On October 25, 2016, Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart addressed attendees at the annual Opportunity Finance Network (OFN) Conference. A believer in CDFIs like Pathway Lending, Lockhart emphasized the unique position CDFIs are in to address community development and improve economic mobility for the underserved.
CDFIs have firsthand experience understanding how unequal access to capital can impact communities and the power of small business owners have and will have on lifting our economy.
Lockhart acknowledged that even in the eighth year of recovery since the Great Recession, “progress has been uneven.” Lockhart also outlined his views on where the CDFI industry is headed:
- The CDFI industry community is fragmented and expansive. CDFI organizations must reach operational sustainability or consolidate with similar organizations.
- Adapt to the evolving financial technology – as Jeremy Nowack said earlier this year “FinTech should be considered a wakeup call for CDFIs”
- The education and lending need is greatest where there are the least resources in terms of institutional partners and funding from large foundations (capacity constraint)
Pathway Lending President Clint Gwin was cited in this speech as one of the Fed’s partners in research to understand the “ground-level challenges” organizations like ours face every day, so we asked Clint to share his thoughts on Lockhart’s speech:
“President Lockhart really understands the issues facing the almost 25-year-old CDFI industry,” said Clint Gwin. “His focus on sustainability, technology development, and educating and financing underserved small businesses efficiently is similar to the focus we have at Pathway Lending. I’d like to respond to where Pathway Lending is relative to the three themes President Lockhart outlined for the CDFI industry.
First, Pathway Lending has spent nearly 16 years building our lending capacity to a sustainable scale. This sustainability is the piece that many CDFI’s struggle to achieve, but through hard work, determination, and strategic decision making, our organization recently reached $100 million in assets.
Second, while many in our industry focused on delivering a large quantity of basic level business coaching and training, we instead focused on delivering one-on-one entrepreneurial coaching through dedicated consultants to drive growth for our client companies. To balance our focused educational offerings, we added the Pathway Women’s Business Center to provide a broader scope of training options to entrepreneurs of all levels especially those located in low-income communities and to start relationship with more potential clients.
In 2016, we launched a new website with short- and long-form online loan applications and integrated communication channels to meet the growing demands for FinTech in our field. Additionally, we have joined with an industry collaborative to use bring technology-based solutions that individually CDFIs could not afford individually to more efficiently respond to entrepreneurs needing capital or technical assistance.
All of these efforts take more time in the nonprofit world because resources are constrained from funders for development and implementation of sustainability programs, and many funders want immediate impacts on individuals. While our work does have immediate impacts, building sustainability takes patience from funders and understanding of the long-term vision. Pathway Lending has been successful in our strategy because we outlined a plan in 2006, and use that strategic plan as our touchstone to make decisions that drive sustainability and real impacts. We are not done by any means, but we now have capacity and sustainability to deliver capital and education in an efficient and effective manner.
During President Lockhart’s speech he asked the loaded question: ‘Are you ready? Are CDFIs ready to be the vehicle of choice to confront the challenges of inequality, economic and financial exclusion, and the deficit of, and the underfunding of, entrepreneurial ventures in low- and moderate-income communities?’