New Report Examines State of the CDFI Industry

Recently, the CDFI Fund released the results of an in-depth analysis of the CDFI industry from 2005 – 2010.  The study, prepared by the Carsey Institute, analyzed financial and loan data from a large sample of CDFIs, as well as interviews with industry professionals and stakeholders, to examine issues of capitalization, liquidity, and portfolio and risk management.

Overall, the study confirmed what FUND Consulting has experienced to be true about our CDFI clients and the industry more generally:

“…CDFIs have succeeded in lending to and investing in indi­viduals and communities not served by conventional financial institutions, while maintaining loan performance standards generally equivalent to those of the conventional financial sector.”

Of note was the study’s major finding that CDFIs “stepped into the breach” during the recession in an effort to fill in the gaps created by the credit crunch.  This finding certainly mirrored the experience of the CDFIs that we work with, many of whom significantly ramped up lending during the recession in order to meet the increase demand from borrowers who were being turned down by traditional lenders.  A byproduct of this trend, however, is that demand for the products and services offered by CDFIs continues to grow as the economic recovery has been slow and more borrowers recognize the benefits of working with a CDFI to obtain a loan.

Additionally, we were interested in the study’s discussion of scale in the CDFI industry.  We agree that there is a need to fill “information gaps [that] stifle innovation and cause replication of ineffective approaches to capital deployment” through improved collaboration and knowledge sharing among CDFIs.

The study provides a great deal of “food for thought” on the key issues facing CDFIs as the industry works toward expanding its reach and impacts and is worth the read.

How does the study compare to your knowledge of the CDFI industry?  We’d love to hear your thoughts.