How trust scales impact: The role of local partners in federal programs for small businesses
This article highlights key themes and moments from the second Strive USA Summit in Washington, DC, on April 17, 2024. Strive USA Summits bring together leaders from government, philanthropy, the private sector, and others with the goal of spotlighting and scaling local and national initiatives that strengthen small business ecosystems.
“Building trust with local communities is hard. That can take decades. The key to driving inclusive growth starts with recognizing and valuing the trust local organizations have established with communities, and then building on that foundation to help them succeed and grow.”
This sentiment expressed by Patrick Davis, SVP, program strategy and development at Community Reinvestment Fund, USA (CRF), summed up the cross-cutting theme of the second Mastercard Strive USA Summit in Washington, DC, on April 17th: At a time of rapid technology innovation and unparalleled federal investments in small businesses, no one organization or even sector can enact change alone. This is particularly true with respect to the billions of dollars the federal government is investing in local communities and small businesses today.
Angela Williams, President & CEO of United Way, brought this topic to life early in the day when talking about her organization’s role in helping to deploy funding from the $27 billion Greenhouse Gas Reduction Fund, starting this summer.
“GGRF really is a once-in-a-generation opportunity,” she said. “Deep partnerships with local groups will be so important to getting the implementation right. In many communities where we work, for example, if someone shows up at your house and says, ‘I am here to install solar panels,’ they will respond by saying, ‘Get off my porch.’ So we need to leverage our relationships with those trusted partners and work with them. Having impact will take all of us.”
Discussions at the summit spanned a wide array of topics, from implementing GGRF, to strengthening Community Development Financial Institutions (CDFIs), to the role new technologies can play in reaching harder-to-serve small business segments. Janis Bowdler, Counselor for racial equity at the Department of the Treasury, also shared her perspective on why, given unprecedented government investment in small businesses, public-private partnerships are more important than ever, not less.
“At a time when we’re making historic federal investments to drive an equitable economic recovery, there can be a tendency for people to say ‘ok, the government has this covered, so I’ll sit back.’ But we knew before passing this legislation the power was going to come from stacking and focusing our resources across sectors. We are stronger together instead of letting a thousand flowers bloom all over the place.”
Ensuring clean energy investments lift all boats
The first panel focused on the implications of GGRF for small businesses and drew lessons from other federal programs.
Cathie Mahon, President & CEO of Inclusiv, a CDFI intermediary for over 500 community development credit unions (CDCUs) that will receive nearly $2 billion to support community lenders involved in projects designed to reduce carbon emissions, emphasized that deploying GGRF funding “will be an operational challenge, but not a strategic challenge.”
“We have been training CDFIs on green lending for five years, so we have a good sense of the capacity and opportunities that are out there,” she said, noting that Inclusiv’s GGRF application required them to get very granular about what categories of projects they would fund specifically. “There are going to be complex tactical challenges ahead. But the strategy is clear. Our focus is bringing the tools and opportunities for affordable decarbonization directly to low-income consumers and households. We have been investing in credit unions for 40 years to build financial health and security. With GGRF we will be able to channel that investment expertise to reducing energy cost burden while greening hundreds of communities.”
Another crucial aspect of GGRF discussed was how local organizations know how to communicate and connect by using non-technical language when explaining the benefits of clean energy.
“The message needs to come from trusted people in the community, but we also need to use language that my mother would understand,” said Donna Gambrell, President & CEO of Appalachian Community Capital. “We can’t be using words like CDFIs and community development and finance — or we’ll lose people.”
Williams stressed this point as well, adding that United Way works in a very diverse set of communities that all have different contexts but “at the end of the day, it is about having more money in your pocket that families can use for other important priorities.”
Building and strengthening inclusive ecosystems
While GGRF remained a focal point throughout the day, other panels delved into broader topics such as the role of public-private partnerships and technology in supporting underserved small businesses.
Panelists also spoke about how local organizations, which are often the closest to the most vulnerable communities, are themselves very diverse. And since they vary greatly from one another, there is no one-size-fits-all solution for how best to support them.
Davis, whose organization develops technology for both large and small CDFIs, spoke about how smaller organizations are sometimes overwhelmed by technology decisions but the trust they have built with communities, a deep understanding of their model, and new innovations can make it easier for them.
“The technology that’s out there now, especially what has been developed in the last five years, has made it a lot easier to adopt and deploy if you can provide the right on-ramps. But you need to deeply understand the problem and how different people in the organizations will use and benefit from that technology.
One piece of the puzzle will be getting more private sector investors to invest in CDFIs. Paige Chapel, President & CEO of Aeris, an information service that provides ratings, analysis, and insights on private community development loan funds, commented that people have underestimated the ability of local organizations such as CDFIs to deliver for decades, but the pandemic proved (again) they can help effectively deploy billions in federal funding.
“CDFIs have long said they need more capital to match demand in their communities, but many investors have responded by saying there was little evidence that CDFIs could deploy that capital at scale,” she said. “During the pandemic, through the Paycheck Protection Program, CDFIs demonstrated that they could step up and quickly move billions of dollars of capital to communities and businesses most in need and more difficult to reach.”
Several panelists also spoke about their work driving additional capital to CDFIs so they could do more lending to small businesses.
“People buy loans because they have value,” said Jaime Aldama, President of Momentus Securities, an organization which is helping to build a secondary market for CDFI-originated loans. “Government and philanthropy can help strengthen that value by, for example, strengthening the institutions who issue those loans.”
“We have seen that new investors will invest in CDFIs if you can provide them with the right data,” said Catherine Berman, Co-Founder and CEO of CNote, a technology platform that connects investors with community financial institutions across the U.S. “This was our hypothesis when we started CNote and we have since proven that this model works. In 2023 alone, we helped unlock hundreds of millions in lending for disadvantaged communities.”
The calls to action
The Strive USA Summit served as a rallying point for leaders across the public, private, and philanthropic sectors who have the common goal of helping more small businesses succeed long term. The resounding call to action across all panels was the same: increase communication, coordination, and collaboration among both likely and unlikely partners — whether on developing potential projects, impact reporting standards, or sharing learnings on how to best collaborate on federal programs such as GGRF.
“We cannot afford to overlook this pivotal moment in history,” said Sandy Fernandez, VP of social impact at the Mastercard Center for Inclusive Growth. “While we’re still in the early days of making sure these government investments drive real impact on the ground, the train is moving swiftly, underscoring the need to forge even stronger connections built on trust to ensure every small business reaps the benefits.”
