The CDFI Fund has a New Strategy (Read it! It Affects You)

On October 27th, CDFI Fund Director Annie Donovan unveiled the Fund’s five-year strategy for 2017-2022. The 12-page document is required reading from every perspective in and around the CDFI Fund world–CDFIs, CDEs, investors, funders, trainers, consultants… It suggests the future of the the Fund is largely more of the same done better (in this decade, at least, that means “with more data”).

Quietly, however, it lays out a new role for The CDFI Fund as home to a “CDFI Fund Network” that could realign how CDFIs, CDEs, and others view themselves, collaborate, and advocate. As any good strategy should–and this is a good strategy–it will cause everyone it touches to dig a little deeper into their own strategies, question assumptions, and adjust plans.

Donovan and the CDFI Fund team worked hard over 18 months to produce this plan, engaging the CDFI Fund staff, the CDFI industry, and hundreds of others to make it clear what she is prioritizing and where she wants to lead the Fund–and, with it, the CDFI industry. It’s a good bet that she will not put this plan on a shelf. Every conversation I have had with her and every public statement I have heard from her tell me she is determined to see it through.

I invite you to share your thoughts on the meaning of the strategy, and so I offer my first responses to encourage you to do so.

The Strategy

A word about strategy: A good strategy differentiates what must change to drive progress from what must never change–what is core to the organization. This plan does both, though most of the changes are nuanced and subtle; for example, using data better and more.

A strategy also has to tell you what the organization is going to do, in its Mission and Goals, with a reasonable measure of specificity.

The Fund’s new strategy does both things–differentiates and tells you what the Fund is going to do–well enough to let you see the framework clearly. For some people, that is enough. After that, though, there is a lot of fill-in-the-blanks promise that will frustrate practitioners until the Fund provides more and more telling detail.


The plan lays out a bold vision (that which will not change) for the nation, not just a wish for the Fund:

The CDFI Fund’s vision is an America in which all people and communities have access to the investment capital and financial services they need to prosper.

This “results” focus and its recognition that CDFIs are important to the nation is great to read. This might seem non-controversial now, but 10 years ago it would raised eyebrows. The important role of CDFIs (and the CDFI Fund) through and after the Great Recession changed things and the CDFI Fund intermediary model rose in credibility and reputation.


The Fund’s mission is:

To expand economic opportunity for underserved people and communities by supporting the growth and capacity of a national network of community development lenders, investors, and financial service providers.

The Fund commits to working for “economic” opportunity (rather than just, say, “opportunity”). Its worth noting that this describes part but not all of the CDFI industry’s purpose, if you agree that CDFIs exist to align capital with social, economic, and political justice. Of course, the Fund’s constituency–or network–is broader than CDFIs and “economic opportunity” may be the common denominator.

The Fund’s mission is consistent with the CDFI Act of 1994‘s stated purpose:

The purpose of this subtitle is to create a Community Development Financial Institutions Fund to promote economic revitalization and community development through investment in and assistance to community development financial institutions, including enhancing the liquidity of community development financial institutions.

The Fund sets five goals that tell you what it thinks are the most important things it must do, or change, to achieve its mission:

  1. Increase the impact of the CDFI Fund network by supporting the growth, reach, and performance of CDFI Fund awardees.
  2. Build the capacity of the CDFI Fund and its network to better capture, produce, and utilize data to improve decision-making, performance, and accountability.
  3. Ease the customer experience and create on-ramps for new and emerging CDFIs and CDEs to access CDFI Fund programs.
  4. Promote Awareness of CDFIs in order to expand their access to new resources.
  5. Create organizational excellence by increasing workforce engagement, enhancing team performance, and improving operational efficiency.

(Emphasis is added to highlight the major things the Fund plans to focus on: impact, capacity, accessibility, public awareness, and organizational performance. But don’t rely on this snapshot; read the full plan to get your own impressions.)

My Thoughts

This is not a typical government strategy. In fact, this is more of an industry strategy and it is very similar to what the CDFI industry as a whole or its component “verticals” might say about themselves. In a sense, it is an industry leadership strategy. I found its key messages remarkably similar to key points the CDFI Coalition made in 1993 to the White House and Congress in its seminal paper, “Principles of Community Development Lending & Proposals for Key Federal Support.” That paper provided the conceptual framework for the Fund, and it is exceptional–and to the Fund’s credit–that 23 years later they industry’s recommendations and the Fund’s new strategy are closely aligned.

The strategy focuses on results that CDFIs and CDEs produce and acknowledges that the Fund is a platform, not a practitioner. What type of “platform” is where it gets interesting.

The Fund considers the industry as a broad, inclusive community of practice for organizations that use or want to use Fund resources. In other words, a “CDFI Fund Network.” The phrase “CDFI Fund network” and variations such as “CDFI Fund and its network” jumped off the page at me each of the many times they appear. The idea that the CDFI Fund is the center of its own network just might be redefining the community development finance world in a CDFI Fund-centric way; it is increasingly true, in fairness, but it is an approach that should feel awkward or wrong for many organizations in that network.

The Fund has always had applicants, awardees, allocatees, participants… perhaps it has described the many sectors and sub-sectors it works with as partners or even a network. It is not the same network as the CDFI network (or the sub-networks of the CDFI industry’s membership organizations); this network includes and values equally banks and CDFIs, mission-driven CDEs and commercial CDEs.

The Fund probably needs to do that, but what does that mean for, say, the CDFI industry network? For decades, the CDFI industry has sought to define itself on its own terms, though over the years more and more CDFIs allowed the Fund to define them. What now?

And what kind of network are we talking about? Is it a consumer network of organizations getting CDFI Fund resources? A users network to facilitate financial and other interactions? A capacity building network? An advocacy network of some sort? An information network? A leadership network?

The Plan does not speak to those questions, and I hope the Fund will.

The Plan leans toward measurable goals… but does not do enough to measure them. Good strategies blend quantitative and qualitative metrics, and this plan does, too. Measurement feels elusive, however, because the Fund does not really say how it will measure success. In that way, the plan slides back from results toward process. Too many phrases such as “Find new ways…” and “Collaborate with…” and “Increase in the number of…”; not enough, Find 10 new… or Double the number of…

More disconcerting, there is no real time frame (other than 5 years) to the Plan, let alone a sense of sequencing that suggests how the Fund will go about getting to its goals by 2022.

The Fund promises to develop metrics, but it is disappointing that it promotes something it does not deliver. Instead of leading by example, it is leading by promising. The Fund may have metrics for its internal use, which would be great. If so, the Fund and its network would benefit from greater transparency.

Bottom line: what gets measured gets done, and the Plan risks underperforming on the first point (what gets measured) and, as a result, on the latter (what gets done).

The timing is right. Less than one month before what will be a dramatically consequential election, the Fund has planted its flag and made a statement that will help it stay above at least some of the political currents that will buffet 2017 and beyond.

No one in the CDFI Fund world has talked about it much, but Secretary Clinton was a champion of CDFIs in Arkansas (she served on the Board of Southern Development Bank Corporation) and of microenterprise, in particular, as First Lady. Her campaign materials mention CDFIs.

Donald Trump is a mystery (in many ways, I know, but I mean it herein terms of CDFIs). There is no reason to think he likes or dislikes The CDFI Fund–or that he has ever heard of it–but the mood and tone of Washington, DC, come January could influence what happens to the Fund.

While the Fund enjoys unusual, perhaps unique, bipartisan favor, the Fund is always vulnerable to political changes; at the least, the elections will determine how much and how advocates for the industry and/or the Fund must do their work. The Fund’s industry-friendly strategy makes it easier for everyone in the CDFI Fund’s “network” to know what to say. There’s a good chance this strategy will coast through the first couple of years of a new Presidential Administration, enough time to have momentum that will be hard to alter later.

Your move, CDFI industry. In the plan, the Fund opens its arms broadly to include as many and as many types of practitioners as possible. It is explicit about intending to broaden its historical tendency of favoring lending over other include vital financial services. It prioritizes “hardest to serve” places and, to an extent, small and emerging CDFIs; the Fund seems intent on expanding the number and reach of CDFIs. There are fault lines across the CDFI industry on these points, and advocates will have to minimize the crossfire that might result in self-inflicted wounds.

Most of all, with this plan the CDFI Fund puts itself squarely in the center of the CDFI industry in a way that should make industry leaders ask themselves whether they want to be defined by a federal program. This is where the Fund’s 2017-2022 plan and the CDFI industry’s 1993 proposal disagree.

The CDFI industry’s future seems closely aligned with the Fund’s right now, but that might not always be the case. Who represents the industry?

The CDFI industry, banks, cities and mayors, and many others worked in an awkward alliance to support the New Markets Tax Credit program in the last year of the Bill Clinton Administration. CDFI leaders discussed the relative benefits (many) of working closely with new allies versus the risks (many) of creating a program in The CDFI Fund that was likely to put most of its resources into other (non-CDFI) entities, as it has.

The ongoing effort to make New Markets more mission-focused is constrained by the need to balance CDFI and non-CDFI interests. The unsuccessful effort a few years ago of a CDFI-led campaign to qualify CDFIs as QLICB (Qualified Low Income Community Businesses), which would have directed a lot of New Markets resources through CDFIs, got stuck on tensions between CDFI-based CDEs and other CDEs.

The CDFI industry’s interests seem generally consistent with the CDFI Fund network’s interests today, but that will not always be the case. Will the CDFI industry speak with an independent voice when that time comes?

Your thoughts? Please comment below.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: