For faith asset owners in the US, community development financial institutions are a developed and utilized method for putting impact investment allocations to work. Why? It’s an organized market, in its modern form existing since the early 1990’s and supported by the US Treasury; there are nearly 1,400 CDFI institutions around the country, and US CDFI Funds are available for investment or deposit (with aggregators like Opportunity Finance Network providing searchable databases), and they often have return, risk, liquidity and expense terms – though not always! – that some faith-based asset owners seek. Importantly, and by design and mandate from the US Treasury …
They are a collaborative force that brings together diverse private and public sector investors to create economic opportunity in low-income communities. CDFIs continue to grow in size and impact, and to support community transformation.
The UK has a CDFI sector modeled on the US approach, however, as we noted in a 2022 post…
“The UK CDFI industry, more recently developed, and while modeled on the US, it’s different and more difficult, currently, for non-banks to access as an investment.”
In late 2022 FaithInvest joined the new UK CDFI Advisory Panel, led by Impact Investing Institute, with Responsible Finance, to devise and bring reforms and developments to the UK CDFI market 'to increase investment by mainstream financial institutions in the CDFI sector'.
The first fruits of this effort were just announced, with a new Community Investment Enterprise Fund launched with Lloyds Bank as lead investor, becoming the 'first [major UK] bank to support the not-for-profit lenders that offer credit to customers who cannot access it elsewhere'. For this sector in the UK, the initial funding amount is not small at £62 million, adding to a total of only around £250 million in currently outstanding UK CDFI loans, with the US market showing the potential of this important step – a CDFI sector of over US$150 billion. Further legal reform and product development is required in the UK for the type of investor access seen in the US, but progress is there, and the Advisory Panel continues its work.
More information on the CEIF can be found on the recently renamed Better Society Capital’s website here.