A group of CDFI and other innovative finance professionals who attended the recent Neighborhood Economics conference in Chicago have been hard at work.
They’re building a playbook to address a thorny community investment problem: CDFI capital often doesn’t reach entrepreneurs from marginalized communities, who are more likely to lack collateral or the friends-and-family funding to be eligible for the loans that institutions set aside for them.
Some CDFIs are using guarantee pools to unlock those frozen dollars, and the new working group has drafted a playbook that would make that practice easily replicable around the country. The money for the guarantees typically comes from local community foundations or other regional and sometimes national foundations. Faith-based funders sometimes contribute as well.
The playbook will address guarantee pool strategies deployed at three different scales: hyper-local, state or regional, and multi-organizational. Each section will include
- sample goals that can be achieved using guarantee pools,
- brief case studies of real-work examples,
- lists of stakeholders and descriptions of the benefits to teach, and
- proven successful tactics that address potential barriers to implementation.
The team is led by Sara Santa Cruz of Bridging Virginia, a Richmond-based CDFI formed in 2020. Neighborhood Economics will be working with the group on outreach to the catalytic foundation investors who regularly attend our conferences.