Thank you very much for that kind introduction, Courtney. I am delighted to be here for the Federal Reserve Bank of Richmond's Community Development Finance Opportunity Workshop.
I began my tenure as Director at the U.S. Treasury Department's Community Development Financial Institutions Fund - or CDFI Fund - in February of this year. One of my priorities at the CDFI Fund is to analyze which areas of the country would qualify and benefit from our programs, and, if we are not currently reaching these areas, how should and could we address the need.
The CDFI Fund would like to thank all of the Federal Reserve Banks and the Federal Reserve Board for their continued support and interest in reaching out to communities and educating them about the CDFI Fund's programs. We also appreciate Federal Reserve Board Chairman Ben S. Bernanke support of CDFIs. In February of this year, during an exchange with Congressman William Lacy Clay of Missouri at a U.S. House of Representatives Financial Services Committee hearing, Chairman Bernanke testified that "[w]e saw the actions of community development financial institutions, CDFIs, that work together with banks, private investors and with government sources to finance some very impressive projects, some new apartments, some social centers for the community, with very good results. And I think that collaboration that we saw CDFIs managing, together with some other nonprofit institutions and private-sector input, is a very promising approach to this."
Later this week, CDFI Fund staff and I also will be meeting with Sandra Braunstein, Director of the Division of Consumer and Community Affairs with the Federal Reserve Board in Washington, D.C., to discuss future partnership opportunities.
The CDFI Fund was created for the purpose of promoting economic revitalization and community development through investment in and assistance to community development financial institutions, commonly referred to as CDFIs. Our mission is to expand the capacity of these financial institutions to provide credit, capital, and financial services to underserved populations and economically distressed communities in the United States. The CDFI Fund does not directly fund individuals or projects. Through its various programs, the CDFI Fund makes investments that strengthen and sustain a network of CDFIs and Community Development Entities, or CDEs. Since its creation in 1994, the CDFI Fund has awarded $820 million to community development organizations and financial institutions and has awarded $12.1 billion in allocations under the New Markets Tax Credits Program.
Through the CDFI Fund's data collection system known as the Community Impact Investment System - or CIIS - we have quantitative evidence of how the CDFI Fund's programs are expanding the economy and directly impacting communities. I am delighted that both Federal Reserve Board Chairman Ben Bernanke and former Board Chairman Alan Greenspan have recognized our system. Specifically, CIIS is a sophisticated web-based system that allows for the collection of institution and transaction level data from CDFI awardees and from New Markets Tax Credit allocatees. The data includes the purpose of the loan or investment, project address, borrower socio-economic characteristics, loan and investment terms, repayment status, and community development impacts. This data allows the CDFI Fund to measure the impact at the census tract level and to map CDFI and CDE activity in specific geographic locations.
In Fiscal Year 2005, 186 CDFI Program awardees reported leveraging their awards with $1.4 billion in private and non-CDFI Fund dollars. These CDFIs helped create nearly 14,000 full-time jobs and to finance over 2,500 businesses in distressed communities. Our 2005 data also shows that CDFIs provided financial literacy training to 148,000 individuals and organizations, and created 14,000 checking accounts for those previously unbanked.
Generally, CDFIs are community-based specialized financial institutions that serve low-income people or work in economically distressed communities, often working in market niches that may be underserved by traditional financial institutions. CDFIs include regulated institutions such as community development banks and community development credit unions. These institutions, in particular, provide consumer financial services that are designed to bring underserved persons into the financial mainstream, building wealth on affordable terms.
CDFIs respond to gaps that exist in local markets that traditional financial institutions are not able to adequately serve. CDFIs provide a wide range of financial products and services. While the types of products offered by CDFIs may be similar to those provided by larger mainstream financial institutions, such as checking and savings accounts, mortgage financing for low-income and first-time homebuyers, small business lending, and lending for community facilities, CDFIs generally lend to and make equity investments in markets not served by these traditional financial institutions.
The size of these transactions and the risk profile of the transactions or customers make it difficult for traditional financial institutions to serve these customers. By comparison, CDFIs often offer rates and terms that are more flexible than those provided by traditional financial institutions.
CDFIs that are certified by the CDFI Fund are required to provide services that will help ensure that credit is used effectively, such as technical assistance to small businesses and credit counseling to consumers. Treasury Secretary Paulson and the CDFI Fund are committed to financial literacy, and I want to take a moment to applaud all CDFIs for their focus on this important area and encourage them to do even more.
The CDFI Fund provides Financial Assistance awards in the form of equity investments, loans, deposits, or grants, depending on applicant needs, and must be matched dollar-for-dollar by the applicant with funds of the same type from non-federal sources. There are two applicant categories for Financial Assistance awards: (1) Core, for larger CDFIs, and (2) SECA (Small and/or Emerging CDFI Assistance), which is available for applicants that are smaller and/or have a shorter operating history. These awards enable CDFIs to leverage private capital to respond to demand for affordable financial products and services in economically distressed markets and by low-income families. CDFIs respond to this demand through the provision of loans, investments, training, technical assistance, and basic financial services, such as checking or savings accounts.
To you who are not certified CDFIs, we encourage you examine if CDFI certification and our funding programs could be beneficial to you as you serve your existing markets or if you are considering expanding into new markets. CDFI certification requires a determination that the institution has a mission of serving low-income communities, is a financing entity, and commits sixty percent or more of its lending or investing resources to low-income communities, together with the provision of technical assistance or counseling services to its customers, among other requirements.
Another one of my goals as Director of the CDFI Fund is to expand the reach of existing certified CDFIs, as well as increase the total number of certified CDFIs. In our meetings with CDFIs and with various CDFI trade groups, a common request has been that the Fund should examine ways in which the certification process could be open year-round and ways to streamline the application process to make it easier to apply. The CDFI Fund is pleased to announce that starting on July 1, organizations can apply for certification as a CDFI year-round.
The CDFI Fund also provides Technical Assistance grants to build the capacity of start-up and existing CDFIs. These grants can be used for consulting services to acquire needed skills or services (such as a market analysis or lending policies and procedures). In addition, Technical Assistance grants can be used to acquire prescribed types of products or services including technology (usually efficiency enhancing technology, such as computers and loan management software), staff training, or staff support to conduct discrete, capacity-building activities (such as website development). More established CDFIs also use Technical Assistance grants to build their capacity to provide new products, serve current markets in new ways, or enhance the efficiency of their operations; examples include upgrading computer hardware and software.
Turning to West Virginia, through Fiscal Year 2006, organizations located in this state have received approximately $2.8 million in awards under the CDFI Program, including $2.4 million in Financial Assistance Awards and $333,000 in Technical Assistance or Small and/or Emerging Assistance (SECA). We have also awarded $4 million in tax credit authority under our New Markets Tax Credit Program.
I would like to mention one example of how a West Virginia CDFI is putting its awards to good use. The Natural Capital Investment Fund (NCIF) provides financing to high-potential natural resource-based businesses that will advance sustainable-economic development in West Virginia. They received a Small and/or Emerging Assistance (SECA) CDFI Assistance award of $194,965 in 2002, which enabled them to provide loan funds, equity investments, and technical assistance to business operating in the eligible investment areas of West Virginia. In 2004, they received a $300,000 Financial Assistance award which helped expand their target market to the entire state of West Virginia from their previous target market, which previously included approximately half of the state's counties. NCIF is using their Technical Assistance award of $49,000, which was awarded in 2005, to obtain consulting services for updating their strategic plan, conducting a market assessment, designing an impact measurement system and training staff in credit analysis.
This is just one example of how CDFIs are working in West Virginia, and we encourage all that qualify to apply for certification to our programs. If your preference is to not apply yourself, but to work with CDFIs or CDEs that have already received awards, we would encourage you to visit our website at www.cdfifund.gov for the following resources.
On our website you can view a list of Certified CDFIs, which includes their contact information. These lists are sorted alphabetically by name, type (such as bank, credit union, or venture capital fund), and by state. For example, you might want to research the list of CDFIs for organizations offering mortgage financing for low-income and first-time homebuyers, small business lending, and lending for community facilities. You can also view a list of CDEs under the New Markets Tax Credit Program. This list also includes their contact information and is sorted alphabetically by name and by state. You can use this list to identify CDEs that you would like to approach if you are an organization interested in obtaining a capital infusion for a project in a low-income community or if you are interested in social conscious investment and would like to invest in one of the CDEs that has received an allocation of tax credits.
If you are looking for who has received our awards in the past, or are interested in how CDFIs are intending to utilize our awards, you can search our complete database of CDFI Fund awards, including the CDFI Program awards and the NMTC allocations. Search by award type, amount, year, location and/or service area, where applicable. This tool offers comprehensive information on CDFI Fund awardees and allocatees, including organization profiles and descriptions of how CDFI Fund awards will be spent or invested.
One last resource we would like to point out to you from our website is our Qualified Equity Investment, or QEI Report. The QEI Report identifies, among other things, each entity that has received allocations of New Markets Tax Credits, the total allocation amount received by each entity, the dollar amount of allocation authority that has been issued to investors, the amount remaining to be issued to investors, and the predominant markets to be served by each entity. Users may download this Report and use either the Find Toolbar" or the "Search PDF" window to locate a word, series of words, or partial word in the PDF document bearing in mind that it is case sensitive.
Users may also find it useful to cross reference this Report with the Fund's reports on States served by Allocatees for each round of the New Markets Tax Credit Program. These reports are available in the New Markets Tax Credit Program section of the Fund's website. The States served reports allow users to quickly identify Allocatees serving particular geographic areas of interest that users could then look-up in the QEI Issuance Report that lists Allocatees in alphabetical order.
In closing, I want to again thank the Federal Reserve Bank of Richmond for having the vision and initiative for putting together this workshop today, and thank each of you for joining us here today. We look forward to working with you as we carry out the mission of the CDFI Fund.
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