Remarks by CDFI Fund Director Donna Gambrell at the Association for Enterprise Opportunity’s 2010 National Microenterprise Conference and Training Institute
May 11, 2010
Thank you, Connie, for those kind remarks. It is an honor to be here today, and to be in the company once again of so many inspired—and inspiring—microfinance professionals.
Our theme today is Visioning a Microenterprise Ecosystem for Main Street, and I must say, I appreciate the term “Main Street” in the title. It has a uniquely American connotation, and I believe that this is an ideal time to begin a serious discussion of microfinance with an American focus.
In recent years, as the microfinance industry has grown and matured, its profile has risen, sometimes in quite dramatic ways. I remember how moved I was back in 2006 when the Norwegian Nobel Committee announced that it had decided to award the Nobel Peace Price to Muhammad Yunus and Grameen Bank for “their efforts to create economic and social development from below.” The award was clear evidence that microfinance was no longer working in the shadows to transform the lives of disadvantaged individuals and communities, but had stepped into the full light of day and was gaining the admiration of an ever-growing audience.
I am sure there is no one here today who hasn’t been profoundly inspired by the visionary work of Professor Yunus and the Grameen Bank—and of the many other outstanding microfinance organizations that are helping to take the industry to a new level.
I am also aware, however, that the success of microfinance around the world has had a curious effect on the way that many perceive microfinance in the United States. Perhaps it would be more accurate to say they don’t perceive microfinance in the United States. Rather, they see it as something that is effective in distant lands. And they largely overlook the vital role that microenterprise can and does play right here on our own Main Streets.
So I welcome a discussion with an American focus. And I am confident that, working together, we can develop new ways to build a strong future for American microfinance and start taking some new steps towards raising the recognition and value of microfinance at home.
A holistic vision of community economic development
A strong future must begin with a clear vision. And at the CDFI Fund, we have a clear vision of the role of microenterprise.
Our vision is a product of our own experience working with CDFIs. There are now 860 certified CDFIs in the United States. They range from substantial organizations with staff in cities across the nation to tiny mom-and-pop outfits that focus on the neighborhoods where they are based. And they do a wide range of work—finance businesses large and small, develop affordable housing, and provide funding for community-based social service organizations.
So there is no such thing as a typical CDFI. Each one is different. And that diversity is our greatest strength, because each CDFI has an important role to play.
You see, at the CDFI Fund we believe that strengthening our nation’s low-income communities—and, in fact, restoring our nation’s economy—requires a holistic approach. For a community or an economy to be strong and vibrant, it needs to have strong and productive businesses of every type—large businesses, small businesses, microenterprises—and businesses in a wide variety of market segments. And it needs much more. It also needs high-quality, affordable housing, effective community service organizations, and a host of other vital institutions.
In other words, there can never be one, big solution; there can only be many small solutions. And the strength of the community development finance industry is that its parts—the separate organizations of which the industry is made—are so diverse that the whole industry by its very nature provides many types of solutions. Indeed, our industry embodies the holistic approach that the task of building stronger communities and rebuilding our economy requires.
The CDFI Fund sees microfinance as an important part of that approach. Once again, that view is a product of our direct experience. In the work of CDFIs, we have seen just how powerful microfinance can be in effecting the kind of individual transformations that are critical steps in the transformation of entire communities.
We have seen, for example, how microloans helped people along the Gulf Coast start new businesses and rebuild their lives in the aftermath of Hurricane Katrina—and are now helping people whose jobs are threatened by the recent oil spill move forward with their lives.
We have seen how microloans have enabled young entrepreneurs in our nation’s Native Communities to launch businesses in their towns and villages, and to stand as role models for others in their communities.
We have seen how microloans have helped disabled Americans—who suffer disproportionately from unemployment and the effects of poverty—to create home-based businesses and discover new opportunities for financial well being.
Yes, the CDFI Fund has seen microfinance in action, and we believe in the power of microfinance.
A strong record in microfinance
When I spoke at this conference a year ago, I noted that we were at the beginning of a new day for the CDFI industry. With funding from the Recovery Act in 2009 and a significant increase in our budget for FY2010, the CDFI Fund has been able to expand its impact. And we have been given the responsibility for implementing some new initiatives that will enable us to continue building momentum in 2010 and beyond.
That momentum is evident among CDFIs involved in microfinance as well. Just consider this: In 2007, the CDFI Fund provided financial assistance awards to 36 Small Business/Microenterprise CDFIs—those are CDFIs whose primary line of work is small business and microenterprise—and the awards totaled $9.6 million. In 2009, we provided financial assistance awards to 77 Small Business/Microenterprise CDFIs, and the total reached $89.2 million. And in the current, 2010 round, we’re committed to increasing both TA-only awards and SECA awards.
Microfinance continues to be a major focus of CDFIs. Of all business loans made by CDFIs, 58.9 percent are microloans. Approximately 53.3 percent of these loans go to minority-owned or minority-controlled businesses, and 40.2 percent go to women-owned or controlled businesses. And nearly half—54.1 percent—go to low-income-owned or controlled businesses.
I can also report that the CDFI Fund has taken significant steps to support the growth of Small Business/Microenterprise CDFIs.
Through our SECA program—“SECA” stands for Small and Emerging CDFI Assistance—we make it easier for newer and smaller CDFIs to gain access to financial assistance and technical awards. The basic idea is that when these smaller CDFIs apply for awards, we place them in a separate pool so that they compete for the awards against organizations much like themselves rather than against larger, more established CDFIs. It’s our way of leveling the playing field for smaller organizations.
Another initiative we have that is critical to the development of CDFIs is our Technical Assistance (TA), which offers smaller grants to both established and emerging CDFIs for the purpose of enhancing their capacity. The average size of the award was under $90,000 in 2009, and they are used to pay for things like consulting services, technology purchases and operating expenses. And you don’t have to be certified to receive TA. When an uncertified group is awarded TA, they have two years to become certified. Out of 27 of these awards made in FY 2009, 21 went to first time applicants, so this is a great tool that you can apply for every year to build your capacity.
One beneficiary of the Financial and Technical Assistance programs has been ACCION Texas-Louisiana. In her testimony to the House Financial Services Committee last March, Janie Barrera, the president and CEO of ACCION Texas-Louisiana, spoke of the tremendous impact that the financial and technical assistance provided by the CDFI Fund organization:
Since 1996, the Fund has awarded ACCION Texas over $6.8 million total in a combination of grants and loans for loan capital, all of which was deployed, on average, within twenty-four months of receipt. We have also received $132,000 in technical assistance grants used to support technology upgrades. These funds have been essential in our expansion beyond our initial office in San Antonio to 14 offices across Texas and Louisiana.
Taking the next step
Microfinance has made tremendous progress in the United States in recent years. And we can do even more in the years to come. Now is the time to begin envisioning the next steps we must take.
And now is the time to rededicate ourselves to working together.
We all share a common goal. We all want to help microfinance organizations to become stronger and more skillful so that microfinance can become every bit as effective and as widespread in the U.S. as it is elsewhere around the globe.
Indeed, we all want to bring forth a new day for microfinance.
So, I would like to conclude my remarks today by offering a couple of thoughts of my own about how we might begin working together to achieve that goal.
My first thought is simple and very timely. On March 2, the CDFI Fund announced that we are undertaking a comprehensive review of our entire authorizing statute, the Riegle Community Development and Regulatory Improvement Act of 1994. As part of that process we have asked CDFI applicants, community development trade groups, and the general public to provide written comments that we will use to formulate future policy and legislative proposals that will increase our support to CDFIs. In addition, we have conducted a series of national listening sessions in distressed communities around the country to really draw out feedback.
These efforts are a critical part of our strategy to position the CDFI Fund to lead another 15 years of growth for CDFIs and the entire community development finance sector. As I mentioned, the CDFI Fund has a keen appreciation of the importance of microfinance and we would like to find ways to do more. So we welcome suggestions from microfinance professionals—from you—about what the CDFI Fund can do to promote the growth of microfinance in the U.S.
My second thought is actually more of a challenge for you. As I was preparing my remarks for my presentation today, I happened to learn that the number of AEO members that are certified CDFIs is…. Well, let’s just say that the number isn’t quite what it could be. And I wondered why that is.
Perhaps you have thought that the CDFI Fund doesn’t provide a lot of assistance to smaller organizations that specialize in microfinance. Or perhaps you have found the application process a bit daunting. If either is the case, I invite you to take another look. I assure you, the CDFI Fund has the resources and we want to help. As I mentioned, our SECA program is designed to make it easier for small and emerging organizations to gain access to our awards, our TA is an excellent resource for first time and established applicants alike and we now provide one-on-one assistance to applicants to make the application process easier.
So my suggestion is to become a certified CDFI. It is the only way that you will be able to take advantage of the tremendous resources that the CDFI Fund has to offer. To learn more about how to start becoming certified and about how the CDFI Fund’s financial assistance and technical assistance programs can help your organization, please contact us. We will be happy to answer your questions.
I hope that this conference, and this session in particular, mark the beginning of a new era in the development of microfinance in the United States. I look forward to hearing your thoughts about how we can launch that era. And I look forward to working with you as we explore new ways to bring new opportunities to Main Streets across the nation.