Keynote Address by Director Annie Donovan at the 2017 Opportunity Finance Network Conference

Thank you for that kind introduction, Lisa. Thank you to the OFN board for inviting me to speak today.

It's so great that you are here in Washington, D.C. - the home of the CDFI Fund. We are excited to have you in our backyard, and to engage with as many of you as possible.

It was great to meet so many of you yesterday at the CDFI Fund breakfast. It is always helpful to put a face to a name, and this is a unique opportunity to make that happen -- especially for the CDFI Fund staff, who, I can tell you, work diligently day in and day out to serve you.

We also held "office hours" yesterday afternoon and this morning, including informal pop-up sessions on AMIS, CIIS and the American Community Survey.

For those of you who engaged with us in one or more of those forums, THANK YOU! I hope it was time well spent. It certainly was for us.

Today, I want to talk about a topic I never get tired of discussing: IMPACT. A favorite part of my job is getting out of my office and into the field to see your work firsthand.

It's nothing short of inspiring.

I want to share a few snapshots from my travels.

First of all, to all of you who have hosted me over the past two plus years, THANK YOU! And a special shout out to CDFIs here in Washington and in Baltimore, whom we have called upon numerous times to host tours for Federal officials. Thank you for all of your support.

This is Big Dad's Grub and Pub in Timber Lake, South Dakota. It is located on the Cheyenne River Sioux Reservation. This small business was supported by Four Bands Community Fund, a Native CDFI headquartered in Eagle Butte.

Their tag line is: small town big deal.

The same could be said about the work of CDFIs ...working to support big deals across rural America.

CDFIs have provided $6.1 billion in loans and investments in small towns and rural communities.

CDFIs have also provided over $757 million in investments in Native areas.

This is Rito Loco in Washington, DC - some of you may have eaten there yesterday. This small business started as a food truck, and grew into a brick and mortar restaurant. The Latino Economic Development Center financed a recent expansion of their restaurant space. Rito Loco has grown through entrepreneurial zeal and LEDC was a crucial partner in their growth. LEDC has also helped finance more than 100 small businesses and startups throughout the greater Washington, DC and Baltimore regions.

This is F & R Pallets in Camden, New Jersey It provides wood pallets to a variety of businesses in the region. Cooperative Business Assistance Corporation financed its expansion and, as a result, the company has grown to 45 employees. F & R Pallets partners with a local reemployment program to place returning citizens in jobs at the company.

This is My Cup of Tea in Memphis, Tennessee It is an initiative of the House at Orange Mound - which serves as a community resource for women in South Memphis. My Cup of Tea is a small business that packages and distributes tea and provides area women with job skill training, mentoring, and valuable experience running a small business. Hope Credit Union supports this effort by providing financial education and on-site account openings to program participants.

This is Mr. Shamwell, my uber driver who picked me up on the west side of Atlanta back in April. I was there to celebrate the opening of Westside On the Rise Financial Center. When I told Mr. Shamwell about On the Rise, he wanted more details. So I put him directly in touch with the center and on the following Monday morning when the center opened, he was the first person at the door. He has been a stellar customer - raising his credit score by something like 150 points in four months!

I do love seeing how what we do in Washington translates on the ground, but today, since we are here in Washington, D.C., I thought I would give YOU a view from my world as well, which I hope will also inspire you.

You see... from my perch... I get to see the big picture. I get to see the impact you are making collectively. And while your individual stories are so compelling, so is the story of our industry as a whole.

Without a doubt, the CDFI industry has come a long way from humble beginnings more than two decades ago. At the end of 1997, there were 196 certified CDFIs with total assets of $4 billion. Today, there are 1,131 certified CDFIs in all 50 states, DC, and the territories with total assets of $136 billion. Impressive growth, to say the least.

However, while the number of CDFIs has grown by more than 470 percent, and total assets have risen about 390 percent, the CDFI industry still represents a very small part of the larger financial sector.

In comparison, the combined total assets of FDIC-insured banks and NCUA-insured credit unions totals more than $18.3 TRILLION.

CDFI assets represent less than one percent of the overall banking sector.

Despite a relatively small asset size, I think it's fair to say that CDFIs punch above their weight.

In fact, I would assert that CDFIs have claimed a legitimate and recognizable space in the financial services sector. CDFIs are an important vehicle for driving lending and investment in underserved communities and play an integral role with banks and other financing partners to spur their investment in low-income communities. Let me give you a few pieces of evidence of the importance of CDFIs.

A study released just weeks ago by the Urban Institute examined the effects of "mission investments" in the city of Detroit. Urban defined the term "mission capital" to mean capital that seeks a double bottom line of financial and social return.

The study found that while mainstream financing activity largely diminished in Detroit in the depths of the recession, CDFIs and other mission capital providers stepped forward in a counter-cyclical manner.

Astonishingly, from 2013 through 2015, 42 percent of investment in commercial, industrial, multifamily, and other real estate in Detroit was sourced from mission capital. From 2008 through 2015, CDFIs accounted for 60 percent of direct mission lending and 14 percent of all lending in Detroit.

That's tangible impact. That's punching above your weight.

If you look around the field there are numerous, transformative initiatives in which banks are partnering with networks of CDFIs to drive investment into underserved areas. For example:

  • We just heard from Esta Stecher about Goldman Sachs 10,000 Small Businesses initiative. They partner with CDFIs to provide access to capital and support services for locally-based small businesses, creating jobs and economic opportunity.

  • Bank of America collaborated with USDA's Communities Facilities Relending Program to provide more than $400 million in financing for CDFIs in distressed rural and Native American communities. The investment is part of the Uplift America program which is working to support infrastructure and facility development in rural communities, especially those characterized by persistent poverty.

  • JP Morgan Chase's PRO Neighborhoods is a $125 million initiative to bolster CDFIs working on solutions to challenges facing distressed neighborhoods in U.S. cities.

  • Project CUE, developed by AEO through an Innovation Challenge award from the CDFI Fund, provides an online platform to match small businesses declined for loans by banks or online lenders with a CDFI that may be able to meet their needs when other lenders cannot. Referral partners include Woodforest National Bank and OnDeck, and AEO received a $1.9 million award from JP Morgan Chase to advance the project.

Banks and other financial service firms are just one example of the types of partnerships that CDFIs have forged to amplify their impact. Foundations, corporations, and state and local governments are also discovering the benefit of collaborating with CDFIs to enhance their own impact.

These are all examples of how CDFIs have become woven into the fabric of the financial sector.

Let's look at how CDFIs are addressing some of the thornier problems in our economy. Since 1996, CDFI Fund program awardees have provided more than $29 billion in loans and investments across America. Here's a map that shows where those loans and investments are.

Awards from CDFI Fund programs have contributed to many communities across the nation, but let's examine awardee activity in some very hard-hit areas.

  • Former Manufacturing Communities: There are more than 400 counties affected by manufacturing job losses, and these counties have simultaneously experienced economic decline and population loss. CDFIs have lent and invested $2.7 billion through more than 49,000 individual transactions. In addition, over $5 billion in NMTC have been invested in these counties.

  • Coal-Impacted Communities: CDFIs are working in areas experiencing economic challenges due to contractions in the coal industry. They are supporting economic diversification and community revitalization initiatives. 60 CDFIs across 14 different states have lent or invested more than $100 million, and 24 C.D.Es have deployed nearly $230 million in NMTC investments in nine different states.

  • Areas of Persistent Poverty: While 6 _ percent of the U.S. population lives in areas of persistent poverty, I can tell you that nearly one-fifth of CDFI investments and transactions, and 18 percent of CDFI headquarters, are located in these counties. CDFIs have invested more than $640 million in persistent poverty counties.

  • CDFIs also support entrepreneurship. Financing entrepreneurs and small business owners remains a challenge in America, but CDFIs are making inroads.

    Last year, CDFI Program awardees and New Markets Tax Credit allocatees provided financing to more than 11,000 businesses nationwide. We also have seen gains with investments in women-owned businesses. Since the inception of the CDFI Program, CDFIs have made over 35,000 loans totaling almost $726 million to women-owned businesses; and since 2001 NMTC allocatees have invested nearly $1 billion in women-owned businesses.

These accomplishments are impressive...But the scope and scale of need is still great.

A report from the Urban Institute released just days ago found that one quarter of all distressed communities have little or no CDFI investments at all. We are making gains, but there are still gaps.

This need is what should drive the CDFI sector to grow.

You may have noticed that we made significant changes to our CDFI Program applications this year. The changes were geared toward increasing CDFI impact by supporting their growth, reach, and performance.

And this month, we announced the awards for the FY 2017 round of the CDFI and NACA Programs. We awarded over $208 million to 303 organizations, including 50 new Financial Assistance awardees.

This is the single largest pool of awardees ever in the CDFI Program.

We are also keeping IMPACT in mind as we review CDFI certification. Our current process has remained largely unchanged for the past 20 years, but of course the country, the industry, and technology have all evolved since then, and we need to take those advancements into account when it comes to certification criteria.

We must ensure that the certification criteria is mindful of the fact that the CDFI industry has grown and adapted to the variety of community development lending and investment challenges that now exist. Ensuring CDFIs continue to focus on mission-driven investing in our nation's distressed communities remains a top priority, but we also need to ensure that CDFIs have the flexibility to adapt and to find the best solutions for their communities.

We expect to be able to release more information about the certification process later this calendar year.

And just a quick note on a program that I haven't mentioned yet:

We announced $245 million for two new commitments in the CDFI Bond Guarantee Program, yesterday. Congratulations to OFN and to Community Reinvestment Fund, who were the qualified issuers for the two bonds.

The OFN bond included 8 of the 9 CDFIs participating in the 2017 cohort. In total, since the creation of BGP, OFN has issued 4 bonds that include 16 distinct CDFIs. Congratulations.

When I look at the big picture, as we have just done, I'm inspired.

CDFIs are providing affordable financial services and loan products for Americans with low incomes and low credit scores, to help them on the path to self-sufficiency.

CDFIs are reaching into far corners, to the places that are hardest to serve. CDFI are breaking down barriers, doing the things that others so often say are not possible.

And it's hard work.

From my vantage point, I see CDFIs every day pursuing their vision of prosperity for all, not because the work is easy, but precisely because it's hard.

That's the ethos I see when I'm out in the field.

And I also see CDFIs bridging divides and working in partnership across sectors, and with other CDFIs, to accomplish the mission.

I urge you to continue to work across sectors, to build those bridges that help your communities connect to opportunity.

Whether you are big or small; urban or rural; whether you focus on creating jobs; advancing workforce development; building affordable housing; increasing access to quality health care, education and child care; banking the unbanked or underbanked; helping people build financial capacity and credit worthiness, connecting people with disabilities with opportunities to build greater economic independence; or some combination of all the above.


Thank you for your hard work. Thank you for having me.