CDFIs have been around since the 1960s and they have a long history of investing in local institutions, providing financing to marginalized communities, and slowly changing the systems that have kept racial disparities in place.

One of the solutions we’re seeing CDFI’s use to advance racial equity and justice is the use of collaboratives to accelerate funding solutions and scale transformative change. Collaboratives form when CDFIs of different sizes and areas of expertise choose to work together to provide funding, model solutions, and then scale successes for larger impact. Here are two examples of these types of collaboratives at work:

Southern Opportunity and Resilience Fund (SOAR)

In response to the Covid-19 pandemic, a regional collaborative of 13 CDFIs joined together to create SOAR, a community re-investment fund. This fund provides access to flexible, low-cost credit for BIPOC-owned or managed small businesses and nonprofits in the southern and southeastern United States. This fund receives funding from philanthropic, private, and corporate investors, and channels that capital into one of the 13 local CDFIs participating in the fund. The CDFIs, in turn, provide capital and support to business owners, many of whom have never accessed traditional financing. Businesses that receive these funds use this capital to build their businesses and support their communities.

Seed Commons

Seed Commons is a CDFI that has created a national network of locally focused loan funds. The organization intentionally does things differently from other funding collaboratives: They raise money centrally, and then give each community fund decision-making authority on where to invest the capital, as well as where to reinvest any proceeds. Their work channels investment into communities that have faced the brunt of the extractive economy, deindustrialization, and systemic discrimination.

Read the full article about CDFIs at Medium.