Community Development Financial Institutions (CDFIs) like Pathway Lending are mission driven nonprofits that seek to generate economic growth and opportunity in underserved communities. Organizations across the CDFI industry work toward their mission in a variety of ways, from operating small business loan funds, to affordable housing initiatives and credit unions helping to build a financial track record in underserved communities. Because there is no singular approach to the work, the profile of the CDFI industry has not been elevated like that of the FinTech sector, and CDFIs remain “the best kept secret in economic and community development”.
Adopting standard metrics, or a common language, is an approach CDFIs can take to raise their profile in the increasingly crowded field of small business finance. The Sustainable Development Goals (SDGs) adopted by all United Nations Member States in 2015 provides CDFIs an opportunity to speak about their work through a context that is broadly understood and widely used.
The framework created by the SDGs helps to clearly communicate our work by making our impacts easily identifiable and digestible to partners, investors, and the public. It aligns our work with common cause pillars, like equality, economic growth, and reduced poverty in a way that invites new parties into the conversation and creates potential to establish new partnerships and expand our work. At Pathway Lending, our work can be measured through many of the 17 SDGs. Here, we will discuss a few of those.
Goal 1- End Poverty in All it’s Forms
By the year 2030, the goal is for all people to have equal access to economic resources, including financial services, supporting SDG goal one. Pathway helps entrepreneurs create opportunities for wealth creation and job growth in communities that have often been overlooked by traditional financial institutions. Our work seeks to fill gaps in the financial marketplace through loan programs with more flexible rates and terms, and a willingness to look forward toward potential, versus backward at cash flow during the underwriting process. Pathway also regularly provides in depth technical assistance to support small business owners.
Pathway’s SBA Microloan program is a great example of work towards this SDG. The SBA Microloan program is a partnership with the US Small Business Administration that supports entrepreneurs with loans up to $50,000 paired with one-on-one technical assistance that addresses the unique needs of each entrepreneur. In 2019, Pathway loan clients received 13,577 hours of technical assistance through this program.
Goal 5- Gender Equality and Women’s Empowerment
Despite starting businesses at higher-rates, female-run businesses have more barriers to access capital, these barriers can stem from the industries in which female-run businesses concentrate, a dearth of female capitalists, and negative stereotypes associated with gender. Sustainable Development Goal number 5 aims to grow opportunities for women to have equal rights to economic resources and financial services. Pathway Lending supports women entrepreneurs and women-owned businesses through the Women’s Business Center (WBC). The WBC offers education and coaching to early-stage entrepreneurs in diverse communities where job and wealth creation can be more concentrated and generate lasting impacts.
Pathway’s coaching helps business owners advance their creditworthiness and capital readiness to create more jobs in their communities. In 2019, Pathway’s WBC provided 4,787 hours of coaching, classroom and peer-to-peer learning opportunities for 878 unique clients, primarily women-owned businesses. Those clients accessed $1,272,388 in capital following Pathway’s assistance. During that period, Pathway provided 21,625 hours of mentoring and coaching to clients; 55% were women entrepreneurs.
Goal 11- Sustainable Communities
Sustainable cities and communities house growing jobs and lasting impacts. With a focus on creating resilient cities, Pathway’s work toward affordable housing and energy efficiency contributes to Sustainable Development Goal 11.
Pathway’s Affordable Housing Loan pool helps communities better absorb the impacts of economic downturns and works toward helping cities weather economic and man-made disasters. Through our Energy Efficiency Loan Program, Pathway addresses the need to reduce the environmental impacts of businesses and provides a new stream of capital businesses can use to prepare for the future.
Collectively, through these programs Pathway sees a promising avenue to preserve existing affordable housing in Tennessee cities where it falls well short of demand. Affordable properties are challenging to preserve because lower rent rates mean fewer funds are available for facility maintenance. This can create big opportunities for facility managers to realize energy savings as facilities upgrade lighting, heating & cooling, and install efficient windows and roofing. Pathway’s Energy Efficiency Loan Program has supported 310 energy saving projects across Tennessee since its launch in 2010. In total, the program generates more than $8.9MM in energy cost savings each year.
About Sustainable Development Goals
The Sustainable Development Goals are a call for action by all countries – poor, rich and middle-income – to promote prosperity while protecting the planet. They recognize that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection. More important than ever, the goals provide a critical framework for COVID-19 recovery.
Aligning missions to generate economic growth and opportunity in underserved communities to the Sustainable Development Goals, helps to fulfill impact investing. As organizations begin adopting and connecting their work to the SDGs, like The GIIN, Iris+, and AERIS, they can drive greater impact results. A common language can drive partnership opportunities and raise the impact of the CDFI Industry, including Pathway Lending. Recognizing and uniting toward the same targets will create a lasting impact across the world.