Local government agencies, financial institutions, philanthropic organizations, nonprofit groups and other potential investors planned to learn about some community development finance best practices at an event financial regulators scheduled for Fort Wayne.
“Community Development Finance in Smaller Markets” was scheduled for Sept. 25 at The Summit on Rudisill Boulevard by the Federal Reserve Bank of Chicago, Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Community Foundation of Greater Fort Wayne.
Part of the event’s purpose is to explain potential benefits of the Community Development Financial Institutions Friendly City Model introduced by Mark Pinsky of Five/Four Advisors.
The model “seeks to implement strategies for the unique challenges of smaller to medium metros, to increase flexible and affordable financing to businesses, housing developers, nonprofits, and others,” said Garvester Kelley, community development director for the Federal Reserve Bank of Chicago.
“Mr. Pinsky and his panel will describe the approach and process undertaken by Bloomington and underway in South Bend to become a ‘CDFI Friendly City,’” he said.
“Determining whether to adapt the CDFI Friendly City Model and its expected benefits will be the result of key Fort Wayne/Allen County stakeholder engagement and consensus building.”
Fort Wayne has three certified CDFIs, Brightpoint Development Fund, which provides consumer and small business loans, and two credit unions: Fort Financial and Union Baptist Church Federal Credit Union.
“Community Development Financial Institutions are mission-driven organizations that provide needed capital to underserved or disadvantaged communities that mainstream lenders typically cannot serve directly,” Kelley said.
“CDFIs function as intermediaries to facilitate lending. A small proportion are banks and credit unions, but the vast majority are loan funds, microloan funds, or venture capital providers, which, while they are generally astute lenders very familiar with their markets, do not have the same capital strictures as regulated financial institutions.”
The Treasury has certified more than 1,100 CDFIs across the country, which work to revitalize neighborhoods and foster economic opportunity.
According to a recent Urban Institute study, CDFIs lent more than $34 billion from 2011 to 2015, with 64% of that lending activity in census tracts with at least one low- or moderate-income indicator.
The Federal Reserve Bank of Chicago’s Community Development and Policy Studies division works with community leaders to bring development and reinvestment opportunities to underserved communities.
This involves an ongoing effort to raise the profiles of CDFIs by documenting their work through published, qualitative research, and connecting them with potential investors, Kelley said.
“’Community Development Finance in Smaller Markets’ seeks to inform local stakeholders about the nature and challenges of community development finance in smaller markets, including rural communities, with an eye towards identifying successful models that best meet community and economic development needs,” he said.
“Panelists will discuss the ecosystem of investors, intermediaries, and service providers necessary to ensure capital is deployed and absorbed by communities,” he said.
“We hope to help increase the level of community development investment in greater Fort Wayne/Allen County region by, in some part, creating connections between disparate parties.”
The Treasury’s CDFI Fund has provided $2.47 billion in financial and technical assistance awards including $10.2 million that has gone to CDFIs in Indiana, which has 13 of them.
“Per the Urban Institute’s Community Development Financial Flows analysis, among counties with 300,000 or more residents, Allen County ranks in the 52nd percentile overall across housing, small business, impact finance and other community development investment,” Kelley said.
“Fort Wayne/Allen County has the potential to increase community development investment with access to the appropriate types of capital through CDFIs,” he said.
Individuals attending the event will improve their understanding of the region’s community development needs and hear how some of the more successful local, regional and national CDFIs work with community groups and financial institutions to improve the socioeconomic prospects of low- and moderate-income people.
“Conference panelists will provide tangible examples of how banks, as investors or lenders, and using Community Reinvestment Act parameters as a guide, can partner with CDFIs to bring about new community/economic development projects, or contribute to ongoing ones,” Kelley said.
In addition to providing concrete examples of successful development involving CDFIs in other parts of the state, the event will facilitate stakeholder and intermediary introductions, he said.
“The framework for ‘Community Development Finance in Smaller Markets’ is to provide a forum for communities/regions to identify and prioritize community/economic development needs, and inform strategies to meet them,” Kelley said.
“For example, some communities may decide that forming a new CDFI is best, while other communities may seek opportunities to collaborate with regional or national CDFIs that provide financing,” he said.
Finding access to favorably priced capital at sufficient scale for community development impact is a challenge common for most CDFIs, Kelley said.
“One of the goals for the event is to illustrate how banks, foundations and other social impact investors can invest in CDFIs to drive transformative community and economic development interventions that respond to local needs and conditions,” he said.
“We realize that, although some conditions in larger and smaller metros may overlap, what works in larger metro areas may not be suitable for smaller markets. Our intent is to identify the necessary elements for a thriving and impactful community development ecosystem in Fort Wayne.”
Kelley hopes everyone attending the event comes away from it realizing there are unmet opportunities for community development investment in northeast Indiana and better leveraging of CDFI capabilities may help address these opportunities, he said
“CDFIs may offer greater flexibility than regulated financial institutions, and work better in communities where conventional financing mechanisms may not meet the complex development and financing needs of a community or region,” Kelley said.
CDFIs work best in ecosystems with local civic, human, and financial community development capital; a network of investors; at least baseline knowledge of a CDFI’s purpose and how it works, and in locations with the capacity to apply for, deploy and manage CDFI funds, he said.
“The Federal Reserve Bank of Chicago will continue to host meetings across the Midwest to inform stakeholders about the benefits and challenges of community development finance in smaller markets, including rural communities,” Kelley said.
“A key component of these meetings will be identifying successful and potentially replicable models, and discussing the necessary characteristics of networks of investors, intermediaries, and service providers to ensure capital is absorbed by communities.”