Keynote Address by CDFI Fund Director Donna J. Gambrell Association for Enterprise Opportunity's National Summit on Entrepreneurship Washington, DC May 18, 2009

May 18, 2009

Introduction

Thank you for that kind introduction, Connie. It is an honor to be here today. Since I was appointed as Director of the Community Development Financial Institutions (CDFI) Fund 18 months ago, I have had the opportunity to address many such gatherings, but this is my first appearance at a national conference sponsored by the Association for Enterprise Opportunity (AEO). I thank you for the invitation.

The CDFI Fund's purpose is to promote economic revitalization and community development through investment in and assistance to community development financial institutions – or CDFIs. We have the critical mission of expanding the capacity of these institutions to provide credit, capital, and financial services to underserved populations and economically distressed communities in the United States.

In Washington, we have seen some significant changes over the last six months, with the election of President Obama and the installation of his new Administration. AEO has seen change as well, with the appointment of Connie Evans as your new President and CEO. Connie brings more than 20 years of microenterprise experience to the position, is one of your earliest members, and was appointed by former President Clinton to serve on the very first Advisory Board of the CDFI Fund.

At a time when the microenterprise industry and the CDFI industry as a whole are in a position to play a very real and important part in America's economic recovery, it is encouraging to know that you have a strong leader at your helm. Connie, thank you for taking on such an important responsibility. I look forward to closely working with you and AEO.

This year's theme of Microenterprise: Restructuring Business as We Know It, resonates with me personally and could not be more timely or appropriate given the financial crisis that our country currently faces.

The CDFI Fund's mission is very similar to that of the microfinance industry. We both support the entrepreneurial spirit that has always been at the heart of economic prosperity in America. We both aim to better low-income communities through investment, and I can't think of a more important time in recent memory to renew ourselves to that shared goal.

To that end, I not only encourage you to utilize our programs, but more importantly, for us to work together and discuss ways the CDFI Fund can better help the microenterprise industry. Let us commit ourselves today to work on this together, because there is no better time than right now.

State of the CDFI Industry

The new Administration views the CDFI Fund with a renewed sense of responsibility. Let me share a few examples how.

The President has included the CDFI Fund in his strategy to address the current economic crisis. To that end, the Administration has assisted our mission through several important means.

First, one need look no further than the administration's newly released 2010 budget to see for themselves. Entitled A New Era of Responsibility – Renewing America's Promise, the budget more than doubles the CDFI Fund's current operating budget of $107 million this year to $243.6 million for 2010 (an increase of 127 percent). This funding will go a long way in our efforts to assist the microfinance industry, and we appreciate the Administration's understanding and respect for our mission and for the work that we do.

The budget requests also calls for $113.6 million for the CDFI Program, which represents a 90 percent increase. It also requests $80 million for the Capital Magnet Fund, a newly authorized program to increase capital investment for the development, preservation, rehabilitation, or the purchase of affordable housing for low-, very low-, and extremely low-income families.

It is also the first Administration budget to specifically include funding ($10 million) for the CDFI Fund's Native Initiatives, which assist Native Communities (Native American, Alaskan Native and Native Hawaiian communities) to overcome certain barriers to financial services;

This funding will go a long way in helping those communities historically underserved by more traditional financial institutions. The CDFI Fund is committed to making the FY 2009 and FY 2010 awards as expeditiously as possible. This is a commitment I first made last year, and since then, the results speak louder than my words.

Just six weeks ago, the CDFI Fund announced 27 awards under the FY 2009 round of the CDFI Program's Technical Assistance-Only program. Due to new business process efficiencies that have recently been implemented, these awards were made five months earlier than the same award announcement in FY 2008.

Since the announcement on March 26, 21 of the awards have been fully disbursed for more than $1.8 million. This is an astonishing 77 percent of the total TA awards of $2.3 million. Clearly, we are on the right track and the staff at the CDFI Fund is hard at work.

The CDFI Fund also received resources through the American Recovery and Reinvestment Act of 2009 (the Recovery Act). It provides us with an additional $3 billion of New Markets Tax Credit allocation authority, which will be awarded equally between fiscal year 2008 and fiscal year 2009.

In addition to the CDFI Fund's annual appropriation for fiscal year 2009, the Recovery Act also appropriates an additional $100 million. $90 million of this total will be applied to the CDFI Program, $8 million will be used to fund Native Initiatives, and the final $2 million will be used to cover administrative expenses.

The CDFI Fund is moving expeditiously to award and disburse these Recovery Act resources. Later this month, we will announce $1.5 billion in allocation authority through our New Markets Tax Credit Program. In June, we will have announced the entire $98 million of Financial Assistance awards made available through the CDFI Program and Native American CDFI Assistance (NACA) Program.

In addition, the CDFI Fund has recently opened supplemental rounds for our grant programs in response to the growing demand and additional funding made available. I would encourage all certified CDFIs to take advantage of this while there is still time left for you to apply.

This is certainly a new day for the CDFI industry. Let us not waste this opportunity. Let us work together to demonstrate to all the vital role we play in providing responsible and affordable financial options for the low-income communities and residents we serve.

Data on Microenterprise Development

I would now like to focus on the area of microenterprise development and highlight some of our data which demonstrate just how active CDFIs are in the microenterprise field. Of all business loans made by CDFIs, over two-thirds (68.1 percent) are micro-loans, and nearly all of these micro-loans are fixed-interest loans (94.6 percent) and are fully amortized (91.1 percent).

• The average size of micro-loans is $12,463, and the median is $10,000.
• The average term is 54 months, and the median is 42 months.

These loans have supported businesses owned by both minorities and by women in both urban and rural areas, those who have had trouble acquiring them through more traditional lenders. Approximately 55 percent of these loans go to minority-owned or controlled businesses. Additionally, almost 43.7 percent of these loans go to women-owned or controlled businesses. I can also report that nearly half of these (44.4 percent) are to low-income controlled or owned businesses.

As a result of our increased funding, we are now in a much better position to support CDFIs that are committed to supporting microfinance in our nation's low-income communities. Together through these efforts, we will create job lending and better practices, which are needed now more than ever as we deal with the financial crisis.

Case Studies

An example of a CDFI using a CDFI Program award to support more microenterprise development is the New Mexico Community Development Loan Fund, a private, tax-exempt organization. Its mission is to provide loans, training and business consulting to non-profit organizations and entrepreneurs within all areas of the Navajo Nation, throughout the United States.

Since 1989, the Loan Fund has provided services to support the efforts of low-income communities, in order to help them achieve their dreams of financial self-reliance. It has successfully assisted hundreds of small business owners and non-profit organizations over the past 20 years.

The businesses it partners with have a vested interest in community development. A prime example is Small World Day Care, which was created in response to the needs of low-income workers who needed a facility to look after their children during working hours. The center was opened in 1998, but within four years it had proven itself to be so popular that organizers realized more space was required. The Loan Fund took up their cause and helped them purchase a new building. Today, Small World cares for more than 40 children.

A relatively new microenterprise development organization supported by the CDFI Fund is the African Development Center (ADC). Created in Minneapolis in 2005, the ADC is a certified CDFI that provides training to African immigrant and refugee businesses, those that may not be applicable for more traditional sources of financing.

ADC is often seen as an industry of one, as there are very few organizations that provide the same service. Since their creation, ADC has lent more than $2 million to more than 130 businesses. Over the next three years, it predicts an annual growth rate of 15 percent.

Minnesota boasts a higher than normal immigration rate from African nations. According to the most recent U.S. Census statistics (2000), 13 percent of the state's foreign born residents come from Africa, and this number is expected to increase dramatically by 2010. Minnesota offers immigrants an established African population, a strong economy, a good quality of life, educational opportunities, and unskilled jobs that don't require fluency or literacy in English. These factors more than any other have helped make it an ideal refuge for many who have known nothing but war and poverty for most of their lives.

Certification

These are just two examples of the many microenterprise development projects that the CDFI Fund has supported. They illustrate our commitment to you and your communities, so I want to once again encourage all of you here today to utilize our award programs.

To those of you today who have already been a certified CDFI, as our funding increases, we want to support your work even more and we encourage you to make the most of it. The CDFI Fund is committed to your success, and we welcome the opportunity to work with you to achieve that.

To those of you who have not sought certification, now is the perfect time to do so, as the new Administration has thrown its support behind the CDFI Fund. The Recovery Act and the 2010 budget have greatly aided our ability to serve you.

Conclusion

It's an exciting time for the CDFI Fund. With a renewed sense of purpose comes a greater ability and responsibility to serve community development organizations and the microenterprise industry. We have earned political capital, and it is up to all of us to see that it's spent wisely. I appreciate AEO and all of its members, without whom we would not have the same impact in improving the lives and economic conditions within America's neediest communities. We will do great things together.

Thank you for inviting me here today. We look forward to fostering new relationships and bringing your economic success stories to fruition.

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