A Conversation with Georgia’s Community Development Financial Institutions (CDFI): CDFIs are Quietly Multiplying in Georgia, Creating a Wealth of Opportunity
Reinvestment Fund financing is supporting a mixed-use development in Atlanta’s historic Sweet Auburn corridor (birthplace of Martin Luther King Jr.) called the Front Porch
In the 1970s, the U.S. Federal Government authorized the creation of community development financial institutions (CDFIs) as part of its efforts to address poverty and racial discrimination in both urban and rural places. These institutions were designed to fill gaps in access to capital and services to support the economic vitality of communities that had been historically excluded or underserved by banks. Today, there are nearly 1,300 CDFIs in operation, certified by the U.S. Treasury and operating all over the United States. Although there are a variety of CDFI structures, each provides a range of resources such as accessible and flexible capital, technical assistance, and business development programs designed to address both borrower and community needs.
Community assets such as affordable housing, small businesses, high-quality schools, cultural institutions, and grocery stores are all essential aspects of a thriving community. Yet disparities in access to capital for low-income and marginalized communities and individuals are wide. CDFIs, often referred to as “financial intermediaries,” can channel capital to areas with the most need supporting projects that reflect community demand in ways traditional banks and financial institutions fall short.
Where conventional finance may see risk, CDFIs see opportunities for positive impact and the creation of strong assets. Leveraging impact investments from mission-aligned foundations, private investors, banks, and federal funds, CDFIs prioritize measurable social impact and invest in borrowers and community-driven projects viewed as unconventional by the financial mainstream.
Reinvestment Fund is a CDFI loan fund headquartered in Philadelphia, with offices in Atlanta and Baltimore. Every year, Reinvestment Fund’s lending team deploys around $250M million across the country to support building housing, grocery stores, K-12 education facilities, healthcare centers, HBCUs and more. One of our biggest projects financed in Atlanta is The Front Porch, a mixed-use redevelopment along Auburn Avenue. Reinvestment Fund also supports communities through grant and capacity-building programs, as well as policy advocacy, data analysis, and research.
Since 2016, when Reinvestment Fund first expanded to Atlanta, we’ve seen an influx of CDFIs making Atlanta and the state of Georgia part of their core markets. This has created a wealth of opportunities for partnership and social impact throughout the state. Today, the CDFI Fund has a record of 26 Georgia-based CDFIs, but we know there are dozens of others (like Reinvestment Fund) operating here with headquarters in other states.
One of the biggest opportunities, and challenges, for this growing group of CDFIs is to figure out how to explain the work of our sector—and its diversity of approaches— to stakeholders, and community-driven borrowers, who could benefit from our partnership and resources.
Despite decades of proven successes in their approach to rebuilding communities, CDFIs still hold a certain mystique, especially within the communities they aim to serve. Yonina Gray, Director of External Relations at Reinvestment Fund, invited two Georgia-based CDFI leaders to share some insights on their approach to community development, the rapid growth of the sector and what’s next for CDFIs in Georgia.
Martina Edwards is the Chief of Strategic Partnerships at ACE (Access to Capital for Entrepreneurs) and is based in Atlanta. Thelma Adams Johnson is President and CEO of Albany Community Together, Inc. (ACT!) and is based in Albany, Georgia.
What is the biggest misconception about CDFIs?
Thelma Adams Johnson: One of the biggest misconceptions about CDFIs is we are poor credit lenders and lenders of last resort. We compete with banks for funding; we complement bank financing and, in some cases, mitigate the risk undertaken by a bank in a deal. Another misconception is that our products are not standard, and anyone can qualify. CDFIs are holistic lenders, providing both capital, coaching, and connections to assist the business in meeting its debt obligation.
Who does your CDFI primarily serve and how do you stay accountable to your community?
Thelma Adams: Albany Community Together, Inc. primarily serves low-income individuals of color. We provide opportunities for this market to have access to affordable capital and business development services to start and/or grow their business. We stay accountable to our community and market by having representation on our board, participating in community events, and hosting community events that support small businesses. We place our borrowers at the center of our work, by analyzing our portfolio and products to determine if they meet our borrowers’ needs.
How does your CDFI support communities beyond lending/ debt?
Martina Edwards: At ACE, we believe that an investment in one impacts many. For 22 years, we’ve helped small business owners achieve their goals by removing barriers to accessing capital. Often, business owners find ACE because they know we offer affordable capital, but they quickly realize ACE’s impact runs much deeper. Using capital, coaching, and connections, we propel entrepreneurs to expand their businesses, create jobs that support communities and families, as well as build assets for themselves.
Thelma Johnson: We participate in roundtables on entrepreneurship. We are a part of an initiative to provide resources to all small businesses in Albany, Georgia called “Mapping Business Assets.” This initiative provides a list of all resources providing assistance to small businesses in the area, trying to create a no-wrong door policy for small businesses. We also offer quarterly workshops on business financials, credit, operations, tax implications, and legal concerns for small businesses.
What do you think is the biggest challenge or opportunity for CDFIs in Georgia?
Martina Edwards: The pandemic exacerbated long-standing racial and gender wealth gaps across the nation and Georgia’s metro and rural communities are no exception. Since the pandemic began, ACE has experienced unprecedented volume, making 1,400 loans and deploying almost $83 million. Women, low-income and small business owners of color have received 86% of the capital deployed. As we support small businesses, their success creates a ripple effect producing economic benefits and wealth opportunities for the owner, communities they serve, as well as jobs they are able to create. The challenge and opportunity will be continuing to attract private investment to scale the growing demand from our robust entrepreneurial ecosystem.
Thelma Johnson: The biggest challenge to CDFIs in Georgia is providing opportunities to access for all of Georgia, creating a bigger impact in rural Georgia and those smaller metro areas. CDFIs must be able to eliminate barriers for all businesses regardless of physical location. One of the biggest opportunities for CDFIs is the influx of capital. CDFIs have an opportunity to increase organizational capacity, grow business operations while providing much needed resources to Georgia’s small business and housing community.
Why do you think CDFI presence is growing in Georgia so much right now?
Martina Edwards: CDFIs are stepping up to help Georgia with its momentum toward making Georgia a prosperous state for all our citizens. There is unmet demand for affordable capital for growing small businesses, creating quality jobs and improving safe, affordable housing in communities. CDFIs offer flexible financing and development assistance as a pathway for underserved, overlooked and undervalued Georgians to improve their lives.
Thelma Johnson: The presence is growing because the need is great in Georgia. Georgia is a state with two tales: one for metro (Atlanta) and the other for the rest of Georgia. Atlanta has long gotten the attention of investors and those looking to fund business growth. CDFIs are known for going to where the need is the greatest, and I think this is the reason that CDFIs are identifying Georgia as a place to do business.
Can you give readers an example of a project that you’ve supported in recent years?
Thelma Johnson: In 2017, we provided funding to Mudd Motors a used car shop serving the Hispanic community of Cairo Georgia. During the pandemic, we offered a 6-month deferment to allow the business time to relaunch and grow. Today, the business has evolved from a small used car lot to a used car lot offering auto repair. ACT! supported this business with the needed access to capital, coaching, and connections to help it grow, stabilize, and offer a much-needed service to the community. Mudd Motors has created four jobs, not including his wife and himself. Mudd Motors owner Delfidio Valasquez attributes his growth to the work of ACT! “Todo es posible porque ACT ayuda me.” (Everything is possible because ACT! helped me out).
How did COVID-19 impact your approach to this work?
Thelma Johnson: ACT! remains committed to our target market and continues to deliver our work centered on our borrowers. We were able to provide access to equity in the form of grants for African American businesses that had been in operations for at least 15 years. What we learned from COVID-19 is that many of our businesses were cash strapped and could not weather a 14-day shutdown. This taught us that we need to lend to our market based on their revenue cycles. As a CDFI, we have the flexibility to alter our policies to meet the needs of our borrowers rather than meeting the requirements of regulators.
Why isn’t impact investing developing at the same pace as Atlanta in other regions in our state?
Thelma Johnson: Most impact investors are focused on the Atlanta Metro Area, not considering those outside of this area has limited impact investment growth in Georgia. In addition, Impact Investors have to be willing to make investments based on the market of the CDFIs. Not all markets are created equal, returns are not all the same. What an investment earns in Metro, may not be the same as in other parts of Georgia.
There is much to celebrate as this sector continues to rise and shine throughout the state. The Georgia Social Impact collaborative (GSIC) is a group of statewide leaders committed to advance impact investing in Georgia. In January of 2023, the group is planning to host a conference on the State of CDFIs in Georgia, where attendees will explore opportunities for partnership for even greater community development outcomes across the state. To stay in touch about the conference or to be part of the growing social impact community, all CDFIs and other financial stakeholders should create a free profile in the GSIC ecosystem map.