California CDFIs Join Forces to Build Resilient Communities and a Stronger Economy

The following is a guest post from California Coalition for Community Investment, a statewide coalition dedicated to providing resources to and advocacy for Community Development Financial Institutions (CDFIs) across California. CDC Small Business Finance is proud to be an active advocate for CCCI and welcome them as a guest blog contributor. 

As mission-driven lenders focused on delivering resources to communities in need, California’s nearly 100 Community Development Financial Institutions (CDFIs) have long played a critical role in helping California achieve its goals for responding to the needs of distressed communities. 

Now, as the state grapples with disaster response a coalition of more than 30 CDFIs have come together as the California Coalition for Community Investment to bring resources and justice to the hardest hit communities in California. The California Coalition for Community Investment (CCCI) advocates for greater access to capital, improved public policy and expansion of opportunities for California communities.

Take a moment to learn about CDFIs and the role that they play:

What is the California Coalition for Community Investment (CCCI)?

The California Coalition for Community Investment (CCCI) is a statewide coalition that brings together diverse leaders that advocate for CDFIs across the state working to ensure California communities are resilient against crisis, are healthy and housed, and have access to economic opportunities. 

CCCI started in the fall of 2019 after a group of CDFIs convened to discuss the opportunities and resources that CDFIs utilize and need to support their California communities. The initial effort grew out of a mutual goal to reinstate the COIN CDFI Tax Credit and evolved into a larger discussion of how a state-level coalition could advocate for more resources and better policies to help support the work of CDFIs in California. When the pandemic hit, the group remained committed to fight in the legislature and federally to bring resources to their communities.

Have you Heard about the California Investment and Innovation Fund?

In 2021, one of those legislative fights, led by Senators Caballero and Limon and sponsored by CCCI, sought to establish the California Investment and Innovation Fund (the Fund) within the state of California. 

The Fund, modeled after the federal CDFI Fund, would establish the programmatic infrastructure for the state to expand its successful partnerships with CDFIs to meet a variety of needs. It could fund CDFIs to provide low-cost loans for quick acquisition of affordable housing. It could fund CDFIs to deploy grants to small businesses hit hard by recession, disaster, or economic crisis. 

In addition to providing an ongoing source of lending for an array of existing community needs, the Fund would also allow California to respond to emergency needs more efficiently. California needs to have an established repository accessible to CDFIs, who already have the expertise and community connections to swiftly deploy resources for housing, economic development, disaster assistance and emergency relief.

The bill, SB 625, gained unanimous support early on from both parties and across the state, but it was caught up in budget negotiations between the Governor, the Speaker, and the Pro Tem. Ultimately, the funding for the California Investment and Innovation Fund did not make it into the final budget package for fiscal year 2022 but the authors and sponsors of the bill remain determined. 

The bill will continue to move through the legislature during the second year of California’s Legislative session. CCCI hopes that by creating the Fund and seeding it with a small infusion of resources, California will create an ongoing home for addressing an array of challenges now and into the future. 

How CDFIs Play a Part in Recovery

As California emerges from the global pandemic and back into the global economy, there are many obstacles ahead. California CDFIs are in the strongest position to help speed the state’s recovery in an equitable and sustainable fashion.

Specifically, CDFIs will continue to be a powerful way to both amplify public funds (CDFIs on average can provide $5 to $10 of flexible loan capital for every $1 granted to them) and to drive capital to those hit hardest by the pandemic and other sources of economic disruption (CDFIs exist to lend to those that have been locked out of the “traditional bank and capital markets”). And California has a strong history of partnering successfully with CDFIs; in 2007, the state turned to CDFIs to help provide housing assistance to struggling low-income homeowners during an economic downturn.

While CDFIs have historically not been as well known among financial resources, large corporations (like Google and Verizon), state and local governments, and big name impact investors are increasingly becoming big fans of and investors in what our clients have always known about CDFIs: that CDFIs will roll-up their sleeves and work hard to find a way to say “yes” to investments where others have said “no”, whether that’s critical investments in small businesses, homes, schools, healthcare, grocery stores, nonprofits and other critical community assets.

The US Small Business Administration recognized this when they gave CDFIs priority access to the PPP program to lend to small businesses that were being devastated by the pandemic and still hearing no from other lenders. As it becomes increasingly clear that equitable economic recovery and growth will not happen without CDFIs playing a major role, key institutions are taking note. For one example, The Los Angeles Times is planning to publish a nationwide CDFI resource guide to make it easier for borrowers to find and connect to CDFIs in their communities.

CDFIs On the Road to Build a Stronger Economy

Like the federal CDFI Fund that supercharges CDFI growth nationwide through an infusion of regulated capital and grant funds, California lawmakers need to usher in a similar era for the state’s dozens of CDFIs. 

The California Investment and Innovation Fund represents a partnership with the state that will play a vital and critical role in rebuilding our economy in an equitable and sustainable way. CCCI predicts a state sponsored fund will become a conduit for increased investments, which CDFIs will leverage far more than any other state or federal agency could. And when California leads, others will follow and join. 

CCCI and other supporters of the CDFI industry stand ready with the knowledge, trust, history, and expertise to serve. If California’s aim is to build a more inclusive economy where everyone has equal access to capital and the diverse and vast opportunities that brings, they need not look further than the CDFI community.