HispanicBusiness

Slightly beyond the borders of where conventional financial institutions will go sits a valuable resource jewel. Community Development Financial Institutions, or CDFI's, venture into unconventional market territory to finance affordable housing, small businesses, community facilities and nonprofits.

For more than two decades, CDFI's have expended billions of dollars to create jobs, build affordable housing, and provide vital community services ranging from child care to charter school education in urban and rural communities across the country.

About 170 CDFI's comprise the Opportunity Finance Network, a leading network of private financial intermediaries that identify and invest in opportunities that benefit low-income and low-wealth residents in the U.S.

Mark Pinsky, CEO of the network, said financing through OFN results in sound financial returns and positive changes for people and communities. He said that through 2007, the network's financing has generated or maintained 191,381 jobs; 43,050 businesses and micro-enterprises; 577,736 housing units; and, 9,552 community facility projects.

CDFI's have proven to be resilient amid the economic crisis, Pinsky said, adding that their beneficiaries have defaulted less on their loans than on those received from more traditional investment institutions.

Why is that so? "CDFI's are mission-oriented," Pinsky told HispanicBusiness.com. "They understand market needs, are flexible, disciplined, and eager to experiment. They have, through their devotion to mission, the ability to take risks other lenders cannot."

The CEO said that traditionally, CDFI's are patient lenders. "Because they are not driven to produce quarterly dividends, CDFI's can take the time to nurture opportunities and build momentum."

One CDFI that is finding success is the Latino Community Credit Union.

Founded in 2002 in Durham, N.C., to meet the Latino community's need to become financially secure and independent and in response to violence against Latino residents in the state, it now has more than 42,000 members. Pinsky said it was the first multicultural financial institution in that state to provide all of its services in Spanish and English, with no price discrimination.

Statistics tell the story of its success: In 2008, the credit union made 1,901 loans for about $18.1 million. Of these loans, 1,816 were consumer loans for nearly $10.3 million and 85 were mortgages worth almost $7.9 million. About three-quarters of the mortgages were for first-time home buyers and 49 families received down payment assistance through the Federal Home Loan Bank of Atlanta. As of the end of 2008, the credit union's mortgage portfolio had no delinquencies and year-to-date losses were 0.2 percent.

ACCION Texas of San Antonio, Texas, is the country's premier provider of micro-finance, Pinsky said. It uses an automated underwriting system and business model to distinguish itself amid a challenging financial segment, providing credit to small businesses that do not have access to loans from commercial sources. ACCION makes business loans ranging from $500 to $50,000 for such business needs as working capital, equipment purchase and inventory.

The organization, said Pinsky, has distributed more than $58 million and given more than 8,100 loans to its clients, helping micro-entrepreneurs strengthen their businesses, create new jobs and stimulate revitalization in their communities. With 12 offices in 10 cities, it serves clients in more than 80 counties across Texas.

Yet another successful CDFI is Nuestra Comunidad Development Corporation in Roxbury, Mass. It was established in 1981 by residents of a neighborhood seeking to take control of blighted property, construct new housing and to better the community overall. It offers affordable housing, business development, individual asset building and resident support services to Roxbury and other underserved areas in Boston. One of its accomplishments is the creation in 2002 of Nuestra Culinary Ventures, Boston's only kitchen incubator for culinary entrepreneurs and one of only a handful in the country.

Based on the past, CDFI's are set to continue down a successful path to aiding communities nationwide. "A history of prudent practices that has become widely known as 'ethical subprime lending' has allowed CDFI's to maintain their foothold, and not succumb to market conditions," Pinsky said, "and thus they are weathering the current turbulence in the market."