Community Development Financial Institutions: Bolstering Community Wealth

“Community Development Financial Institutions: Bolstering Community Wealth” is the first video in Generocity’s series exploring the impact of Community Development Financial Institutions, or CDFIs. CDFIs are mission-driven financial organizations dedicated to expanding economic opportunity in communities that have historically been overlooked by mainstream lenders.

For nonprofit and social impact leaders CDFIs can be an essential resource. These institutions not only offer access to capital and resources that can help organizations grow and thrive, but also serve as vital partners in revitalizing neighborhoods and addressing economic inequities. Throughout this series, we’ll highlight how CDFIs are making a difference and how social impact and nonprofit institutions can amplify their own impact through them.

Varsovia Fernandez, CEO of the Pennsylvania CDFI Network, discusses the role and impact of CDFIs in Pennsylvania communities.

Transcript:

“I am Varsovia Fernandez, Chief Executive Officer for the Pennsylvania Community Development Financial Institutions Network.”

Can you share a story about how CDFIs are serving communities?

“In Pittsburgh, A young lady, she’s like 21 or 22 years old, who learned the towing business from her dad, and she decided she wanted her own tow company. And, um, neighborhood, uh, Community and CDF—one of our funds helped her get the tow truck and start the business.”

What is a CDFI?

“A Community Development Financial Institution, known to many of us as CDFIs, is a 501(c)(3) nonprofit organization, generally certified by the US Treasury.”

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Who is in the CDFI network?

“The network members are small business revolving loan funds—CDFIs. There also are housing CDFIs, equity CDFIs, and there are credit unions. The Pennsylvania CDFI Network is formed by 17 member CDFIs that are certified and well capitalized to serve the communities—uh, low-income communities and their markets.”

Where do you see more challenges at in your network of CDFIs?

“It’s, believe it or not, can be more difficult in rural Pennsylvania. The density and the limiting resources. There’s really a fantastic CDFI in Greenberg, Pennsylvania, that has developed a vertical business in recreational, right? It’s very difficult for a bed and breakfast or hotel or a rock climbing facility to secure funding with a bank. Banks generally consider those high-risk businesses, especially because they’re seasonal, right? So if you’re along the Appalachia, um, trail—the Allegheny Trail—it can be difficult in the wintertime in southwestern Pennsylvania or western Pennsylvania to bring clients to do any hiking or enjoy the rivers. It’s a summer, you know, better weather. So they actually have specific products to help those businesses prosper and maintain working capital, and they have been very successful in building economic development along the Allegheny Trail.”

Can you tell me about the challenges that the network and its members are facing?

“Every nonprofit’s challenge—it is capital. Unlike, um, most nonprofit organizations that have programs to help children and to do social services, CDFIs are working with small businesses, and there are very few revenue streams that CDFIs can access. There is some uncertainty for all of us based on all the changes—executive orders and so forth. Most recently, the Small Business Administration (SBA) made changes to who can qualify for a loan. That has an impact on some CDFIs that offer certain SBA loans. There is also a clawback to the greenhouse gas reduction program that was launched last year. Seven billion of funding potentially is going to be managed by the EPA, but the national organizations that are currently planning and managing the program are probably going to be returning those funds.”

If you could give advice to people who are running CDFIs that are in states that don’t have a CDFI network, what advice would you give them? What are the benefits of having a CDFI network?

“I think that the most amazing thing is the collaboration. The CDFIs in that particular region, that state, need to come together to collaborate and to leverage resources, because those are your customers, right? Those are your members, and they are the boots on the ground, first responders, helping our small businesses and low-income communities. So they are the strength, you know, they are the strength, and when we collaborate, we can accomplish so much more, whatever we are.”

(Transcript ends)