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Return to CDFI Fund mainpageU.S. Department of the Treasury websiteCommunity Development Institutions Fund
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Community Development Financial Institutions Fund
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CDFIs in Rural and Underserved Markets
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  1. Community Development Financial Institutions and the Segmentation of Underserved Markets by Spencer Cowan, Danielle Spurlock, Janneke Ratcliffe and Haiou Zhu, UNC.

    This report seeks to determine whether some CDFIs are more effective at serving racial and/or ethnic minorities, and if so, to examine the attributes and practices that make these CDFIs more effective. The research design included both a quantitative analysis of CIIS data to examine organizational attributes, as well as a qualitative case study analysis through key informant interviews. While limitations in the data make conclusions of limited generalizability, the quantitative findings show some interesting patterns. Minority-owned CDFIs in the limited sample of CDFIs that provided transaction-level information on race are providing higher levels of service to historically underserved minorities, measured by the percent of transactions. The key informant interviews with minority-owned CDFIs offer some tentative explanations for the percent of transactions. Those interviewed said that they did not specifically target minority borrowers, but pointed out that their CDFIs were located in target-rich environments. Further analysis of CIIS data that focused on the location of the borrowers rather than their race or ethnicity confirmed that minority-owned CDFIs are more likely to lend in census tracts with high minority populations. However, they are not more likely to lend in areas that meet the CDFI definition of a lower-income census tract. The key informants also suggested that familiarity with the cultural norms of potential customers is important.

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  2. Community Development Venture Capital in Rural Communities by Julia Sass Rubin.

    This report examines the universe of Community Development Venture Capital providers that invest in rural geographies, to understand the various organizational models that they utilize and determine which ones appear best suited for which environmental factors. The twenty six CDVC providers that invest in rural geographies have used one of three approaches: 1) primarily equity investing via a for-profit limited life partnership or limited liability corporation structure, capitalized primarily by external equity investors; 2) primarily near-equity investing, (e.g., debt with warrants), via a non-profit community development loan fund structure; and 3) equity and near-equity investing via a range of legal structures. Funds formed after 2001 have used only the first two approaches. There are benefits and drawbacks to both of these. Which approach a particular organization chooses is dependent on the kinds of investments that it believes to be most appropriate for its target market and its capacity to raise capital for such investments. The paper concludes with policy recommendations designed to increase the supply of developmental venture capital in rural areas.

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  3. Investing in Native Community Change: Understanding the Role of Community Development Financial Institutions by Sarah Dewees, First Nations, and Stewart Sarkozy-Banoczy, Oweesta.

    This report develops presents a framework for understanding the unique challenges that face Native CDFIs in their work. The research provides quantitative and qualitative information about the characteristics of active and emerging CDFIs serving Native communities. The five case studies provide information about how well Native CDFIs are meeting the needs of their markets and explore the relationship of CDFIs to job creation and entrepreneurship development in Native communities. The case studies also describe the role of Native CDFIs in providing financial education, repairing credit, reducing predatory lending. The authors’ analysis of the a dataset on Native financial institutions compiled by Oweesta suggests that the universe of Native CDFIs consists of mostly unregulated loan funds, and, it appears that Native CDFIs have pursued a range of legal structures for their financial institutions. The limited dataset suggests that Native CDFIs may be younger, on average, than non-Native CDFIs. The case study research suggests that Native CDFIs are effectively meeting the needs of their market and are offering innovative financing and development services, although more research is needed to confirm this.

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