CDFIs Bring Development to Disinvested Communities

In order for communities to thrive, they must have access to financial services and investment capital that spur economic development. However, nationally and in Chicago, most private capital flows into predominantly high-income neighborhoods, leaving fewer economic opportunities for low- and moderate-income communities – many of which are Black and Latine. Development in these communities is also more vulnerable to the current triple threat of inflation, high interest rates, and supply chain disruptions. 

Enter community development financial institutions, or CDFIs. CDFIs have become a growing force to serve the needs of disinvested communities by providing them with financial services that range from small business loans to mortgage lending and access to credit.  

Currently, there are more than 1,400 CDFIs in the United States, with 36 operating in Illinois. According to Robert Tucker, interim president at Chicago Community Loan Fund, Chicago’s CDFI ecosystem is diverse, collaborative and critical to building thriving neighborhoods. “I think this is the greatest city in the nation, but caring for our city means lifting up communities that have faced disinvestment and discrimination that prevent them from obtaining capital,” he said.  

Last year, CDFIs saw a record high demand for lending services. However, CDFIs are also contending with rising costs and thinner profit margins in the current economic environment, presenting an opportunity for donors and funders to help strengthen these important community resources.  

Two local CDFIs, Chicago Community Loan Fund (CCLF) and IFF, are charting different paths to help serve the needs of communities. Both organizations are also supported through the Trust’s Impact Investing Program.  

Bringing Development to Disinvested Communities  

For more than 30 years, CCLF has been what Tucker calls a “leading early-stage lender for community developers,” heavily focusing on lending to affordable housing projects, cooperatives and social enterprises that bolster development in neighborhoods that have suffered from long-standing disinvestment and the effects of redlining.  

CCLF’s lending has supported food and urban farming projects in Back of the Yards and Englewood, and various affordable housing throughout the South Side. To date, CCLF financing has led to the creation of 12,200+ housing units and 13.2+ million square feet of community and retail space, and brought 7,600+ new jobs to communities.  

Serving the Nonprofit Sector 

While IFF was established as a CDFI in 1988, it started as an initiative at the Trust to support nonprofits struggling with skyrocketing costs during the late 1970s energy crisis.  Today, IFF continues to partner with nonprofits to serve their facility and real estate capital needs and provide thought leadership to the sector through advocacy and convenings. 

According to Kate Ansorge, managing director of Real Estate Solutions – Chicago, IFF’s work is about helping their nonprofit clients—a diverse roster that ranges from arts and culture to health care organizations—both strengthen their physical presence and their ability to create impact in the community. Since its inception, IFF’s $1.4 billion in flexible, affordable financing has led to the creation of 15,000+ childcare slots, 159,000+ new school seats, and 647,000+ new patient visits, among other milestones for their clients.  

“When we talk about investing in neighborhoods, we’re talking about investing in people and in the built environment in those neighborhoods – and nonprofit facilities are a really big part of that investment,” she said. 

Supporting CDFIs in the Current Economic Climate  

Kristin Carlson Vogen, Trust associate vice president of philanthropic strategies and innovation, notes that CDFIs offer a strong return on investment and allow donors to make a high impact with their dollars. 

At the Trust, donors have a few options to support them: 

• Impact Investing: The Trust’s Impact Investing Program enables donors to recommend impact investments from the assets of their donor advised funds, increasing the impact of their charitable dollars while supporting the services that CCLF and IFF provide.  

• Donor Advised Fund Grants: For CDFIs that are registered 501c3s, donors can also support their capacity by directly recommending grants through their donor advised funds.  

Regardless of whether they invest or grant, Tucker says support for CDFIs is an important investment in Chicago’s future. He adds, ” The more opportunities to fund CDFIs, the more good we can do in the community.”