CDFIs, often assumed to have a race-blind mission to alleviate poverty and provide wealth opportunities in under-banked communities, in fact were formed specifically to address the racial wealth gap resulting from years of exclusionary, racist economic policies like redlining. In this session, we addressed the need to go back to the civil rights roots of CDFIs to address the persistent racial wealth gap.
Marisa Calderon, Executive Director, NCRC Community Development Fund, Chief of Community Finance and Mobility, NCRC
Bulbul Gupta, President & CEO, Pacific Community Ventures
Marla Bilonick, President & CEO, National Association for Latino Community Asset Builders (NALCAB)
Donna Gambrell, President & CEO, Appalachian Community Capital
NCRC video transcripts are produced by a third-party transcription service and may contain errors. They are lightly edited for style and clarity.
All right. Welcome everyone. My name is Marisa Caldron. I’m executive director of the NPRC community builders. And I also hold a also hold something back there. Yeah, there you go. I am also chief of community finance and mobility for NCRC for the parent company of the CDFI. Thank you all for joining us today for this really exciting conversation with me today. I have a really exceptional panel of speakers. Lenwood unfortunately couldn’t be with us had some some flight issues. So he won’t be joining us today. But I’d love to introduce you to Bulbul Gupta. Bulbul is President and CEO of Pacific Community Ventures and nonprofit impact investor and community development financial institution. She’s a 20 year veteran of the industry. Under Bulbul’s leadership PCV has doubled their community investing in business advising portfolios and recommitted to addressing racial wealth gaps through a good jobs agenda. So thank you so much for joining us Bulbul. Marla Bilonick is also with us and Marla is President and CEO of the National Association for Latino community asset builders, who many of us know is now CAB. Prior to joining now CAB, Marla served as executive director of the Latino Economic Development Center in Washington, DC, and has been a board member of now CAB since 2016. And also with us today is the incomparable Donna Gambrell. Donna is a legend and is President and CEO of Appalachian Community Capital where she’s responsible for attracting and directing investments to CDFIs and other mission driven lenders in Appalachia. She’s also the longest serving and first African American woman to be appointed director of the US Department of Treasury CDFI Fund. So please join me in welcoming everyone. So just to kind of set a little bit of context, established in 1994. Through a bipartisan act of Congress, the CDFI Fund vision is for an America in which all people and communities have access to the investment capital and financial services they need to prosper. In our conversation. Today we’ll discuss the origins of the industry before the fund, whether and how now 28 years later, CDFIs are positioned to accomplish the mission codified by the fund. So Donna, long before there was a CDFI Fund, community activist organized in church basements and local businesses, establishing institutions to bank the unbankedable, and provide access to capital to marginalized communities. Can you provide some context on the history of the Community Development movement that led up to what we now know, as the community development finance industry,
Happy to do so. And first of all, good morning everyone. I have to tell you how thrilled I am to see people in person, I haven’t been out, I felt like a mushroom for the last two and a half years. I’m trying to get my travel muscle back into gear and forgetting that there are certain protocols, so I was actually here on time, and then had to get tested, which absolutely makes sense. So my apologies for running in, like the wind at the last minute. So good to see everybody. And so good to be here to talk about the role of CDFIs, where we are at the industry and really re centering our efforts to where we began to our roots. Ramona is here from Mississippi. And we were talking about this earlier about just how important it is to not forget the history of the CDFI movement and where we started. And so when you look back, and certainly the origins can go back as far as the 19th century, where you saw in neighborhoods, particularly neighborhoods of color, black, African American communities, where there was a lack of financial institutions, a lack of affordable access to funding, people were segregated in particular areas of communities and did not have a way of looking at opportunities, frankly, that would allow them homeownership or to create small businesses or to get further their education. And so what you saw at the very early stages, were the creations of minority depository institutions, in particular, black banks, black owned banks, and I can’t you know, as difficult as it is to start a bank today, I can’t even imagine what it might have been like, you know, 100 years ago. And in fact, one of the banks that still exists today, the longest operational bank in the country is citizens bank in Nashville, Kentucky, I’m sorry, Nashville, Tennessee, created in 1904, and continues to operate today. And they were created primarily to provide African Americans an economic opportunity to help build wealth, to help create assets to provide a longevity, for generational wealth, all the things that we’re talking about today, were things that were present, you know, 100 years ago or more. And so as you see that evolution, you see the role that these institutions have played not only for minority, black owned brown owned banks. But also, as you look through that arc that has happened from the beginning of the, you know, first bank that was formed, you also saw the creation of credit unions, community development corporations, that were specifically in neighborhoods that had been marginalized, that had been historically shut out from the financial mainstream. And so communities came together, as communities often do, when there’s a gap, to try to fill that gap. And they had been doing that for decades upon decades. So you see, again, the growth of the credit union industry, you see the growth of the CDC industry, but you also see this convergence of those institutions with the Civil Rights Movement. And so many of those institutions were either supporting or actively supporting the movement, financing activities, in some cases, sheltering, providing the kind of shelter and protection that was often needed. But they all had one common interest. And that was to push for equal rights to push for economic justice. And it is a theme that continues to this day. Now we’ll talk about what more needs to be done. Because like a lot of things we start, you know, walking in tall cotton, and we forget sometimes where we come from, and the need for especially the CDFI industry, to go back to those roots, or at least to recapture those roots. But up until even the 1990s, what you saw are these, you know, the evolution and the engagement of these different institutions and and up until the point of 1994, when the real act put into place, the CDFI fund the creation of the CDFI Fund, you already had these community development financial institutions that were doing the work in the communities for decades. But now you had a vehicle that actually certified the CDFIs that went through criteria, vetting, if you will, with the Department of Treasury, and said if you are lending in low and moderate communities, but in particularly if you’re living in low income community 60% of your lending is being done in that then your you will become a certified CDFI. Of course, there are other criteria as well, in terms of governance, you know, accountability, and all of that. But you saw, again, the formation in those early 90s, of the certified CDFI industry coming together, started out with just a handful, a couple 100 now has grown to over 1,200 CDFIs located across the country, and you have CDFI bank CDFI credit union CDFI loan funds, CDFI venture capital funds, if you ask any of them, what they do or what their mission is, hopefully, it’s all the same answer. And that is to support underserved communities through affordable access to capital, credit, technical assistance and other types of support. So it really is this arc that we’re going through, I think that we’ve seen in terms of the industry and the movement itself. And again, it’s a movement that intersects with civil rights, with equal rights with economic justice. And so our charge, I think, always is how do we make sure that we’re staying on track, that we are staying focused, that we’re keeping our eyes on the prize that we’re doing what we need to do as organizations and to recognize and to celebrate, that we are very different from banks, and we should be. And my mantra always is, is that there’s a place for each of these institutions. There’s a lane for a bank, and there’s a lane for a CDFI. And when you see a CDFI acting more like a bank, then that’s where you start to question or start to question. And so I’m looking forward to this discussion today about how we can and you’ve got these fantastic women here. On the panel today, we can talk about what we need to do, what concrete steps we need to do to make sure we’re staying true to the mission, but it’s also staying true to our history
Thank you so much for that. So Marla, let’s jump right into to that. So from your perspective, what does it mean to recenter civil rights in the CDFI? Industry?
Thanks, Marisa, I also wanted to echo Donna’s comments about how wonderful it is to just be in a full room of human beings, it’s really not to be understated just how different the energy is, than being in my bedroom behind my computer screen. So it’s just great to see you guys. And to see old friends as well. So I really think what’s interesting, sort of about this question and about sort of recentering is the industry as we’ve seen, it has really come to a place where sort of larger CDFIs higher performing CDFIs are lauded as the gold standard. And I really hope that in this conversation, we can kind of flip the switch on that a little bit. Because really, sort of what we’re celebrating doesn’t always align with serving the community that we are intended to serve. And so to me, sort of that sweet spot between serving the community in a culturally competent way, in a community competent way, a community grounded way, while still achieving scale, while still performing while still not, you know, making unwise decisions with other people’s money. That is kind of the sweet spot that we’re aiming at. And I think, you know, to Donna’s point, when CDFIs begin acting, sort of like quasi banks, that’s a really dangerous spot. And it’s a real departure from, to my mind, the origin of, of the CDFI industry and why CDFIs were created. A couple of other points that I wanted to make were that I think, and we’ll talk about this later in the panel, but what we measure can also be sort of off base and skewed. So, you know, for any bankers in the in the room that that fund us as CDFIs, you know, I would challenge you to sort of think a little bit differently with regard to how we measure success of CDFIs. And maybe put, if not less emphasis on performance indicators, like a healthy portfolio, or, you know, to also put emphasis on sort of racial equity, ethnic equity measures, as well, um, and this is mirrored in the new CRA Notice of Proposed Rulemaking, and we’ll talk about that as well. But you know, to keep a lens that includes racial and ethnic ethnic equity. And then the last thing that I wanted to say, and we’ll I’m sure touch on this as well, later on, is that in the housing world, we have data that shows discriminatory practices with openness, a ghost. So I was just gonna say, the housing world, we have hard data around the discriminatory discriminatory practices that have happened and can measure if and when those happen moving forward, that does not exist for small business lending. And so, you know, I just want to continue to put pressure on the CFPB, to enforce section 1071 of the Dodd Frank Act, because while we have self reported and inferred data around discriminatory practices in small business lending, we just don’t have that hard data as a baseline to start from. And so, you know, it’s very difficult to say how successful CDFIs are being in the small business space without having that sort of baseline as a starting point. So I’ll move on from there, but those were sort of my initial thoughts around that.
This particular point, I think is so important that I’d love to invite Bulbul and Donna to share a little bit about your perspective on what it means to recenter civil rights in the CDFI industry. So if you want to sort of go first Bulbul, that would be great.
Sure. So I’m newer to the CDFI industry than probably both of my amazing colleagues here. I came into this role, leading a CDFI in California a couple of years ago, having spent 10 to 15 years in the impact investing space before that. And I think for me, coming in, and realizing that CDFIs and having certainly worked with CDFIs before that, but if CDFIs were created out of the tail end civil rights legislation out of a federal acknowledgment of systemic discrimination and redlining in the formal financial industry, then why are we not measured with race affirmative metrics. Being colorblind in our industry is like saying all lives matter when someone is saying black lives matter. And I that was very eloquently said on a call last week, but I don’t have the woman’s permission. yet to quote her, so I will not take credit for that quote, but I think it really makes the point of why we’re here and why we’re having this conversation. And that is exactly the kind of language we are pushing for in CRA reform and the CDFI funds governance this summer when the comments are open. Because if we do not recenter that mission, we are only worsening the black, white and brown white wealth gap that exists in this country and has worsened since the creation of the CDFI industry, which is perverse, right? That’s the opposite of what was intended to happen. So that’s why I’m here. And that’s why I’m committed to this topic.
So Bulbul said it very graciously, very eloquently. You know, I think for for me, it’s a couple of things. I actually started my career at the Federal Deposit Insurance Corporation, bank regulatory agency, focused on consumer protection Community Reinvestment Act and other areas that were particularly consumer focused. And so I also think that I, I understand the value of clearly a financial institutions, I also understand the value of CDFIs. And CDFIs, to me are like the on ramp, you’re helping folks get to the highway, which might be the financial institution, there are things that CDFIs do beautifully do very well. But we don’t do everything perhaps that a bank can do in the bank has certain levers, I think of power, that relate to how they look at risk, how they mitigate risk, who they access, who they open those doors to in terms of customers and who they don’t. And so, for me kind of recentering really means looking at ways in which we can really be very clear about our role for CDFIs, in particular, but also, as partners with those banks, true partners with the banks, and opening the doors for people who simply have not had the key for generations, the key to opening up those doors. And so what does that mean? That means that we need to be looking at our own policies, both banks and CDFIs, as it relates to credit, it means means we need to be looking at specific programs that will help create not only wealth, but also close that gap. And for me, it’s always been two things. It’s always been about homeownership. And it’s always been about business, small businesses and business financing. Those are the two standards for me in which you actually can gain wealth and help close that gap. And so what are those concrete steps that need to be taken because we talk about closing the gap? But we don’t talk about what that really means? What are those steps that are actually going to be taken have to be taken? What are the programs that are going to have to be put in place? What are the policies, frankly, that will have to be either revamped or abolished altogether, in order to allow that access to happen. The playing field will not be level until there are some specific, aggressive actions to make that happen. And for those of us who are in the financial services industry, we have to look at this as a way in which we are working in partnership to make that happen, in the same way, frankly, that the Civil Rights Movement had this larger umbrella. And folks from different walks of life, who looked different, different income classes, different races. There, you know, we have to look, I think at what we’re doing, and saying what do we need to do to make sure that that umbrella is wide and includes everybody under there that can really affect change and be serious about it?
And Bulbul, I wonder if you can talk a little bit about why this is an important conversation now and whether under this administration, there’s even a small window of opportunity for systems change.
Well, we certainly hope so. I think some of us were here, maybe last in DC for the President Biden signing of the racial equity, executive order, right. So what does that mean for different agencies to be practicing and embodying that order, not only towards racial equity, but also racial justice, as someone said this morning as well on the affordable housing panel. I think when we think about why is this an important conversation now, right, Donna was talking about the on ramps to the highway, but is the highway working? Right? So if we talk about she talked about homeownership and business, when we think about even pre pandemic 99% of black entrepreneurs get rejected from formal financial loan applications pre pandemic 95% of black small business owners were denied access the PPP through the In 2020, right 41% of black owned businesses went under in the first three months of the pandemic. So what we’re talking about, and in the venture capital space, only 2% of venture capital dollars go to entrepreneurs of color, less than 1%. Go to women of color. Right? So we’re talking about if lending isn’t working, if venture isn’t working, right, what are the forms of capital that are working? I think that remains to be seen. So why are we here, because none of those streams of capital are working very well, for black people, for brown people, indigenous people, the range of Latinx people, immigrant entrepreneurs, were denied access for language barriers, all kinds of different streams of capital, right? At the same time. So as a leader, I want to know if half of my customer base, my potential customer base isn’t being served by products and services I’m designing right. So if I’m the leader of this country, if I’m leader of these different departments practicing the racial equity, executive order, if what I’m putting out in the market isn’t resonating with half of my country’s population, I’d want to know that. And by 2044, this country is going to be majority people of color. That is in my lifetime. That’s when our all of our most of our lifetimes, my kids graduate college, right? What does it look like for us to dismantle these systems that haven’t worked for our people to create a new majority that has access to equitable capital to realize their full potential. And when we’re talking about wealth building, we’re not talking about just getting people to paycheck to paycheck living, right? We’re talking about good jobs, where you can actually thrive. So that’s why I’m here. I certainly hope it’s a systems change moment. But there’s a lot of things converging that really show us like, what is it look like for us to reimagine a financial system where we are empowering the new majority to come into their own and really actually realize equity and not wait for another 100 years for us to actually get to equity?…This is a conspiracy, Marisa.
I feel like it is. So kind of with those comments that Bulbul will just made in mind, I wonder if you could talk a little bit in more detail about the black white wealth gap, and in some steps that need to be taken. Just leave it on the table maybe yeah. Okay, yes. Even the laptop is enthralled?
Well, you know, the gap is a serious gap. I mean, we’ve seen again, 20% more than about now. Yeah. Okay, great. So the gap is a serious gap. I mean, we see that the widening gap, when you look at the homeownership rate, the fact that we, for black homeowners, we are still at that same level that we were when the Fair Housing Act was passed in the early 1960s, a 20% gap between black and white households, you’d see it in the wages that are, you know, wage gap that’s happening between black and white families as well. So I mean, this is we can keep going on and on and talking about the numbers. We know that the gap exists. We know that it’s a serious gap. And as long as we you know, 50% of Black homeowners lost wealth after the 2008 financial crisis. Now, if you’re already behind, how do you gain? And it’s only been, you know, what, 15 years since then, if you were already behind a little, you know, somewhat in 2008, you lost 50% of your wealth, we are now we’ve hit another crisis. Within the last couple of years, we’ve had an economic and a health crisis, you can continue to see that you’re, you know, black families, brown families, brown households, black households, indigenous households, continue to fall behind. And so you it’s a it’s a gap that can’t be ignored. And I think again, we have to find some really workable solutions to how that gap can be closed. It’s, it’s real. And it will continue to exist. You know, I look at where I am today. And I even in my own family. I mean, my parents probably didn’t make more than $10,000 a year in annual salary. Certainly my mother did not my father, maybe a little bit more than that. He was a laborer at the Department of Treasury. And in a strange twist of fate, I ended up at Treasury and I think he would have said he would have never imagined that but in his lifetime, because he never really was able to make economic gains, his daughter happened to make some gain. You know, I had a great salary I had worked for the FDIC, I’ve worked for, you know, places that we’re paying the top dollar, certainly within government, but I look at my generation that comes after me, my niece, my nephew, and they’re struggling, once again, I mean, their annual salary is I am trying to figure out how they’re even living from day to day, frankly, my niece has a daughter, a six year old, you know, daycare and all of that. So you know, it really is real for me, it hits home, because what I see in them is a regression, not a progression, but a regression, where they’re making less, they have less affordable places to live, their job wages have are stagnant. And they are living in places where, you know, again, in this beautiful city of Washington, DC, you cannot find enough affordable housing to accommodate the needs of people who need it the most. So if we again, I keep saying the same thing over again, I hate to sound like a broken record. But if we do not find concrete ways to address these issues, I worry about not only the generation behind me, but the generations that come after them. And where will we be if in fact, our children, our grandchildren, our our grand, great grandchildren, aren’t even able to live in a country, the richest country still in this world without having a livable wage and affordable place to live enough to eat? You know, a good education, affordable health care, all of that. So I don’t know if that answers your question. But it’s real.
Yeah, no, it is definitely. I mean, and Marla, I wonder if you could talk a little bit about the Latino white wealth gap and sort of provide some context as well, as, you know, how, how does that differ in ways than it does for the black white wealth gap?
Yeah, so a couple of things, even just with the the couching of the question, I think I want to very much underscore that, I really think it’s important that our communities come together. And so to me, it’s less important about sort of, like, what’s the difference between the black and white, you know, income levels, household income, versus the Latino and white? You know, I think it’s really, the disparity is between, you know, racial and ethnic minorities and, and their white counterparts. So I don’t think you were trying to make a statement with the question, I just wanted to sort of put that out there. I
I mean, I think the thing that folks would hopefully, sort of take away is that there are different reasons why these things exist. And I know that you’re well positioned to sort of, kind of point out why those things differ.
100%. And I think, you know, the other thing that really was resonating for me, when Donna was speaking is that I think our society has gotten to a point where sort of overt racism or overt discrimination is more generally frowned upon, but financial oppression still exists it very much, you know, is is holding us back. And it’s it’s much more subtle, much more covert. And so I think this work is so so important in terms of, you know, closing that gap. And addressing the the injustice is, but I did want to sort of throw out some points just to understand, you know, exactly where we are in looking at at the Latino wealth gap. So these are just, I’m just gonna throw some stats at you. So Latino household median income is 18%, lower than the national median income and 24%, lower than the white household median income. Latino men earn 69 cents to the US white man’s dollar, and Latinas earn 58 cents to that same dollar. You know, another sort of important point is sort of the vulnerability, you know, so 71% of Latino households are in liquid asset poverty, therefore, over half of Latino households would be vulnerable. If they were faced with an economic shock, they probably would not be able to overcome that. That could be anything from a medical emergency, a divorce, a death in the family, you know, all the things that life throws at us. And so that’s, you know, real vulnerability. The point that I wanted to make that was really shocking to me, and I had not seen this data point before and it actually came from a report that that Dedrick put out if he’s in the room is that let single Latinas from age 18 to 64 have a median wealth of $100. And so I just thought that was unbelievable. And so I think, just, you know, the point of these stats is just to say this is real, this is dire. And really, you know, the whole point of this panel is that CDFIs were created to address this, you know, and how are they? How well, are we addressing it? And so I just really wanted to, you know, put that out there just to underscore the challenges. You know, it’s, it’s real.
Well, and I think what I hear the two of you saying is also that there are some real serious capital needs for these groups within our communities. And, and I wonder, Donna, if you can talk a little bit about how establishing the CDFI Fund has helped to provide liquidity and direction for the industry in a way that can help to address some of these, you know, significant gaps.
When the CDFI Fund was created, it was created primarily to provide the kind of capitals access for CDFIs. So it still remains the only government agency that is solely devoted to fulfilling the capital needs of CDFIs that are supporting low income communities. Now, I came in in 2007, at a time when the CDFI Fund and other community development agencies within government were being viewed as duplicative and perhaps unnecessary, and that there was a call to combine the different community development agencies. To me, that was the worst thing that could have happened, it didn’t happen, because the crisis hit. And I think, you know, the financial crisis became the major distraction. But when I came in the CDFI funds budget was $50 million. That’s a drop in the bucket. That’s pennies, compared to what the real need and what the demand was, during the time that I went was at the CDFI Fund, I think the budget, the appropriations went up to something like 220 million a drop in the bucket, compared to what the demands were. And so what you saw in the just recently, certainly with the administration’s support of getting more funding into the CDFI Fund, even the $3 billion that has been set aside, that’s separate from the 9 billion that went to NDIS is a drop in the bucket. So we need to be thinking about I think, for the CDFI Fund, I think there has been great strides made, great accomplishments made, but there’s still more that needs to be done. And the fact that they are still the only agency within government specifically targeted or focused on CDFIs with to me a very, very limited budget, that you can only do so much with what you have. And that means that for the time that I was there, and I know certainly when Annie Donovan, succeeded me and now Jody Harris at the helm. What we spent that appropriations on 90% of that went to awards to grants 10% was for staffing and research and compliance and certification. It was never enough. There was never enough staff. There was never enough funding to support additional staff. And so I think when we look at the role of the CDFI Fund, there’s still an important role, a critical role that they pay that they play, but we need to be I think, great encouragers and advocates to making sure that Congress understands they need a lot more money to do the work that supported by the great work that CDFIs are doing all across this country.
Yeah, thank you mean, so Marla, despite the fact that there are these sort of serious capital needs still for CDFIs what makes them well suited to meet the needs of underserved communities.
So I’m sure I’m preaching to the choir, you know, with what I’m about to say. I mean, I think, particularly now, PPP was a test that proved exactly the positioning and the uniqueness of CDFI is to respond quickly. I think the unique position of CDFIs in terms of being entrenched in community is very different than traditional finance. It’ll service providers just in terms of the depth of understanding of what’s going on and communities, that cultural competency, ideally, the reflecting back, you know, in terms of the staff of the organization. So I have taken it upon myself, starting this calendar year to come up with analogies for various things that I’m talking about on panels, it’s kind of just a self challenge thing, but I came up with this one, and I think it’s actually accurate, which is that the difference between CDFIs and traditional financial service providers is that, you know, your traditional commercial banks are the individual sending the child support check. Whereas the CDFI is the parent that’s at home and knows exactly how that check needs to be spent. And so, you know, whereas the check is very, very important. And without it, little can be done, the parent that is at home that knows, you know, schoolbooks need to be purchased, a uniform needs to be purchased, we need this much for groceries, we need this, you know, or there’s, you know, something coming up that isn’t, you know, the typical thing on this month, summer camps are coming, whatever it might be, obviously, I’m a parent, so I, you know, have these things here at summer camp is like, in my head, you know, the 1000s of dollars that are going to be spent on summer camp, but, um, you know, so I just think that the depth of understanding is the understanding of what’s going on in the community. And I don’t know, that’s my fear is that as CDFIs grow, that that touch and contact with the community can be lost, I’m not saying that it has to be lost, but it can be lost. And that is, is a dangerous, sort of point, a teetering to be on. So as much as we can grow and serve more clients while still having that understanding of what, you know, Joe, on the corner is facing? You know, and I don’t know that I have the answer to how to do that. But, but that’s kind of that’s there. And then I had another thing that I wanted to say just real quick, around, because in my current position, I fund CDFIs. But we are also a CDFI. And so, and also having run a community based CDFI, I know that it’s also challenging to just as as challenging for the end beneficiary or the client, the small business owner, the consumer borrower to access financial services for, particularly for minority led CDFIs. It’s challenging to get funding to run programs, or even to deploy out in the community. And so I just wanted to put out there that there are over 1000 CDFIs, there are less than 100, Latino led CDFIs. And that is a big disconnect if you’re talking about who’s being served versus who’s serving. And so, you know, I just wanted to put that out there because it’s, it’s, that’s where we could improve, I believe. Thank you.
On through that. In the same way that Marla talks about the small number of Latino led CDFIs, you’re seeing, again, the same sort of thing with black LED CDFIs as well. So Linwood Long, who is not here today, and I am so sorry that he missed, his plane was canceled, he’s coming out of North Carolina. But Inez Long, who is the CEO of the Black Business Investment Fund of Florida. And I formed an organization four years ago, called the African American Alliance of CDFI, CEOs. And we did that primarily because what we were seeing was that even within the industry itself, there was disparity with how black LED CDFIs were receiving investments, the types of investments, the amount of investments. And I remember telling Linwood that I was in a room with one of my colleagues who I treasured dearly. And he was talking about this $10 million investment that he was just getting from one of the banks and I thought, wow, what must that be like? Just to be… He said all now we didn’t go through much underwriting and I said you didn’t. And he said, not only that we’ve had this relationship with them for years. And so it just drew a fine point for me on just what those disparities are Hope Enterprize corporation that delta love Bill Bynum and the work that his organization does, they have a policy institute, and they did a study and analysis a few years ago, that showed where that disparity was for minority led CDFIs. And the difference between those that were minority led and white LED just in terms of CDFI Fund awards, but also investments themselves and it was like a, you know, a five to one difference. I mean, it was white land CDFIs are getting five times the amount of investments that minority led CDF eyes were. So it really, I think clarified for us why we needed to come together. As a group, we are a group of CDFI, black lid CDFI loan funds executives, we are there are 60 loan funds that we that are members of ours. And that doesn’t include, of course, the banks and credit unions. But again, a still a small number when you look at us compared to the rest of the industry. And one of our main focuses has been not only advocating for the CDFIs, many of whom are small, but again doing, you know yeoman’s work day in and day out in these communities, advocating for those small CDFIs, but also advocating for changes in public policies, the way that policies are actually put into place that are not necessarily friendly in terms of the investments that are going into those CDFIs across government, but also the role that private sector must play as well. I mean, we are talking about both public sector and private sectors that need to better understand the investments, and what these investments do and build those relationships in a way that they have not done today. So I’m proud to be part of that. And as I said, I’m sorry that Linwood isn’t here because Linwood is, is, well he’s I was gonna say he’s a former pastor, once you’re a pastor, you never give up your vocation. But he would be here preaching today, for sure about the need to really continue to put put the pedal metal to the pedal and the pedal to the metal, whatever the saying is, for us to keep, keep pushing forward, because we can’t stop we cannot stop.
Just a one quick. Hello, hello. Two second advertisement, that now Kab is launching, or has launched formally the in partnership with and friendship and sorority or brotherhood with Triple A or the Alliance, we are launching the National Alliance of Latino CDFI executives called NALSA. So it’s a little bit different, because we had already convened a group of CDFIs within our membership. So within our 170 members, we have about 55 CDFIs. But this is kind of a fence around that group for exactly the same purposes for advocacy for investment for peer learning for, you know, just moving the field ahead. But we very much anticipate and have already worked in partnership with the Alliance. So I don’t want it to seem divisive, but there you go. Alliances, alliances and alliances between alliances.
And another area that is I would say, you know, less explored for CDFIs. But which there’s a need for more engagement is around impact investment work. And Bulbul, you’ve talked in the past about decolonizing capital through your own investment work and at your fund. I wonder if you can talk about how impact investments have the potential to affect real change in democratizing the sort of finance landscape.
Thanks. And I’m still hunting for more Asian American CDFI CEOs out there to start our own little Alliance friendly group. So anyone of you know any Asian American CDFI CEOs, please please email me. But yes, so One interesting note, I think we do not talk about this often enough at all in the impact investing industry is that similarly to the origins of the CDFI Fund, impact investing was formed out of its its origins trace back to the early 1800s. Similarly to what Donna was describing earlier, it was born out of the movement in the UK, to divest from the enslavement of blacks, and the enslavement of labor practices and slave plantations. And we have lost again and I beating a dead horse perhaps but we have become colorblind as an industry because the majority of assets held in this world are still held by white asset owners. And while impact investing was formed officially about 12-14 years ago, out of two sort of major practice changes from the traditional financial industry. One was that we were going into investments with an intentionality of having social or environmental impact. And the other was that we were going to measure the outcomes of our investment to make sure that they aligned with the social and environmental impact outcomes. We intended going into that investment. PCV my organization Pacific Community Ventures was one of the first impact investing funds in this country. And so So we became a CDFI, about eight years ago. So when I look at, you know, how do we go back to the roots of both impact investing and CDFIs. And the organization that I run decolonizing that to me means one dismantling practices that work for white majority asset owners that don’t necessarily come from community and work for people of color. Looking at are the outcomes of my investment working? Right. Are they meeting the goal that I set out to meet? And that’s part of why, you know, we’re here having this conversation, because it’s one thing for the CDFI Fund to be created to have some assets as Donna was describing not sufficient yet, but to have some assets to meet that goal. But if we’re not measuring the outcomes of those investments, are we improving the black white wealth gap or the people of color to white wealth gap? No, right? We’re worsening it, we’ve worsened it in the last 30 years in this country on top of 400 years of of not having that access to capital. So in decolonizing, our capital, how are we decolonizing, our underwriting practices, right to not only be intentionally inclusive, because we use that word really broadly. But also where are we being unintentionally punitive? What are we asking for that we do not need to be asking for to get to a yes, one of our first values of PCV is coming from a place of Yes, and this is probably where we bake it in more than anywhere else, is really looking for reasons to not have to say no, I hope I didn’t do a double negative there. But you know what I mean, and democratizing access to our capital, both on our, for us on our lending side of the CDFI Fund, but a loan fund, but also on the mentorship program that we run nationwide. And when I think about what that looks like, that is inherently in the impact world, a blended capital model for reparative capital, right, so CDFIs, if we were formed to address a market failure of the banking industry, we are inherently, in order to address market failure, you can’t address market failure with market based approaches, and market return approaches. Right, because then similarly to what Donna was saying earlier, you end up acting, and Marla too much like the banks that you were meant to disrupt. And we’ve forgotten the disruptive part, I think in the way that we are governed at least tends to lean towards being so intentionally inclusive that it becomes colorblind. And that’s where I think when I think about where are their impact investing best practices that we bring? Absolutely. The measurement part is something that I really take deeply into where we are, with both the CDFI Fund and the CRA reform opportunity to think about how are we in baking in better data collection and measurement to make sure that we are really looking at designing the right product and the right service and actually measuring s it having its intended impact? And if not making different decisions. But we don’t know the answer to Marla’s point earlier. And housing, you know, industry you have at least more disclosure and with HMDA especially. And we’re not doing enough yet on the CFPB side with the section 1071 in collecting race disaggregated data in small business lending, and we absolutely need to.
I’m stepping in as moderator because I’m, I’ve always been fascinated by what your organization and under your leadership has done. And you’ve done it in ways that I know other CDFIs are doing it. But I think just talking with you and working with you, probably a year ago when we were co authoring that article, can you just talk a little bit because, you know, I think it’s really important as an industry for us to also turn that mirror on ourselves and say, Okay, we may not be able to make drastic changes today and how we look at our credit policies or underwriting or you know, credit scores and things like that. But there’s a place where you can start. So I know that you all certainly started even longer than a year ago. Can you talk a little bit about what you saw as the pieces that needed to be fixed within the organization so that you could better serve the population or the communities?
Sure, thanks for asking. So one of the first things that we did is look at our underwriting and look at what were we you know, if we’re, if we’re a small business lender, we’re doing non bank non SBA lending. We are not a collateral based lender. So why are we asking for collateral? Why are we asking about collateral, too, we found in our research that entrepreneurs of color tend to under report personal assets, whether it is because they don’t deem their assets as worthy enough worth reporting, or because they’re suspicious of a loan go south. They We’ll be seized, probably both right we can imagine. Why are we asking that if we know it is going to disincentivize them from applying or from getting the capital? Why is it part of our scoring? So really intentionally looking through our underwriting and taking out anything that was unnecessary to get to a yes. And then re scoring our underwriting to really make sure it was matching what we bare minimum needed to get to yes. to It was also looking at, you know, were we doing a blend of micro and small business lending to make sure we were building the pipeline, working better with micro lenders in our community to really make sure we were building a better continuum of capital. How do we start to share diligence behind the scenes, which is our next couple of steps. And also, you know, really, frankly, I’m the first person of color who’s ever led PCV. And we’ve led Ron through a pretty tough transformation in the last couple of years, having tough conversations and intentionally saying to ourselves, if this this has been colorblind for so long, we’re impact investors, if we’re not collecting the outcomes of our data based on what we’re supposed to be measuring, we’re not going to know for meeting the mission or not. So we’ve gotten in the last two years from deploying about 65% of our capital to entrepreneurs of color and women to 90% as of the end of 2021, and we are collecting race disaggregated. For the first time in the last two years, we know 30% of our capital goes to black entrepreneurs, 20% is going to Latin X entrepreneurs, it’s so on so forth, and intentionally measuring that so and you know, so that way we know what we need to improve on. We did our first earned media placed multi language translation last year when we launched our Oakland restorative fund. And again, that’s out of small grant dollars, right. But knowing that the PPP didn’t reach many, though our communities because of language barriers, and hearing from our community partners that they needed Spanish, Vietnamese, Cantonese, Tagalog, etc. We intentionally use grant dollars to launch in different languages, right from the get go and build it in advisors who are ready to support and languages but that’s a blended capital model. I’m not getting money from the CDFI Fund to do that I’m not getting money from my investors to do that, which shouldn’t be the case. Right? So those are some of the things we’ve done.
I’d love to sort of dig in a little bit more to what you mentioned earlier, Bulbul and and Donna. And for you, Donna, you were talking about, you know, being concerned about when CDFIs begin to act too much like banks. And so I wonder if you can talk a little bit about how CDFIs can sort of lean in to CRA to help them hold true to mission to increase capital that’s provided to them from banks, and and to better serve the communities that they’re intended to serve?
Yeah, well, this is a perfect time, because CRA is going through a reform and, and unlike the last effort a few years ago, the bank regulatory agencies are pretty much aligned in sync working together. And I think are very interested in getting comments. And I tell people all the time, don’t send and I realize it’s easy to send them the standard template letter. But be personal about it really talk about what’s happening in your community, because I think when you look at CRA, there are things about it that won’t change, it’s going to be lending investment, and services time and time again, and how does CRA make an even deeper impact in those communities that we are supporting? And so, you know, in my own personal opinion, is that I think the regulator’s almost went too far to the other side a few years ago, because they said, Well, if you’re a small institution, we’re not going to come in as often we’re not going to examine you as much, you’re going to have a more streamlined examination process. And I think in many ways, it actually worsened the impact of CRA because I think there were a lot of institutions, not all of them, but a lot of institutions who said, Hey, I’m just doing the bare minimum, I’m getting a satisfactory CRA rating. I don’t want to get an outstanding, we’re perfectly fine where we are, we’re going to stay in this little space and just an operate and I think that there there was a missed opportunities. Because I think there are some banks that say, you know, we want to go beyond CRA. We’re just trying to figure out how to do that. And so there is an opportunity now with CRA reform to really make it even more meaningfull than it has before. I think that we have skirted around this issue of race and CRA for much too long. You redlining, you know, CRA came about because of redlining. I mean, I remember folks like Gilson, kata and others who talked about what was happening in neighborhoods in Chicago and other places. And, you know, throughout this country were folks of Black and Brown hue simply could not move into neighborhoods where others have been because of the very strict real estate laws that were in place. And so I think, see, that was an opportunity to acknowledge that, yes, when we talk about low income, we may be talking about different races. But we also is part of that, talking about whether it’s low income, moderate income or another income, we’re also talking about marginalized people who are black and brown, indigenous, as well. And CRA, I think, has to finally recognize that this is an issue that needs to be addressed. And it can be addressed through reform of this legislation that let’s say, of this act, you know, lending, investment in services, this is what it’s all about in our communities. This is what we do day in and day out, we make loans, we provide investments in grants and others to organizations that provide that cushion, that helps elevate the work that CDFIs are doing the services of financial services, and looking at ways in which you know, you use stem the flow of branch leakage of branch closings in these communities that still rely on brick and mortar. You know, not everybody is digital, not everything is digital, and Technology is wonderful. But how do you continue to serve those communities where people expect to go up to a teller and have a face to face conversation and face to face interaction. So I say all that to say that, you know, I hope that everybody in this room really is very thoughtful about the providing the comments and providing some real recommendations, some real, thoughtful recommendations about how the Community Reinvestment Act can really better serve the communities that we serve. Because when we talk about this being once in a lifetime, once in a generation, in terms of what’s happening in this country today, CRA is just as important as everything else that’s going on. As we look at the economy, as we look at, you know, the communities that have been hard hit by COVID, this becomes just as important that shouldn’t be at the top of our list.
Thank you, Marla, earlier, you meant you said what gets measured gets managed. I’d love if you could sort of talk just a little bit about how some of the metrics that CDFIs are managed by are helpful or hindrance in accomplishing what we’re trying to set out to do here.
Absolutely. And I quickly wanted to follow up on on Donna’s call to action, I believe there’s something set up in the hallway where people can actually comment
There is. Actually, you know, as folks come off of the escalator area, to your right, there’s a CRA comment station.
And it’s very interested in being part of a sign on letter that’s actually intentionally trying to center race and race disaggregated data collection, we’re working on one with the African American Alliance of CDFI CEOs, so please come see me as well, if you’re interested.
And I will say like, if there’s a point that you’re looking to drive home, that’s just kind of a broad point is that the the proposed rule, look solely at income as a lens, there is not a racial equity lens for evaluating CRA activities. And so I would just, if you just want to drive one point home, I think that’s the big one. That being said, there, there are some, you know, good things there in the sense that like any activity with CDFIs, is, you know, is worthy or eligible. And then also the focus on native and rural communities, you know, sort of calling that out is is different. So those are, I didn’t want to make it sound like it was all bad nor nor did I nor did you but that that one kind of oversight of a very big, you know, piece of the work that we do needs to be stated. But to answer your question, where is that around? Sort of what’s measured? I think there is a conflict between what’s measured and how we can be successful in centering CDFI work, you know, as a civil rights activity and so, you know, what are what is being measured what is allotted scale performance of the portfolio. You know, the level of risk taken, you know, all of these don’t exactly jive with successfully carrying out the mission of a CDFI. And so I think we really need to re examine that and think about different ways that we can measure activities. I know. You know, certainly increasingly, we’re looking at sort of who’s receiving those loans. What was the pricing on those loans? What was the term offered and extended on that, that loan, even for CDFIs, we should be, you know, looking at ourselves and seeing what we’re doing. You know, I think the thing that’s interesting is that, you know, funders always want to look and how ironic the people who fund our work, do our work for a living, so they understand it, they, you know, they, they have their own criteria of success, and therefore, those are sort of overlaid on top of CDFIs. And the challenge is, you know, we actually should not be allotted for having perfect, you know, performance in our portfolios, we should not be allotted for having zero, you know, loans par, you know, under 30, are we that, that is actually in conflict with the reason for being of CDFIs. And so, actually, Donna and I sit on the offene board, and we had a conversation, a lively conversation on our board meeting around, you know, how wonderful that Oh, offense portfolio is performing, so well. But, you know, should we be making some riskier deals, does this mean that we’re not, you know, extending loans out to sort of smaller, less established, less known, less proven CDFIs. And so, you know, I think maybe it’s a set aside, maybe whatever it might be within the CDFI, where you’re kind of doing that I know, the CDFI, that I used to run had a scoring system for each deal that came through. And I think that was really helpful in terms of balancing our portfolio. So it wasn’t to say that only the A’s would get through, we wanted to know, okay, we’ve got 25% A plus plus 25%. D, you know, and that was, that was a healthy portfolio, from our point of view, because it meant that we were covering all of our bases, I’m not saying do not make healthy performing loans, but I do think there’s a room for a balance, rather than putting all of the eggs. You know, and I think as if, and when we go into a recession, we’ll see what happened, you know, in 2007 2008, where folks who could have gotten bank loans in the past are now coming to CDFIs, which then totally skews the system, because then you have, you know, these amazingly performing CDFI portfolios that are basically made up of like the the people who are just a hair below that bank credit box. And so, you know, I just would challenge all of us to really think about how to convey or how to spin, you know, the negative as a positive, because, you know, if you make a loan that defaults, it’s still a loan that wouldn’t have been made by a bank, and it still should be, you know, celebrated.
yeah. I mean, just to add to that, to be frank, what that does to CDFIs, measuring us similarly to bank, you know, financial health solvency metrics, is forced us to act more like the banks, we were meant to disrupt. And I have seen in my community in Oakland, where that breaks trust with community partners, who look at us, like, you guys were supposed to meet us, like you failed us to if we can’t even rely on you to meet our community’s needs, then why the hell do you exist? Yeah, like, what’s the point, I’m gonna go do this myself and not be a CDFI. And that actively breaks trust in government and the role we are supposed to be playing? Right. So I am really appreciate because it’s hard to say, it’s hard to say some of this stuff, when perversely, the majority of funding to CDFIs still comes from the same banks, we were meant to disrupt. So we inherit the colonizer rates, terms, rules, restrictions into our industry, that we then have to perpetuate to communities that we were meant to solve that for. And that is why we are calling for CRA reform as well as the CDFI Fund to not only be race affirmative to meet their intended mission for why they were founded, but also to collect race disaggregated data, and to change their metrics to not just be 60% LMI capital but also be 60% bipoc focused, because we are not going to get to equity with colorblind approaches.
Well, thank you. So on that note, we’d love to invite any questions from the group if you can, there’s a stand mic here if you want to kind of take a spot and we’ll get through as many questions as we can in the remaining time.
Audience Question 1:04:55
Okay, thank you. My name is John Verona. I work for a bank. We do a lot of investments in CDFIs and lending to on providing grants through the foundation. But one thing that I’ve sort of noticed in talking to some local CDFIs, as well as some black owned banks in my area, they’re actually having trouble getting all the money out the door. And I heard you earlier. Now I agree with what you were saying that you need to do more. But Have y’all heard that? I’m just curious. And a lot of that is, you know, just all the money is funneled down over the last couple of years, and from non traditional sources, like the pipe house and other places. So I’m just
Can I just, I’ll just have a quick answer to that. I think part of that challenge is that most investors want to invest debt into CDFIs, rather than also offset operational expenses that are needed to deploy that debt. And so there’s a disconnect there. And I just, I think, you know, a huge service to CDFIs would be operational grants that would then allow them to staff up deploy that money, you know, that’s, that’s the challenge is you have a very liquid fund, and you don’t have enough staff to deploy that money. And so it’s, I don’t think it’s a reflection of the need, it’s a reflection of the capacity of the organization to to deploy the capital,
it’s also rates, if banks are lending capital to us at rates that are higher than what our communities can afford, yeah, there will not be as much demand for that, especially in the hesitancy to take on more debt right now that we have communities that have been disproportionately hit by health and debt costs as well. So we, we need that capital to blend with the rates that we are able to access to offer what the community actually needs. And we have a $10 million pipeline and PCV that I’m trying to raise capital to meet, because we’re slashing our rates for the community, but not accessing capital at rates I can’t afford to take.
Audience Question 1:06:51
And I understand that, but in this case, it’s actually been equity investments. And so I think it goes baby back to your point, having an optimal leverage structure on the liability side. And so I think there is something missing, because it sounds like, you know, I don’t know, if it’s deposits, do they need more deposits, if they’re getting a lot of capital, you know, from an equity perspective, and so I’m just not quite sure, but there’s something not quite matching up.
Hangover of of COVID funding as well, which will not perpetually be here, you know, is that a lot of organizations, you know, the irony of, of the industry that we’re in is that crises put us in our best position. So that might be it too.
You’ll you’ll you’ll probably start to see that change, the demand hasn’t changed is the ability for some of those institutions to get that debt, quickly out the door. As the other types of support programs, you’ll see that starting to decrease your that demand will increase even more. And I think you’ll again, start to see some Lebanon, Lebanon, Lebanon leveling, leveling, leveling out. Thank you. But I, you know, I certainly hear from some banks that, you know, they can’t take any more deposits right now, because they’ve been so deposit rich as a result of COVID as well. But it’s it’s a capacity issue. I think it’s you know, so you need resources to move that out the door.
Audience Question 1:08:28
My name is Erica bed, and I’m from Columbus, Ohio. And I lead an organization which is I basically addressing human trafficking, drugs, gangs, violence, gun violence in youth. Columbus is second largest community for Somali population Somali refugees. My question is, do you have any good model that has really built the capacity for refugees program? Because I hear minority I hear black, I have been an NCRC member for a long time now, I’ve been in meetings, we have been given some time to talk about a little bit about refugees. But really, I mean, I’m the only organization right now from Ohio led by an immigrant person, my background is media, I had to look up sites Efdc. And all of this last year when I became a member of NCRC. Many of my committee members leaders don’t understand what is out there. When they say refugees come from Afghanistan, Syria and all of these places, we don’t really know how to help them. So really, we need to know if there is a model that has been adapted anywhere in the country that can help us who can help our people. The refugees that come are many, many very professional people highly qualified to run a business and they can be very successful in very short time and we are really given the proper you know, and we have built the capacity. So I really want to look into NCRC’s leadership and all of you who you have done some talk about Different races, and I appreciate that. But really, we really need to have this as a separate policy. And we really need to work and I’m here to do work with you or to learn from you, whatever could be done. Thank you.
Thank you so much for that question. I really appreciate it. I think the language is pieces. One thing we’ve been talking about with immigrant and refugee populations. I know in my community in Oakland, there’s a couple of organizations that are particularly trying to change at least state policy in California and leveraging being able to make loans to folks who don’t have a social security number, who are undocumented. I think that’s one piece of one for some refugee populations. I also know so African Development Center, I think it’s called ADC in Minnesota also works with a lot of Somali refugees. And I think that’s, I’m just starting to get to know them better. But I think they’ve really carved out really interesting. Micro, I think it’s mostly micro lending, but particularly to Somali refugees, that might be an interesting conversation, at least for you to brainstorm sort of a similar model and what’s worked for them, but happy to put you in touch with them if that’s helpful.
And I would also add the mission assets. Yeah. Oh, yeah. These like, like, is like not working. Mission Asset Fund in the Bay Area – Yes, has a model that would probably be of interest. It’s immigrant focus, not specifically, right, refugee focused, but on helping to find the naturalization process, because it’s extraordinarily expensive to be in poverty in general. And, you know, worse so if you’re an immigrant trying to pay for that process to become a naturalized US citizen. So that maybe addresses part of the thing that you were talking about, but we’d be happy to put you in touch with them as well.
And there’s also an organization in New York, the name escapes me at the moment, but they have spent most of their CDFI spent most of their tenure, working with refugees and settlements. So we need to get your
Yes. The group that Donna was talking about is called a company capital, a company capital.
Yes, I think we have time maybe for one more question. Yeah.
Audience Question 1:12:25
Okay, I had a question and just an observation. I’m here with my colleague Kerwin Brown from the state of Arizona, just a quick snapshot, 7 million people only have 13 Community banks, we have 16 CDFIs, eight of them tribal, eight of them, non three of them looks suspiciously like banks, extreme lack of access to capital, more than 90% of our money is deposited in non local banks. 76% of our money is just in Chase, wells and BofA 76% of our total deposits. So it is truly we’re in a difficult situation. So my question is, I only know enough to be dangerous, and I’m trying to come up with ideas, we’ve been very active with the CRA. What do you think of the idea of tying the CRA requirements to the percent of holdings that they have by state? In other words, in a state that has so much money in these banks, and they’re advocating to not give back in our state, it’s outrageous. And so I wondered, you know, you have big brains, and you’re in this space, what do you think of that idea? And then second, my observation is just being members of NCRC. And being out here, I have to say it really was deflating to see all of these logos on these sponsor lists for well, all the people who got us here, the very evil core, and I know you have to take that money, but dammit, we don’t have to let their logos go on anything. And anyone in this room that wants to fight for a just economy, you cannot have your money in one of those banks, and fight for just economy. So I just wanted to share that as an observation.
Thank you. Thank you. Thank you. Thank you, everyone. And I know there were a few people who had questions and I’d love for us to maybe if I can invite my colleagues here we can, you know, collect in the hall. That way the next session can get kind of get ready to be able to get started with that way.