Although this blog is focused on banking, a key banking function – lending – is also provided by non-banks in many countries. In the US community development finance institutions (CDFIs) are a major source of credit for businesses operating in disadvantaged communities. These businesses are often owned and operated by minorities or individuals facing a lack of credit from banks that see them as too risky. And CDFIs often provide not only credit but other forms of support to strengthen these businesses that help build healthy communities and address the inequities in the US economic system. A good source of information on CDFIs is the Opportunity Finance Network, a trade association for CDFIs.
The importance of CDFIs was highlighted in an article in today’s New York Times. This article provides examples of how CDFIs mobilised people to protect businesses in communities facing violence during the current unrest in the US. CDFIs provide an example of client focus that should be taken on by all banks. If the US is going to address the deep seated issues of inequality, banks need to look beyond their current models and support individuals and enterprises that can make a positive difference in communities of need – even if it requires taking on more risk and being more actively involved.
