Today, the Community Development Financial Institutions Fund (CDFI Fund) announced the winner of its 2015 Innovation Challenge. The winner, Association for Enterprise Opportunity (AEO), has been awarded a one-year contract to test an innovative way of partnering Community Development Financial Institutions (CDFIs) with small businesses in low-income areas that need investment.
"I am very proud to announce the winner of our Innovation Challenge, Association for Enterprise Opportunity," said CDFI Fund Director Annie Donovan. "This is the first time the CDFI Fund has awarded a contract specifically to experiment with new tools to expand the reach of CDFIs nationwide. I am excited to see both what we will learn over this next year and how we'll be able to apply those lessons to our future support of CDFIs."
The CDFI Fund created the Innovation Challenge to seek new ways to expand or increase investments in underserved communities across the country, especially in rural areas. AEO won the Challenge with a proposal to develop a screening and assessment tool to match small businesses searching for loans from banks or online lenders with a CDFI that may be able to meet their needs when other lenders cannot.
Every business day, 8,000 requests for credit from small businesses are denied. Many small businesses that are unable to receive loans from a bank or online lender may be eligible for assistance from a CDFI. AEO's tool will create a mechanism for small business lenders to refer potential borrowers to certified CDFIs. The tool will screen and sort the referrals and match them to partnering CDFIs, who will then review and assess the borrower's profile and determine if they are a good fit for one of their loan products. The first cohort of CDFIs include: Access to Capital for Entrepreneurs (Georgia), the Intersect Fund (New Jersey), Justine PETERSEN (Missouri), and LIFT Fund (Texas).
The CDFI Fund will provide an update in 2016 on its lessons-learned from this initiative. The ultimate goal of the Innovation Challenge is to finance the development of a method, model, tool, or product that can be used by all CDFIs in the future. If the platform proves to be viable, it will be made available to any certified CDFI who wants to use it, expanding access to capital for small businesses operating in economically distressed areas.
About the CDFI Fund
The CDFI Fund invests in and builds the capacity of community-based, private, for-profit and non-profit financial institutions with a primary mission of community development in economically distressed communities. These institutions certified by the CDFI Fund as Community Development Financial Institutions or CDFIs are able to respond to gaps in local markets that traditional financial institutions are not adequately serving. CDFIs provide critically needed capital, credit and other financial products in addition to technical assistance to community residents and businesses, service providers, and developers working to meet community needs. The CDFI Fund's vision is an America in which all people have adequate access to affordable capital, credit and financial services.
About the Association for Enterprise Opportunity
Association for Enterprise Opportunity (AEO) is the national trade association for U.S. microbusiness and microfinance. AEO's Alliance represents a broad and diverse membership network that has helped millions of entrepreneurs contribute to economic growth while supporting themselves, their families and their communities. AEO is working to change the way that capital and services flow to America's underserved entrepreneurs-on Main Street and beyond-so they can start, grow and hire.
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