Giving Compass' Take:
- Community development financial institutions (CDFIs) can help female entrepreneurs garner capital, especially during economic hardships like the pandemic.
- In what ways can donors support partnerships between CDFIs and women-owned businesses?
- Here is an introduction to community development financial institutions.
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Because women-owned businesses are smaller, with fewer financial resources, they are less resilient to economic shocks. It happened after the financial crisis of 2007-2009, and without intervention, it will happen again during the age of Covid-19.
What if a source of financing could help women entrepreneurs rebound faster and grow stronger, healthier businesses despite the pandemic?
There is. In 1994, with tremendous bipartisan support, Congress created Community Development Financial Institutions (CDFIs) to provide affordable financing to women, minority, and other underestimated entrepreneurs.
CDFIs are mission, not profit-driven. They have lower requirements regarding years in business, credit score (or no credit score), and collateral. Entrepreneurs still have to prove that they're creditworthy, but CDFIs work with entrepreneurs whom banks typically turn away. CDFIs have proven that financing women- and minority-business owners are NOT risky.
"CDFIs are very effective at both capitalizing small businesses and reaching diverse communities that sometimes are unable to access traditional financial services," said Jenny Flores, head of Small Business Growth Philanthropy at Wells Fargo.
Read the full article about CDFIs by Geri Stengel at Forbes.