Community development finance has shown we can invest in low-income communities and get repaid. It’s time to do more.

We are called to address the inequality and injustice that continue to hold too many people back

By Antony Bugg-Levine and Ellis Carr

Community development finance can climb to the next level of impact — if we answer some tough questions

As leaders of community development financial institutions, we are inspired and humbled daily to be part of an industry that has brought together thousands of talented and motivated people and billions of dollars to make real, positive differences across the country. At the same time, we are frustrated and heart-broken at how far our nation still has to travel to expand to more people the opportunity and equity that is this country’s founding premise.

The community development finance industry emerged almost half a century ago as an outgrowth of the civil rights movement. Social justice pioneers recognized that equal opportunity required access to loan capital that mainstream banks were not providing. They set out to answer a chorus of skeptics who wondered “how can you invest in low-income communities and get your money back?”

Today our industry has proven to the skeptics that partnering to invest in low-income communities can indeed yield a double return, making both business sense and positive impact.

Collectively, community development financial institutions have invested billions of dollars in affordable housing, school facilities, health clinics, grocery stores in former “healthy food deserts,” and other mission-driven businesses. Many, like the organizations we lead, have repaid our investors every dollar we borrowed. The pioneers of community finance also secured transformative victories in the creation of the US Treasury Department’s Community Development Financial Institutions Fund and tax credit programs that supported many of our organizations to expand.

Making sure we repay our investors and increasing the scale of our operations remain crucial inputs to enable us to make a bigger, positive difference. But they cannot be all we aim for or how we measure success.

We say this not because we are dismissive of the people who built the industry we have been entrusted to help lead but out of our deep respect for what they accomplished. They sweated to establish the track record we trade on, fought for the subsidies we benefit from, and trained us. We owe it to those who developed this industry to take this work to the next level.

Our generation is called to answer a new question: How can community development finance make a measurable contribution to addressing the inequality and injustice that continue to undermine our national aspirations?

To answer this call requires us to consider four difficult questions:

• What can we do to become more diverse and inclusive? Let’s be blunt: our industry’s leadership is less racially diverse and gender balanced than we need to be. We miss out on talent and products that can better respond to community need. And focusing on not just the effects of the capital we provide but also who is empowered to provide it can unleash additional hope, when individuals in the communities we serve see this work led by their own.
• How can we measure and manage our social impact more effectively?
  When our industry started, many considered the lack of capital in low-income communities to be the problem to solve. So it made sense to focus on counting how much capital we were moving into communities previously considered unbankable. Now we must understand better how our financing can unlock sustained social progress and use this understanding to maximize our impact.
• How can we stay true to our founders’ spirit of social justice? As community development finance has become an industry, with established ways of working and institutional ground to protect, we risk losing touch with the reasons we were created in the first place. The focus on market share and effective risk management can distract us from developing innovative new ways to uplift the communities we serve. As professionalizing opens up more possibilities for institutional partnership and scale, we must cultivate the same urgent impatience for change that our clients feel daily and which motivated our industry’s founders.
• How can we build conduits that connect marginalized communities to innovations in impact investing and social enterprise? Private investments that specifically aim to drive social progress, benefit corporations with a twin focus on profit and purpose, crowd-funding platforms — none of these existed when our industry emerged. All have huge potential, yet only a tiny share of their capital and creativity is currently being deployed to drive progress in our country’s most marginalized communities. The community development finance industry, with our collective reach, credibility, and track record can change that by building conduits between these movements and those communities. For example, we can help wealth managers and corporate finance departments provide their clients with access to the high-impact product they increasingly seek, but only if we work creatively and patiently to overcome our mutual constraints.

Vocal social movements and private conversations painfully reveal the persistent and pernicious structural prejudice and inequality in our country. The community development finance industry owes it to our founders and our country to help the healing. We honor our legacy when we recognize how far we have travelled while keeping our sights on how much more we can become.

Antony Bugg-Levine is CEO of Nonprofit Finance Fund. Ellis Carr is CEO of Capital Impact Partners.