CDFI Funds: They Work!!

Last week, I blogged about the efffectiveness of economic gardening programs.  Today, I’m continuing with more good news—this time about a recent study of the Community Development Financial Institutions (CDFI) program.  A recent Federal Reserve Bank of Cleveland working paper, by Kristle Romero Cortes and Josh Lerner (who has been a strong critic of many publicly-backed capital access programs) examines the impact of CDFI support of community credit unions.

The researchers find that the programs have been quite effective.  The CDFI review process does a decent job of keeping politics out of the decision-making process.  Even more important, CDFI support helps create larger local capital pools.   Within a year of receiving CDFI funds, credit unions typically lend out an additional 45 cents for every dollar of investment.  Over three years, these numbers jump–with $1.60 in new investment for every dollar invested.  CDFI funds work!   This research shows that, when done right, publicly-backed programs can have an important impact in generating new funding opportunities for local businesses.



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