OAKLAND, Calif.–A new report has found many loan funds that are community development financial institutions (CDFIs) have “urgent, ongoing capital needs.”
The analysis, released by CNote, a women-led fintech firm working to close the wealth gap for women and people of color, found loan funds classified as CDFIs have an urgent need for capital over the next six to 12 months, particularly to meet the needs of low- to moderate-income, Black, Latinx and women borrowers.
The analysis was released prior to the announcement by Treasury that it will be distributing $3 billion in grants to CDFIs this year.
CNote said its CDFI Loan Fund Capital Needs Survey Report is the first in a planned semiannual series designed to map CDFI capital needs and point corporate, foundation and other accredited investors toward high-impact investment opportunities.
“This survey shows that CDFI loan funds are open to new investors, and corporations and foundations increasingly are stepping up to work with them,” says Catherine Berman, CEO and co-founder of CNote. “We also see that the communities most in need of capital continue to be underfunded. Institutions that want to fully deliver on their diversity, equity and inclusion commitments have a real opportunity here.”
Key Findings
According to CNote, key findings in the analysis include:
- Capital Demand: “Over 75% of survey respondents expressed an “urgent” or “somewhat urgent” need for capital over the next six to 12 months, and 65% said their capital needs had increased during the past 12 months. Collectively, the 52 CDFIs surveyed (about 10% of the total CDFI loan fund market) said they could deploy at least $182 million within the next year.”
- Unmet Needs: “CDFIs surveyed said their most underfunded lending areas are affordable housing (55%) and small business (39%).”
- Underserved Borrowers: “Asked which demographics are most underserved due to lack of capital, CDFIs most frequently cited low- to moderate-income borrowers (73%), followed by Black (59%), Latinx (45%) and women (41%) borrowers.”
- Rising Capital Partners: “Asked which investor segments are showing increased interest, 55% of CDFI respondents cited foundations, over 37% cited corporations and 33% cited high-net-worth individuals. Those that work with capital intermediaries like CNote said the primary benefits are access to new investors (more than 69%), followed by industry knowledge (57%), infrastructure (53%) and due diligence simplicity (49%).”