bank looks like, because you’re going to have, again, more flexibility built into that credit box than normal. And then I think you have to think through just what it will cost, it might mean that you’re putting in some of your own funding as well, to get it started. And I’ve certainly seen with new CDFIs, and CEOs and most CDFIs, a number of them have said, you know, we had, we had to make a decision that we had to put in some of our own money to get things going until we could really get the traction to to, you know, move the organization forward. So I would start with just those three things. And then, you know, turn it over to Marla and Lucy, but happy to jump in. phones are just so so important, I think a foundational piece is to start with a good foundation on why you’re you’re wanting to create a CDFI in the first place. Oh,

Marla Bilonick 17:10

I was just gonna say, so I just wanted to jump in with some thoughts to just follow up on what Donna was saying. So when we were preparing for this, I tried to think about, if I were, you know, just coming in cold, like, what would it be helpful to know. And so, originally, I thought, like, what is the team structure that needs to implement a CDFI, you know, CDFI activities. But then I realized, because we’re all nonprofit organizations, it’s not necessarily that each one of these functions is a person, it’s just that you need to know that these functions have to be covered off on and it’s very likely, especially starting out that, you know, one person will take on multiple functions. So with the awareness of that, I just wanted to share kind of like the key functions that you have to keep in mind when starting a loan fund. Because, you know, it’s not entirely intuitive. So, you know, I would say, to start, you know, the functions that need to take place is that you need to have a way to market your product and products and services. So ideally, when you engage in it, and assessment, you know, for the community demand, you’ll you have a way to gauge Yes, there is an interest to my community for this, there’s a need in my community for this. And so that’s actually an place where you can do some of the initial marketing of what it is that you’re hoping to offer. But that’s sort of ongoing, you need people to know that you’re out there, what you’re offering specifics about what you’re going to be offering, not to mention that, as we all know, on this call, most people don’t know what a CDFI is not just nonprofits, but people out in the community. So if you go out and say like, Hey, we’re starting a CDFI, that is not going to resonate for most people. So sort of what is the verbiage that you’re going to be using to market this product, then you’re going to need someone who’s available to take in clients. So you know, just the basic information, their contact information, you know, what it is that they’re looking for any basic information about their, you know, loan request, which tends to change over the course of the process, because, you know, those of us who have been on the ground know that when you have a range, most people come in and say that they need the maximum of your loan range, because that’s kind of the most attractive, and then you kind of worked out what the actual project projects cost is going to be. You’re going to need someone to do the actual underwriting of the deal. So looking at the numbers, looking at the client’s capacity to repay, looking at, you know, other leverages, that they have against their ability to repay, if they have multiple loans out, for example, you’re going to need someone who can do that assessment. And then as far as decisioning, is this going to be internal? Is this going to be external? Is it going to be a combination of the two? I know, you know, a lot of organizations have sort of thresholds for what can be determined internally and what needs to be go to a committee that is either made up of board members or other sort of financial experts that they have access to? You know, and typically that’s tied to risk. So like the higher number, dollar amount deals are going to go to sort of a second party set of eyes, then you need the less fun elements of it, you know, billing collections, portfolio management. So looking across all of the loans that you have out, you know, are are they being repaid in time? Are you seeing a trend? You know, I mean, of course, with the pandemic, that was something that we were all really keen to is, you know, our our clients able to repay the loans that we have out right now, let alone new loans that we’re going to be making, but just, you know, what is currently active in our portfolio? Is it is the whole portfolio at risk, are there a set subset of clients that are in a particular industry like restaurant this year, you know, we knew that that was going to be an impacted industry. So, you know, sort of just wanted to put that out there, because it’s, there are so many functions involved in doing lending. And I think where it can get tricky is that nonprofits are so so skilled in understanding the nuanced needs of their communities, but they’re not necessarily, you know, financial experts, or, you know, have ever taken on something like this. And so, you know, it’s, it’s a leap, it’s a leap. And I think, you know, just considering kind of like all the steps that need to take place, who in your organization is kind of going to cover off on that? Is this all one person to begin with? Is this, you know, so just wanted to put that out there? Because I thought that would be helpful. If I got into the shoes of someone who was thinking about doing this, that those considerations might help.

Irvin Henderson 21:40

Lucy please go right ahead.

Lucy Arellano Baglieri 21:42

Sure, I mean, everything that Donna and Marla have said definitely resonates from my perspective as well. You know, I think, probably we might all say that this work is very personal to us. You asked about recruiting staff, and you know, Marla spoke about Getting to Yes, Donna spoke about not being paternalistic, and imposing solutions on communities, right. So I think it really the core of success, for me is something that’s born out of a community, and that’s really driven by people who have a stake in the community. Right. So when we’re feeling like, this is my aunt who’s trying to grow her business, and I’m trying to get her alone, you know, this is my developer, brother who doesn’t come doesn’t show up with wealth, right. And so personal guarantees are a barrier, really wanting to think that, regardless of, you know, thinking about systems, when you’re starting new, if you’re not showing up with wealth at scale, if you’re not showing up with connections at scale, we’re going to be running up against the same systems, that the communities we’re serving, or, and are part of our running up against, right. So we need to kind of prepare for that, think ahead for that, I think the grid that we show up with is what’s gonna get us through that, but we’re gonna hit a lot of nose, we’re going to hit a lot of walls. And this is where I think partnerships are really, really important as well. You know, even thinking about our own personal networks, right? How do we leverage somebody that’s maybe in a position of influence? Or how do we leverage someone who might have some assets that we can lean on, or really just have the Intel of what communities have already developed solutions around, and maybe the remaining gaps that a partner can fill. So those are the things that kind of come up for me is really kind of homegrown grit. That’s what’s gonna keep us going when things get really hard when we get doors shut in our face. And that’s what’s gonna keep a pulse, because inevitably, we will, there will be sway, right, like maybe we don’t have funding or resources available for what we asked for. But we might be tempted to try to tweak it so that we can access certain resources. But really having some clear boundaries around whether that fits our mission or not, I think is really what keeps us on track. And I think a lot of that really starts with as Marla was saying, who, who’s really doing an ad who will be willing to do 10 different jobs at the same time, right until we can actually hire more. So really, really resonate. resonates with me what Donna and Marla are saying and just a couple of pieces that stood out to me within that,


Donna Gambrell 24:29

you know, Lucy I’m so glad you talked about partnerships, because one of the other things I would just share is that sometimes you are not going to be able to have everything at once when you start a CDFI. And so you really need to look at how you can leverage those resources. And Appalachian community capital we were fortunate and remain fortunate because Virginia Community capital, which is a CDFI bank, provides all of our backroom support so they do our accounting our loan servicing our it, our HR We have a service agreement with them, that’s renewed annually. And it’s fantastic, which meant that Appalachian community capital didn’t have to bring on a lot of staff right away, because we have the support of a CDFI bank. On the other end, we also formed a small pool of contractors that we also rely on. So it’s our underwriters, our finance person, our grant writers, and we actually draw upon that pool, depending on what the workload is, if it expands, we use more contractors, if it’s contracts, we use fewer. That’s been a good model for us, I think, especially during this pandemic, when you know, we didn’t have to face the prospects of laying somebody off or, or things like that, it’s given us the flexibility. Now that puts more work on the CEO in many cases in, but also it also takes off some of the burden as well, because we’ve got two great sources of support on either side of me, which has been very helpful.


Irvin Henderson 26:04

You know, I’m so glad that you mentioned that both the piece about partnering and developing capacities together with others. But also the any small business has to expand like an accordion when it needs to, and contract like an accordion when it needs to. All three of you had great comments there. And you actually teed up my next question, because senior advisors are not just lenders, they have specific requirements in terms of serving distinct communities, and providing support beyond just offering lending capital. So let’s talk about some of these distinctions. And, you know, you may want to talk about the requirements to provide technical assistance, the requirement to serve racial demographic, income based populations, and geographically based focus as well. So if you could speak to those, we would appreciate it.


Lucy Arellano Baglieri 27:03

Maybe I can start since I this really resonated for me around again, the responsibility and the obligations that come along with being a CDFI. You know, when I think about my first when I first started working with CDFI, which was at meta was one meta created a CDFI, specifically targeting a gap that existed for immigrant entrepreneurs, particularly those who are itin holders, which, you know, again, if we think back about what perceived risk, that was kind of one of the fell into the rest of your categories. And we saw that our community members were really having trouble accessing capital to scale up their business. When we created a CDFI, we ran into the same walls right around trying to fundraise around trying to get support for this sort of, sort of initiative. And I that is what made me really realize that capital is make or break, right, but capital is also not the end all for everything. And understanding that, you know, just again, like us, as individuals need mentoring, need technical assistance, need capacity building, and that never ends, right. It doesn’t matter how far along you’re getting your career, it doesn’t matter how big you grow your business, or how big of a developer how experienced you become. That’s there’s always a need here. And so we’re console that really, but how to how to be able to access that was a remaining gap, because we were smaller, because we were less resourced. And that’s why I came over to live right to leverage such, quite frankly, massive platforms, much larger resources, we know that at scale, people like us are not represented as high level decision makers in these organizations. And so really wanted to kind of bridge the gap and bring more perspective to the type of technical assistance. Again, this is often an area where we often hear well, we created this because a funder asked for it, or we knew that we could be more competitive for this type of capital if we had this sort of design, but really having more candid conversations about what is truly needed. As Donna mentioned, what is the community saying that they need that they want, and that we can partner with to support if we have those resources or, or that expertise, and that this is a relationship that we expect to end, right. We don’t want to be interconnected or dependent in this way forever. The goal is and there needs to be clarity that at some point, the power dynamics need to shift away from the more traditional partners or the systems and in the financial world, and that communities, the grand goal is for them to really not have to rely on other and other partners like lift so I think that that’s really, really important around Thinking about the end result or the end goals of technical assistance or focusing on communities. And that’s a lot of what lift is thinking about, you know, how can we be more lean more deeply into that? How can we, you know, we’re s&p rated, we’re well resourced. But we’re really diving into racial equity and economic equity and shifting power dynamics. And that’s complicated, right. But once you have an opportunity to leverage your power and your privilege or influence status, again, I feel like there’s really a requirement and an obligation to do that. And that will that will be the guide for whatever technical assistance you’re going to provide or whatever additional capacity building beyond lending that we might offer.


Irvin Hernderson 30:56

Yeah, well, there’s no question that it’s very refreshing to have a leader in the position that you are losing, talk so passionately about how important it is to focus on what the people need, and to not be as concerned capital is king, we all understand that. But beyond the capital, you’ve got to focus on what comes from the folk. Marla, would you like to add to that?


Marla Bilonick 31:22

I didn’t necessarily have anything additional. I’m happy to answer. There was a question that came in through the chat. But I don’t want to shift from the previous question if Donna had something to add.

Irvin Henderson 31:35

No, I think we’re fine there. And there were several questions that really came to the same level. And some of it was about how you stay true to the, to the constituencies. And then also, there’s there’s questions asking about how you get started? Are they eligible for grants, that kind of thing? And then someone is asking, Is there a roadmap for the overall development of a CDFI? So if you want to start that conversation, Marla, that would be fantastic.


Marla Bilonick 32:06

Sure. So first of all, I think this idea of putting together a roadmap, you’ve inspired me to do something like that, for now club members, and and really anyone who could use it, I think that would be so so useful. Um, what I will say is that most people who want to become certified CDFIs. So let me just clarify that you can lend without being a certified CDFI, of course, becoming certified gives you many more options with regard to obtaining funds, primarily from the CDFI Fund, which is under the treasury of the United States. So I’m wanted to make that one distinction. But I think the other thing I wanted to say is that most people who are aiming at becoming certified CDFI do not do this alone, they typically engage some sort of support consultant, who can really guide them through this process, because for those of us who have done any kind of federal contracting ourselves as nonprofits, we know that it is not straightforward. It is very paper intensive. You know, it is just, it’s the kind of thing that you sort of have to do at least one time to fully understand how to do it. And so typically, I would say, and there is a real need, I think, in the philanthropic philanthropic work to support, you know, just that fee of the consultant self, which can be the hurdle for some nonprofits from getting, you know, over the hump to actually becoming certified, or providing, you know, free of charge consultants to to nonprofits that are looking to become CDFI. The other thing that I would just wanted to say, with regard to funding is that there are kind of three streams and my colleagues think, like, correct me if they think of it in a different way, but there are three streams of funding that you have at the CDFI. So one, yes, you can obtain grant funding, either from government or private sources, you also can get debt for your loan funds. So to capitalize your loan funding, you can actually lend out money that you borrowed yourself as a nonprofit. And in addition to that, you have interest income. So you know, you will this will become a money making endeavor, will it cover all of your operational costs? Probably not, I think until you get to a really, really big scale. And even then, I think it’s kind of counterintuitive to believe that nonprofit CDFIs will ever be completely self sufficient. Because if we were then we wouldn’t be doing the kinds of loans that are needed in our communities. So um, you know, all that to say, Yes, they are eligible for grants, CDFI are eligible for grants per the question in the chat, as well as debt and you also have this sort of unrestricted interest income that’s coming off of the loans that you’re collecting.


Irvin Henderson 34:49

Thank you so much for that. We’ve also been asked is there training on how to start a CDFI and of course, there are you know, there are a number of different ways to approach that. So I’d like to ask the panel to speak to that. But I also want to put on your mantle, if you will, CDFI typically coordinate. together there are cooperations and assistance between CDFIs. So talk to us about how a new CDFI perhaps could be mentored by an existing CDFI and specifically talk about the training aspects as well?


Donna Gambrell 35:29

No, that’s a great question. They’re also in and I just want to go back real quickly to the roadmap, I have seen roadmaps, one of the recent ones I saw, and I don’t know, I don’t think it was particularly dated. It seemed pretty recent was one that was done by all the stuff, which is the National Organization for tribal communities and tribal populations. And they actually did a wonderful PowerPoint slide on how to start CDFIs at great information in it. The collaboration piece, though, is really important. I think what you find in the CDFI community is that people are very willing to share information, share expertise, share their documents, you know, here’s how we got started, here are some of the roadblocks we encountered. And I do think that that collaboration is important. It can be informal, it can be simply a CDFI reaching out to someone in their footprint. And saying, I’m new. And I get questions like that in my region, as well, where we have new CDFI that are just coming online and are wanting to to talk and say, Well, you know, I’m encountering this issue, how did? How did you handle it? Or is there other ways in which we need to approach that, and I think that that is a perfectly fine way. But you’ve also got formal organizations as well, you’ve got certainly trade associations like the CDFI coalition and opportunity finance network, and NCRC, which you have a host of CDFIs within the membership that have, you know, bring a tremendous experience and expertise. So I always say, you know, do it both informally. And formally, if you can, there are different ways in which that can happen. And you will find that even in your footprint, sometimes that even a small collaboration of just little CDFIs, within that area can be very helpful, very beneficial, as you grow as a CDF.


Irvin Henderson 37:34

Yeah, please, Marla and Lucy, this, this category is something I know you want to share on as well.


Lucy Arellano Baglieri 37:45

Sure, I’ll just say that this is actually an area where I really have seen now cab step up a lot. You know, here in California, in you know, years ago, has, there was beginning a lot of conversation about kind of what we’ve been talking about today, one, just a lack of CDFIs infrastructure and resources. And then community LED, right, California is like 40% Latino, and we can count on one hand, you know, half of a hand, how many Latino led CDFIs there are particularly outside of urban centers, you know, really thinking about how we can collaborate to really understand where the gaps are. So we’re not stepping all over each other, we have coordination, we’re obviously much more successful together and coordinated. And then some of the challenges that we spoke about with regard to getting to starting up, we can support each other through those learn from each other’s you know, kind of stumbles along the way. And so I know that I don’t want to speak for Marla. But this is an area where I have really appreciated the now cab networks, collaboration, and obviously now cab is an affinity network focused on the Latino community, but not exclusively partnering with the Latino community. Right. And so how can we think about being allies, across communities, particularly thinking about the African American community that we are, you know, right there next to each other in a lot of a different inequities with regard to economics or housing or entrepreneurship. But again, as I mentioned earlier, with regard to our successes and our upward trajectory, we’re right there next to each other as well. So how can we really collaborate I know that later this month, Marla and I will be talking with the Urban League. Also, just following up on some conversations that we’ve been having around what we can support each other with learn from each other. That’s really, really important. Oftentimes, we go to partnerships with this is what I have to offer you and I can help you, right and we don’t let less so sometimes listen or seek out learnings from others. But I’ve really seen that to be the beauty of the collaboration. I think we’re We’re gonna be expanding that, and I’m excited for LIIF to be able to be a part of that as well.


Marla Bilonick 40:06

I would just add a quick two cents to that, in that, like, it’s absolutely true probably because of our very close knit membership, I can just give one example, a recent example is that when some of our members sort of reached capacity with the PPP loan product, which was a paycheck Protection Program, to help keep workers in place in the entrepreneur, in the small businesses that were struggling to keep their doors open, let alone keep employees on payroll, we sort of had a call out among members, where the overflow was going, you know, to sort of the higher capacity membership. But I think there’s a real opportunity that I hope to exploit and I think, you know, sort of an industry wide opportunity to really pair more established higher capacity, CDFI with, you know, just starting out CDFI, or lower capacity, CDFI that are looking to grow. Because that kind of relationship, you know, is so much more dynamic than a handbook or then training or whatever, you know, to just have someone that you can go to and ask whatever question under the sun you have on whatever day you know. So that’s something that we’ve heard from our membership is wanted, and that I actually think, you know, we could really follow through on because we have such a wide range of CDFI in our membership in terms of where they are and how large they are and their scale. So that’s one of them. The other thing, just having been on the ground in the community is we also partnered in just as an idea for partnership with regard to risk. So we partnered on larger deals, that sort of us or another CD, if I wouldn’t have felt comfortable taking on our own, but we would partner and you know, each put in a portion of the capital. And that’s sort of another way to sort of be able to achieve what you’re looking to achieve without having to take it on by yourself,


Donna Gambrell 42:00

then you know, that affinity relationship is so important, even within the CDFIs. sector. So my day job is running Appalachian community capital. My night job is actually a Board Chair of a nonprofit called the African American alliance of cbsi CEOs, these are 52 CEOs, primarily loan funds, we came together about three years ago, because it was really important for us to be in the room together to be able to see one another to talk about the challenges that we were facing, but also to be very proactive about identifying solutions to those challenges. And I can’t tell you how incredible This group has been not only in looking at ways in which we can kind of promote the work that we’re doing individually and collectively but also how we are working with one another. Larger signifiers in that group working with the smaller asset side CDFIs, for example, mentoring them, showing them ways in which they can diversify their capitalization strategies, etc, etc. But we also have partnered with mal camp on joint letters when you know when there there are issues that we have felt that we are absolutely aligned with. There’s been no reluctance at all for us to say, hey, let’s sign that letter. Because we believe in the same sort of issues that they’re raising and the same sort of recommendations that they’re proposing as well.


Irvin Henderson 43:34

But there’s also an empowerment, level two, this affinity collaboration, elimination, because you know, often there are situations where funders put together technical assistance and training and this kind of thing. And it’s not that that’s not appreciated. But when you really get with your peers, that’s when you let down all of the barriers, you tell the truth. You talk about the stuff that folks don’t want to talk about around funders, and you can really make a difference. So I want to put a pin in how important what that previous discussion was. Now, we’d be remiss, and let me continue to encourage folks to put questions in the chat. We are officially in the q&a portion. So any other questions that people want to bring forward are great, and we want members and participants to be able to do that sponsors everybody else. But we’d be remiss if we didn’t talk about how we partner with banks, how CDFIs partner with banks, and give us some best practices, some things to avoid, and perhaps most importantly, how you really can get a bank partner to be that source of capital, that source of lending authority, that source of special relationship access to the marketplace.


Donna Gambrell 44:56

You know, it’s all I think we probably give Same mantra when we’re talking to banks, about what our needs are. And that is long term, low cost patient capital, that if you’re going to be an ally, if you’re going to be a partner, you’ve got to understand the Community Economic Development doesn’t happen overnight. So that means you’ve got to be with us for the long haul, you have to understand that, yes, there, there may be some differences in how banks lend versus how CDFIs lend, that doesn’t necessarily mean that they’re necessarily more risky. But that means that not everything is going to be a success, either. And so there’s a certain tolerance level that you have to have, if something doesn’t quite work out in that CDFI, I have to step back and say, you know, what we need to realign or we need to redo or, you know, modify something that has been funded by a bank. I just think that it’s really, I think the blank partnerships are important. I, you know, my hope is that, even more will come to the table with that long term capital, because I think at this point in time, it’s not just the debt, but it’s also the grant capital that’s needed. It’s not just the debt and grant capital, but it’s also in many cases, kind of the technical support, or the technology, or other types of products and services that a bank could offer and should offer as part of that partnership. But very important, and and certainly, we held those good bank partners. And a good example, is just a recent announcement that came out of US Bank, where they’re providing $25 million of capital, both debt and grant, we are collaborating as part of that effort. The African American alliance of CDI CEOs are beneficiaries of that as well as Grameen and Liske. But we will be responsible for the dispersion of the grants to our members. And, and that’s really important for us, especially identifying those smaller asset size members who, you know, just need that grant to hire somebody, or to bring on some additional equipment or, you know, whatever the case may be to keep the, you know, General operating support going, is really important. And so that’s, that’s been a very good relationship for us. And we hope to see it continue and grow over the years to come.


Irvin Henderson 47:26

Marla, why don’t you go first, this time, and then we’ll go to loose?


Marla Bilonick 47:30

Sure, yeah, I was just gonna say a couple of other ways to partner with banks. So of course, there’s the funding relationship that that Donna mentioned, you know, around them providing capital, both for our loan funds, as well as operating capital to do what we need to do to support the implementation of those loan funds and the execution of those deals. And she also, you know, sort of made a nod to in kind contributions. So, we’ve had some great experiences, you know, engaging staff from the various banks that support our work that are providing pro bono expertise in areas that we simply don’t have in house. So that could be anything from, I can just give, you know, a couple of examples, you know, anything from like strategic planning, marketing. And speaking of marketing, another sort of nuanced partnership with banks that happens around marketing is that sometimes we can sort of achieve a shared goal around them demonstrating their corporate social responsibility, while at the same time publicizing the work that we do. So there have been radio spots, there have been TV ads, you know, and those sorts of serve that dual purpose, you know, or even elevating some of our clients. I know, one of our bank partners, did, you know a whole ad campaign around small business and you better believe that those small businesses were getting all kinds of calls for their flowers, or for whatever it was, he knows that they kind of had to gear up for that. But, you know, there’s sort of less obvious ways that you can partner with things as well, that are equally fruitful, either financially, or just, you know, in terms of building your capacity and reach.


Lucy Arellano Baglieri 49:12

Yeah, and of course, you know, I agree with everything that Donna and Marla have said, and I’ve also been thinking about kind of the same concepts that I mentioned earlier around power dynamics and around systems, right, obviously, as CDFIs we really value and need the partnerships with banks. And you know, thinking a lot about like we all are, this past year, we’ve been in the pandemic, there’s been, you know, a huge spotlight on racial equity, banks have come out with big commitments around racial equity. And so if similar similarly to what we’ve already spoken about is really listened to communities and, you know, stepping into beyond CRA requirements, right and knowing that, just like everything else, banks are reliant on the communities that there’s Serving for their profits for their success. I think that, you know, the chase, I can say from personal experience, Chase has been a really great partner, Janice badler, who heads at the Foundation has been a really great partner really, in terms of listening and also pushing us, you know, she’s, we’re very fortunate to have her on the board of lift, I’ve been very fortunate to work with her and her team, through my previous work. And I know now Cabot, she’s been a great champion for really listening and responding with all of the things that Donna listed based on what they hear, right. And that’s really what will empower us to not have to wiggle through our mission, after we’ve jumped through the hoops that, you know, we that we have to get through, I think also willing to being willing to learn from us, you know, Irvin, you and I were first connected, went through a bank partner, who thought that there might be some synergy around a new product that Lyft is rolling out this summer, specifically focused on black affordable housing developers, which is a line of credit that we’re increasing the size available, as well as significantly reducing the personal guarantee requirements, you know, our hope is that we can show that this is not actually that risky, right. And that banks will then see that and replicate that and scale that up. I mentioned that my in my previous work at Mehta, we really jumped into focusing on small business loans for immigrant, particularly undocumented entrepreneurs, we were able to then we have essentially no default, right years down the line, we can the you know, point 000, whatever the default rate is, so would really want to see some power shifts in terms of the banks adopting from these learnings. We’re doing a lot of testing, we’re in the lab, you know, trying to get really creative, and banks have a lot of are very well positioned to help us scale that up. And that’s what will ultimately lead to the systemic shifts. So that’s what I’m thinking a lot about when when we’re talking about to our bank partners.


Irvin Henderson 52:13

You know, those are great, great comments, and I so appreciate your explaining the relationship building and what it means to an institution. But let’s make it plain. Basically, CDFIs are developing the future customers of all banks. And there is a special interest that the institutions should have in your growth and development in your capacity, because you are growing the communities for them, and they will thrive one way or another based on how black and brown communities do. The populations are getting large enough now so that the success of any institution is based on how it deals with all people of color. And that’s just something we’ve got to put right out there. So we have a great question here that I want to highlight from one of our colleagues from Francis, in fact, so she wanted to know, what kind of background does one need in order to work for or start a CDFI? And are there any recommendations on how to gain experience to be qualified to work for entry level positions, or even start a CDFI? And I have one other question that I want to go to. So if we can sort of quickly answer that one, we’ll get this one other one in, let me Shut up and let you do that.


Donna Gambrell 53:35

Well, I always think it helps to have some sort of finance background, you don’t necessarily have had to work at a bank or credit union, but I think you should have an understanding of a balance sheet and income statement. You know, will cash flow, just some very general terms. And then I think, you know, this is always a learning experience throughout, you know, nobody knows everything’s coming into an organization. And so, again, it’s incumbent upon the person working at that CDFI, leading that CDFI to always be at a place where they’re learning even more about finance, frankly, if they if they feeling like they don’t have all of that experience, to not be embarrassed about saying I need to know more and to actually seek that education or that additional information.


Marla Bilonick 54:27

If I can make a quick comment just on this. I know we’re short on time, but I know that we recruited more for commitment to mission than the actual skills. So I totally agree those are a plus. But I think, you know, there are a lot of nonprofits that will take a risk on someone who has the commitment to the community, the passion for serving the community. You know, the remaining skills can be taught and will be learned. But I just wanted to put that out there too, to not turn off people who may not have that background.


Lucy Arellano Baglieri 55:01

And I was thinking the exact same thing as Marla did if it weren’t for that I wouldn’t be I wouldn’t have a place on the CV if I feel.


Irvin Henderson 55:10

Well, I appreciate that. And this is a question that has come twice. So I think what the questioner is looking for here is, what enforcement or regulations are in place that ensure that CDFIs initiatives have direct involvement in the form of and this was an intentional use of this word, voting voices and input from the community that they’re set up to serve. And and how do people who live in the community extend some control to their CDFI? If you could?


Lucy Arellano Baglieri 55:49

I can start I am not an expert in the different kinds of the legalities or the different guidelines. But I do know that I mean, there are guidelines and also principles around ensuring that there is community voice, for example, on CDFIs boards, whether that be someone who maybe has or is a borrower. Currently, I would say that one thing I have seen in my personal experience is that sometimes we really want to be careful not to really tokenize those seats on the board, right? I love what they talked about voting voices, right? Oftentimes, there might be like an advisory board that doesn’t have voting power, or there might be a bit of a hierarchy around the different levels. And basically, as Donna and Marla have said, recognizing what might not be academic, or technical expertise, or as equal, right, the lived experience, I think, is a is a top expertise that we can’t learn in school or any sort of training. And so ensuring that we are lifting up voices equally, I would say is a real a real premise for that. And there are some more formal guidelines around that. But the implementation of those guidelines, I think, can be inconsistent, quite frankly. would either of you like to speak to it as well?


Marla Bilonick 57:14

I would just add one note, which is that, um, sort of another way to gain community involvement is recruitment of staff from the community. And so I think that is maybe a more implicit way, I don’t know that it counts as a voting voice. But it certainly counts as you know, who are who are people at the table making decisions or or, you know, actively executing the work.


Donna Gambrell 57:34

And I don’t know if Lucy mentioned this earlier, but we’re Marla, but also just having an advisory committee as well. You’ve got people from the community who, in addition to your board, and other types of governance structures in place, but that advisory community is often comprised of people from the community who are giving you the real talk, that you really need to hear sometimes when you’re in a bubble, thinking Everything is fine. And they’re saying, no, that’s not working at all. So having that community voice at the table is important.


Irvin Henderson 58:07

Well, I want to thank each of you for what has been an incredible panel, I think you’re a hands on expertise, lead to hands on advice, and the hands on advice is going to serve our folk well. I want to encourage everybody that’s considering this, to recognize that this is a trend that is going to continue, and therefore this is a tool that you want to develop. So I’d like to ask you each now to do you know, 2025 seconds, final thoughts.


Donna Gambrell 58:42

You know, I’m just so happy to be a part of this industry, proud of the industry itself, I think, impressed with the work that continues every day. And the fact that you have younger folks who are coming into the industry, who have a great deal of interest in energy and savvy and expertise and know Owl and are willing to push, help us push the envelope even more Frankly, I think we’re at this point in time. Where in this country, where we see certainly the ongoing racial strife, the social injustice, or upheaval that’s caused by the pandemic, both health and economics, that it really has been a time of reflection, I think, for all of us, and I think especially for those in the CDI industry. So hopefully, it’s also a time where we’re thinking certainly for me, thinking about what more can we do, how much greater impact can we have? And you know, how much more we need to raise our voices to ensure that the communities that we serve are also being served by others. Please,


Marla Bilonick 59:56

I was just gonna say there is absolutely no way that I could top that but i Just wanted to say that, you know, I would encourage the participants in this session to, you know, act on your interest, you know, try to make it happen. And I think everyone on the call would agree that either we or we can connect you to someone who will help you get on your way. Absolutely, we could use more CDFI. So, however, we can be helpful.


Lucy Arellano Baglieri 1:00:25

I’ll just piggyback on that and say that we all have a role to play in supporting communities of color, low income communities, communities that really are the focus of the CDI field, which has been around for almost 40 years now. And, you know, things kind of ebb and flow, we’re having a resurging moment right now, you know, whether it’s the CDI field obviously has been sorry, the CDI fund has benefited from outstanding leadership, as you can see, but you know, the tides go up and down. And so regardless, right now, there are a lot of resources available a lot of attention on CDFIs. And whether you work for a CDFI or create a CDFI, you can be an advocate for not just CDFIs, but the communities that we’re from and are focusing on. And so I would definitely love to hear from those of you who might want to get more involved or are exploring filling some gaps in your communities and how we might be able to collaborate. So appreciate the collaboration that we’ve already had today.


Irvin Henderson 1:01:30

My thanks to Donna, to Marla and to Lucy, for all of your expertise and your generous giving, and even offers to help people as time goes on. NCRC was there at the beginning, walking the halls of Congress to get this legislation passed. And we will be there as we continue to try to develop these very important pieces of capital and assets for our communities. Thank you again, thank you to our audience, great questions. And this will conclude our workshop NCRC. Fight, fight fight. Thank you so much, everyone. Fantastic.

Print Friendly, PDF & Email

Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

Complete the form to download the full report: