At this year’s Opportunity Finance Network Conference, keynote speaker former President Bill Clinton addressed the opening day plenary.
He posed a challenge to the CDFI industry: “you need an answer for ‘what’s next?’. Where is the next opportunity for community finance? Where should we be focused moving forward?”
This is an inspiring challenge and we, as an industry, should rise up together to meet it.
Today, the economic intricacies of an increasingly complex region are at the forefront of our mission to create economic freedom for those who need it most. The reality of a changing Bay Area means that, like in many places across the nation, food and retail service jobs no longer provide wages that make local housing affordable, many workers work more than one job just to make ends meet, and local business owners struggle to raise the capital they need to scale.
“Knowing the nuance of place is critical to making good decisions about the long-term value creation we can offer our small businesses and our communities.
At this year’s OFN conference, organized under the theme, Lending Where it Counts, there was, unsurprisingly, a reverberating discussion on the importance of “place” in our work. Knowing the nuance of place is critical to making good decisions about the long-term value creation we can offer our small businesses and our communities.
The nine-county Bay Area is our place. And for for the last 23 years, we have been closely attuned to its changing needs, and our role in supporting small businesses, helping entrepreneurs and their employees to create wealth, and ultimately working to close the racial and gender wealth gaps. Our place – the Bay Area – has changed and we have been adapting in response.
At OFN we pulled together an esteemed panel titled “Pushing the Boundary of Impact in Small Business Capital” with Mekaelia Davis from the Surdna Foundation, Justina Lai from Wetherby Asset Management and Harold Pettigrew from the Washington Area Community Investment Fund.
Through a context of historical financing, lessons learned from the field, and new ways of approaching risk assessment, the panelists fostered a lively interactive workshop that explored new ways using capital stacks to more effectively support growing businesses owned by entrepreneurs of color.
They also shone a light on the many new approaches being tested and used by our partners in the space in the process of investment sourcing and conducting due diligence. Leaders from MACED, Pacific Community Ventures, Accion, BBIF, AEO, Citi and UP Community Fund all shared innovations in their approaches.
What we learned is that there are numerous products and strategies that get deployed in other areas of finance that we can use in the small business space: equity, direct public offerings, credit enhancements, providing capital for seasonal/cyclical businesses, among many others.
So how are we going to do this on an industry-level?
While the CDFI industry has been tremendously impactful in getting capital into the hands of underestimated small businesses across the country, the gap between those that have access to capital and those that don’t has grown rapidly over the past 40 years.
ICA is a proud Community Development Financial Institution (CDFI). Collectively, as an industry, CDFIs have accomplished a lot. From the early pioneers who proved the concept for this industry, to those that grew the affordable housing industry into an investible asset class, to our colleagues who created a healthy food financing initiative, the industry has been actively responding to the community needs around us. Now it’s time to meet the needs of the small business sector.
And we who focus on providing capital to small businesses must rise to the challenge of what’s next.
“It also means that we are clear about the imperative of closing the racial wealth gap and what our role is to play in that.
So, what’s next?
For us at ICA, that means continuing to make equity and equity-like investments in high potential small businesses that have been starved for growth capital. It also means that we are clear about the imperative of closing the racial wealth gap and what our role is to play in that. Lastly, we are thinking about ways we can continue to have the collaborative efforts, like we did at OFN, to work together to solve these challenges that no one organization alone can face.
Allison Kelly is Chief Executive Officer of ICA Fund Good Jobs.