Thinking about people and place-based lending

Blog post originally posted 9/23/2021

What is FUND CI thinking about this fall?  People and Place-based strategies.

In the CDFI industry, many of the recent relief programs, like the Rapid Response Program, were a mix of people and place-based strategies.  However, one program in particular, the Emergency Capital Investment Program (ECIP), strongly focused on people-based interventions. Since we know that many CDFIs operate with place-based target markets such as investment areas and that banks are restricted by regulators and regulations in tracking and planning lending to targeted populations, it started us discussing where the industry stands in terms of place versus people-based lending and development services.

Over the summer, FUND CI conducted an online survey of CDFIs which indicated that CDFIs are using the following strategies:

·        23% place based

·        22% people based

·        55% both place and people based

Furthermore, 76% of survey respondents (across all CDFI types) think CDFIs should follow a mixed approach to lending strategies. Some of the write-in comments included:

Every CDFI should find the way to make the most impact in their community. those solutions will be custom to their needs and cannot be universal – there is no right or wrong strategy, local people, local needs, local solutions with accountability.

A CDFI can not just concentrate on one or the other it requires a full approach – I compare it to the stool – it is the CDFI, the place based and the people working together.

You should adopt faster growth strategies, which would allow you to get capital back and then redeploy it again thus helping more people overall, rather then focusing on specific people or areas.

CDFI’s often chase money and spread it over a wide geography.  This greatly reduces impact and eliminates strategy.  Focusing on both people and place will allow for real impact to be achieved.

We can root investments in places to garner critical mass for other investors and bring the most positive outcomes to individuals seeking to build wealth. Traditional sources of wealth are often rooted in real estate, thus the need to focus on place.

It is not only about people but it is also about communities and combining people and place yields significantly greater results than just apply one.

By pursuing only place-based we cannot possibly reach all the communities lacking access to capital.  We must incorporate a people-based approach also.

CDFIs will be more effective by utilizing both strategies to create a much bigger impact in communities.

Under invested places are usually the places where underrepresented populations are located.

I can’t envision how a place based strategy would work for us (suburban and rural service areas) but think it would be a very effective strategy for densely settled urban areas.

There is room for both or either, depending on CDFI size, origins, maturity and areas of needed.  There is room and need for both place and people centered organizations and activities and those CDFIs who do both.

Over the next few weeks we will continue thinking and writing about these ideas as well as sharing survey results.  What is your opinion?