Keynote Address by Director Jodie Harris at the 2022 Opportunity Finance Network Conference

Thank you Robert for that introduction.

Hello. I am Jodie Harris, Director of the CDFI Fund. It is a pleasure to finally join OFN, in person, for its 2022 Annual Conference. Thank you to OFN for the invitation to be with you here in New York City.

This is certainly a bittersweet moment. It is wonderful to be back in person with my CDFI family. However, we must now bid farewell to our dear Lisa Mensah. I know that, as she has described in her own words, she will continue to be in the "work that unites us - building strong, thriving communities, advancing economic opportunity, and fighting fearlessly for economic justice for all Americans." I hope that we are all able to continue to be in this work that Lisa has led for the last five years. Thank you, Lisa!

I thought a lot about what I wanted to say in my message to you this afternoon. I certainly want to highlight all of your, and the CDFI Fund's, accomplishments. However, I also want to speak to how we leverage this moment that we find the CDFI industry in.

I remembered the words former President (and CDFI Fund architect) Bill Clinton said at the 2019 OFN conference. "If you make enough difference at the margins, year in and year out, pretty soon you look around and the world is a much better place."

In my mind, nothing else more perfectly describes the work CDFIs do in distressed and underserved communities across the nation, especially helping communities struggling to overcome a variety of ordeals, from:

  • the withering economic effects of the COVID-19 pandemic; to
  • the cycles of economic deprivation faced in persistent poverty counties; or
  • the pervasive lack of financing needed to buy a first home, or open a small business, or cover an unseen expense in areas abandoned by mainstream financial service providers.

This year, CDFI Program Financial Assistance (FA) recipients reported originating loans or investments totaling more than $38 billion. This included providing financing to more than 101,000 businesses and the construction of nearly 54,000 affordable housing units. Over the course of the pandemic, FA recipients have collectively reported originating in excess of $76 billion in loans and investments.

While we are still combing through and analyzing the data, so far, CDFI Rapid Response Program (CDFI RRP) recipients have reported lending or investing an additional $14.8 billion. This number will no doubt increase dramatically as fresh information is received. So combined, since the start of the pandemic, CDFI RRP and FA recipients have reported lending or investing more than $90 billion. 

What is truly remarkable is that CDFIs continually outpace themselves in fostering economic opportunity. Just five years ago, in 2017, FA recipients reported $5 billion in lending and investment activity. Now, that number is over $38 billion. 

That is an increase of more than 650%. That is so much more than the margins; so much more than marginal improvement.

As CDFIs have considerably increased their activity over the past few years, the CDFI Fund has also provided substantial support. Over the past two years, we have awarded in excess of $2 billion in grant funding, $5 billion in New Markets Tax Credits, and issued more than $450 million in bond guarantees.

With still more to come.

We will soon be announcing, in the next couple of weeks, a $5 billion allocation of New Markets Tax Credits. Early next year, we will announce the fiscal year 2022 FA awards, as well as $1.75 billion in CDFI Equitable Recovery Program (CDFI ERP) awards.

In recent years, we have seen tremendous growth in the CDFI industry, and tremendous support for the CDFI industry and the CDFI Fund's programs. But because of this success, because of this moment, I believe the industry is facing an inflection point.

A heightened understanding among policy makers of the specialized role CDFis play as conduits for economic recovery, and facilitators of social and economic justice, has led to unprecedented levels of resources and funding from the government, philanthropic, private, and social impact investment sectors.

This comes with increased demand for results-oriented data to quantify CDFI activity and impact, as well as the need for accountability to compliance and reporting mandates. As the stakes get higher, so will the demands on CDFIs to document and verify their results.

CDFls are no longer a cottage industry, and probably haven't been for a while now. CDFls are market movers in our nation's financial ecosystem. That investors and governments should continue to fund CDFls based on merely mission alone is becoming less and less a sufficient justification.

I believe that with the development of the CDFI Fund's revised CDFI Certification Application we can lead in this regard. In designing the new Application, we were purposeful in setting high standards for mission, responsible products and services, accountability, conduct, and performance.

The new Certification Application may compel some CDFIs to adjust their practices. We acknowledge that some may no longer be able to meet Certification requirements. As I have said before, CDFI Certification is not for every financial institution just doing good work, it was never meant to be. It is for those working at the margins and beyond to consciously and deliberately make impact.

The CDFI Fund's strategic plan seeks to promote the growth, reach, and performance of the CDFI industry. However, it also states that "the CDFI Fund does not want growth for growth's sake if it comes at the expense of a strong community development mission."

With this in mind, the new Application strives to maintain the integrity of what it means to be a CDFI from a mission perspective, but still provide the flexibility needed for CDFIs to grow and serve the hardest to reach and most distressed communities.

In thinking about scaling CDFI resources it is important to acknowledge that the CDFI Fund provides just one piece of the greater support matrix that CDFIs need to grow.

A few years ago, the Urban Institute estimated that the annual community investment gap totaled more than $150 billion. This is a sizable gap. To put it into perspective, the largest single direct infusion of resources into CDFIs in history was the $12 billion that was provided in December of 2020 to finance ECIP, CDFI RRP and CDFI ERP. It still only represents less than 10% of this yearly shortfall. It is unrealistic to expect that this level of investment from the
federal government is sustainable.

We have and continue to benefit from broad bipartisan Congressional support. This has enabled annual CDFI Fund resources to steadily increase year after year. However, a hard ceiling to that increase does exist.

The CDFI ERP received over 690 applications. For the fiscal year 2022 funding round, nearly 40% of all Certified CDFIs submitted either a CDFI Program Financial Assistance or Technical Assistance application. For years we have been saying that the demand of the CDFI Program far outstrips the supply, and that has never been truer than it is today.

But we are dedicated to finding ways to make sure the CDFI Program can continue to provide impactful awards to CDFIs, even in this high demand environment.

As we have mentioned, the CDFI Fund will not open the next round of the CDFI and NACA Programs on their traditional schedule. The round will be delayed until fall of 2023 and will most likely be a double round that is combined with fiscal year 2024 funding resources.

While I know it is not what some may want to hear, this will provide us the necessary time to conduct public feedback on the programs' applications and evaluation processes. There are definitely some operational changes we want to explore - to make them align more closely with how CDFIs operate. We are also going to examine some tough questions:

  • what does it mean to be a small and emerging CDFI;
  • what level of awards are most meaningful;
  • how do we recognize innovation and impact and still be able to fund the core work; and more broadly,
  • if scaling the CDFI indsutry cannot be done through federal investment alone, what can we do to drive increased industry investment?

Even with the improvements that the CDFI Fund can make, however, our programs are only one part of what CDFIs need to succeed and to meet today's challenges.

I'm going to quote from another former OFN speaker and my immediate predecessor, Annie Donovan. She said, "invest in the development of your ecosystem. CDFIs striving to meet their mission know that this cannot be done alone, but has to involve partnerships, and the development of local capacity. Contribute in ways that you can to develop the ecosystem you are part of. This will help you expand your impact."

I would add that the CDFI model is built on a foundation of public-private partnerships. Fostering these types of connections, over the long-term, is the most viable way to generate the level of exponential growth needed to consistently replace and grow CDFI capital.

Recently, we have seen CDFls expand collaborations with, and investments from, the nation's largest banks and philanthropies. CDFls are making new partnerships with some of the most recognizable names in corporate America - Google, Starbucks, Block, and Netflix (just to name a few) - all of which is centered on increasing the availability of capital and credit in underserved and minority communities.

The newly formed Economic Opportunity Coalition, which has committed to investing billions in CDFls and MDls, is only the most recent reflection of the increasingly pivotal role our industry plays in supporting initiatives to advance equitable outcomes. As initiatives become more creative and innovative, and hopefully more frequent, our industry needs to keep pace. The CDFl Fund will do its part to support this movement. By providing technical assistance, capacity building, and flexible capital, we hope that we can serve as faithful facilitators in this process.

I know that over the next couple years, we will still be navigating new waters. But, I also know that we can have impact, far beyond what we think possible. We will be able to look back at this moment in time, collectively, and know that it was our launching pad.

There is so much more I would love to get into: how we need to diversify talent in the industry, how we need to leverage the power of technology, and how we should standardize our data so that it tells our story and impact in a common language understood by all parts of our financial system. But my time is limited.

So, I thank OFN for giving me this time today. Even though we all have different experiences and perspectives to share, we are all aligned around the common goal of generating economic growth and opportunity in under-represented and underserved communities. The CDFI Fund remains dedicated to that goal, and dedicated to supporting all of you in your work going forward.

Thank you again for having me, and enjoy the conference!