The upward looking.
The immigrant guilds of Manhattan's Lower East Side in the late 1800s aren't usually recognized as financiers: but in a way, they were. Regular banks wouldn't do business with immigrants, so the guilds became alternate sources of credit.
These days, Community Development Financial Institutions (CDFIs) do basically the same thing--they step in where most other banks leave off. So maybe it's fitting that this summer, on the eve of Independence Day, New York authorized a unique state-level fund supporting the gamut of CDFIs to revitalize struggling communities.
Although there are roughly six different types of CDFIs, their common mission is community development. Some think big. They raise capital to finance large-scale redevelopment projects, such as affordable housing. Others think small, providing fledgling businesses with low-cost loans and free assistance, such as help with a business plan or marketing advice.
Community Development Credit Unions, perhaps the most well-known CDFIs, offer financial services like credit cards, savings accounts, and car and education loans to people who lack access to mainstream banks.
There are currently more than 700 CDFIs nationwide. According to the CDFI Data Project, 517 CDFIs studied in FY 2004 held more than $18.3 billion in assets and had backed almost 7,000 businesses that in turn supported more than 28,000 jobs. CDFIs also had built or renovated nearly 42,000 units of affordable housing and helped 14,500 people open their first bank account.
While many CDFIs receive partial funding for their work from the U.S. Treasury Department's CDFI Fund (which also certifies institutions as CDFIs), they are by definition privately owned and usually locally controlled. Some are for-profit, some are not, and most raise capital through a mix of private investments, institutional grants and member deposits. The CDFI Fund calculates that every dollar it invests in a CDFI leverages 21 times that m the private sector.
Since the CDFI Fund's inception in 1994, it has awarded New York's 100 plus CDFIs about S 124 million. The creation of a state-level fund is expected to boost that number, because local CDFIs will be able to use state money to attract the federal dollars, which usually require a one-to-one match. Although no appropriation has yet been made for the fund, hopes in New York are high.
"There is no other program like this anywhere else in the United States," says Rafael Morales, the New York CDFI Coalition coordinator. "If we succeed, New York State will provide the nation with a model asset-building strategy that supports both big industry and individual entrepreneurship--the impact could be tremendous."
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|Title Annotation:||TRENDS AND TRANSITIONS; community development financial institutions|
|Date:||Dec 1, 2007|
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