Show me the money : promises and pitfalls of asset growth in community development credit unions and loan funds

Abstract

As private non-profit, locally based organizations, community development financial institutions (CDFIs) are increasingly important supporters of community development policies and programs designed to alleviate poverty. In the face of declining federal funds and political support for social programs, deregulation in banking, and capital market failure, CDFIs provide a range of financial services that encourage economic self-sufficiency and wealth in low-income communities. In order to expand their impact, some CDFIs have increased their assets to serve more customers and offer more products and services. This thesis seeks to answer the question: which factors and practices do large CDFIs employ to increase their total assets that other small CDFIs do not? This thesis uses two research methodologies: web surveys and case study interviews. Surveys of low-income credit unions (LICUs) and community development loan funds (CDLFs) indicate that large CDFIs grow through geographic expansion, customer and product diversification, more debt and equity funding sources, and a focus on fundraising.

(cont.) Two case studies of prominent CDFIs-Opportunities Credit Union in Burlington, VT and The Reinvestment Fund in Philadelphia, PA-reveal how leadership and creative partnerships drive change that results in organizational scale and asset growth. The thesis concludes with recommendations for CDFIs, investors, and policymakers that are interested in supporting the growth of individual CDFIs and CDFIs as an industry.