August 2011

Voiceover: This is part two of a two-part podcast on community development financial institutions, or CDFIs. Part one focused on CDFI funding and general economic impact, and part two focuses on how CDFIs help to create jobs.

Joseph Firschein: Welcome to the Federal Reserve Bank of Atlanta's Economic Development podcast series. I'm Joseph Firschein with the Federal Reserve Board of Governors.

Community development financial institutions, also called CDFIs, provide traditionally underserved communities with access to capital, financial services, and technical assistance.

Today I'm speaking with Donna Gambrell, director of the U.S. Department of the Treasury's CDFI Fund since 2007.

Donna, given the current economic climate, there's a lot of interest at the Fed and elsewhere on job creation, and so I'd like to focus on how CDFIs are contributing on that front. What's your sense of the role that CDFIs play in job creation, and how do CDFIs and others in the CDFI industry track this impact?

Photo of Donna GambrellDonna Gambrell: CDFIs play a vital role in job creation. Their investments in low-income communities frequently create permanent jobs for local residents, as well as construction jobs for new developments. In our own tracking system, we've seen that these CDFI Fund awardees have reported creating or maintaining 30,000 jobs through new loans and investments in fiscal year 2010. And these are reports, Joe, just from a small subset of the entire CDFI industry. So 30,000 jobs, while it may not sound like a lot—again, what we see in these, especially, small communities or in distressed areas, those jobs become just critical to helping to stabilize the community.

Firschein: Can you describe what innovative practices you've seen from CDFIs that help accelerate or sustain job creation?

Gambrell: We've seen wonderful work out of the CDFI industry in supporting job creation, because CDFIs are high touch, meaning they don't just provide funding without also providing support. So an important component of the CDFI model is to provide technical assistance and form long-term relationships with its borrowers, and to find public and private partnerships with organizations that can provide training, that add value to the business. So, for example, CDFIs might connect a borrower with a business incubator or develop partnerships within the industry that encourage entrepreneurs to find mentors or form other beneficial relationships.

We've also seen CDFIs take the lead in job creation by assisting small businesses in three important ways. They may offer flexible underwriting criteria; they may help restructure and consolidate business debt; they may provide business expansion loans. We've also seen an increase in the number of microfinance loans for entrepreneurs as a move by CDFIs toward more innovative financing. Our 2010 loan fund application, for example, provided more than 9,900 small-business loans in the past year alone. And let me just give you an example of one CDFI, and what they're doing. The Montana Community Development Corporation, or MCDC, is a CDFI based in Missoula, and it's known for working on complex, multipartner deals with triple bottom-line impact. In one such deal, MCDC was the coordinator of a loan to a 100-year-old dairy. The loan financed a $1.2 million methane digester that has enabled the dairy to recycle 100 percent of its waste into fertilizer, and has turned the dairy into an environmental leader.

Eventually, the dairy plans to sell carbon credits. MCDC led the project with its own financing, as well as funds from two economic development groups, two banks, and four federal grant programs. Montana Senator Jon Tester recently recognized this effort as one of the leading triple bottom-line economic development projects in the state. This is an organization that has looked at the impact of their work in three different ways. They will look at the financial impact, environmental impact, as well as the social impact, what's actually happening in terms of transforming that community.

Another example is Access to Capital for Entrepreneurs, or ACE. It's a certified CDFI, as well as an SBA [Small Business Administration] microloan intermediary and USDA [U.S. Department of Agriculture] intermediary relender. And they've done some excellent work encouraging the growth of small-business ventures in the rural Southeast.

Firschein: That's helpful. Given your experience as a former bank regulator, and given that CDFIs are financial institutions, can you talk just a little bit about some of the challenges CDFIs, like any financial institutions in the current climate, face in working with small businesses and other organizations to support job creation?

Gambrell: CDFIs face the usual challenges that any other lender or investor would face working with small businesses. But I think the difference is that they often go the extra step of providing that technical assistance that I mentioned earlier. So that means spending many hours of helping a potential borrower write a better business plan or do market research that will help them be successful. CDFIs approach their customers a little differently, and so I think they provide that training and support that makes the borrower less risky so they don't have to, for example, charge higher fees.

The other challenge, I believe, is really just that there's more demand for small-business loans than the supply of available dollars. CDFIs have made extraordinary efforts to keep funding available to struggling or new small businesses, while many mainstream institutions have really shifted their focus. Small businesses have always driven job growth, and I think that CDFIs understand this and have been instrumental in providing entrepreneurs with the skills and capital to take on many of today's challenges.

As other institutions have stopped lending to qualified borrowers, it's given CDFIs, quite honestly, more customers to work with, and this is a mutually beneficial relationship when you consider that CDFI loans and investments generally offer better terms to the borrowers. So we have a number of programs that we're seeing with a special emphasis on small-business lending, and one of those is in the Department of Treasury, called the Small Business Loan Fund.

It's making up to $300 million available for CDFI loan funds that engage in small-business lending. So the priority, for us, will be CDFIs, matching them with funds that will allow them to do even more small-business lending.

Firschein: For those that are listening to this interview, who could be a good partner for CDFIs? And what are some of the mutual benefits of these partnerships for both parties?

Gambrell: CDFIs partner with all kinds of organizations on their projects. Many projects actually incorporate financing from several different invested parties, so you might have local and state government organizations that provide support and resources, you might have local businesses, developers, a variety of nonprofit and for-profit institutions that are involved. And very commonly, for-profit banks partner with CDFIs as well. Banks receive the benefit of a CDFI's expertise in specialized financing, and investing in CDFI also qualifies banks for CRA [Community Investment Act] credit, so it's a great match.

Firschein: My last question is, how can economic development organizations, both public organizations and private, better support the work of CDFI? And related to that, where could people go if they have additional questions on CDFIs?

Gambrell: So the CDFI Fund, and I say this all the time, Joe, that we take that same advice that we give to the CDFI industry. I've been encouraging the CDFIs, over the last few years, to look at other ways in which they might partner, and leverage resources, and the CDFI Fund has been doing the same thing, we've been increasing and solidifying our partnerships with other federal agencies. We're currently part of an interagency effort to increase economic development in Native American communities. We're partnering with the U.S. Department of Agriculture and the Department of Health and Human Services on the Healthy Food Financing Initiative that will be implemented this year, and the Small Business Administration has recently opened up its 7(a) lending program, called Community Advantage, to eligible CDFI loan funds.

So, I would strongly encourage organizations that typically look to these agencies' programs for assistance to also consider CDFIs as potential partners in their projects as well. CDFIs, as I mentioned earlier, we have over 900 and they are in every single state, Puerto Rico, and Guam. In general, though, I really believe that the best way organizations can support CDFIs, and the work that they do, is through collaboration with CDFIs on their projects. There's a very strong movement, as you know, toward socially responsible investing in this country at the moment, and the CDFI industry is a great place to start looking for those key projects. They're doing very exciting projects, Joe, that transform communities and change lives, and they're doing them in neighborhoods that truly need this type of economic development.

If economic development organizations would like to partner with CDFIs, I would encourage them to visit our website, which is

Firschein: Donna, thank you so much for joining us today. We really appreciate your taking the time.

Gambrell: Thank you; it really has been my pleasure. Good talking with you.

Firschein: So, this concludes our podcast. We've been speaking with Ms. Donna Gambrell, who is the director of the U.S. Department of the Treasury's CDFI Fund.

For more podcasts on this topic and others, please visit the Atlanta Fed's website at And if you have comments or questions, please e-mail Thanks a lot for listening.