CDFI Program Awards: Insights into Funding Decisions, Celebrating Success

On September 10, 2015 the CDFI Fund announced awards to 195 Community Development Financial Institutions (CDFIs) totaling $202 million in grants and loans through the latest rounds of the Community Development Financial Institutions Program (CDFI Program), the Native American CDFI Assistance Program (NACA Program) and the Healthy Foods Financing Initiative ( HFFI).

Those receiving assistance from FUND Consulting performed well overall in this funding round, with 30 organizations receiving $38,368,334 in awards.

The FUND Consulting team conducted an analysis of both awardees and those who did not receive funding in order to gain insight on any key trends:

Common Characteristics of Awardees in the FUND Consulting Cohort:

• Awardees met either all MPS or fell short in only one MPS.
• CORE awardees had an historic and projected deployment ratio of over 70%.
• All awardees had conducted a market study or created a formal planning document within the past two years.

Key Trends in Unfunded Applications:

• Overall, unfunded applications were more likely to score lowest in the Policies and Partnerships sections.
• Scoring in the highest quintiles did not always result in funding.
• Many perennial awardees did not get funded in this round.

According to the award announcements, the FY2016 round is slated to open in early 2016.

Consumer Credit for Military Families

As many of our readers know, CDFIs are set up to provide access to capital in underserved markets. One market segment that is getting increased attention are military families. Policies have been enacted to address the consumer credit needs of this population. The Military Lending Act was enacted by Congress in 2006 as part of the John Warner National Defense Authorization Act for Fiscal Year 2007. The Military Lending Act provides protections for service members and their families by:

• Expressly capping the rate which a creditor may extend consumer credit to covered members of the armed forces or their dependents at no more than 36 percent including fees
• Creating a series of special consumer protections for covered members and dependents.

The Military Lending Act is implemented by the Department of Defense and, pursuant to a 2013 amendment, is enforceable in the same manner as the Truth in Lending Act by the Federal Deposit Insurance Corporation, member banks of the Federal Reserve System, Office of the Comptroller of the Currency, National Credit Union Administration, Consumer Financial Protection Bureau Federal Trade Commission, and certain other specified agencies. However, there is currently a movement in Congress to delay the enforcement of this amendment before the amended regulations can take effect.

Additionally, a 2014 report by the Consumer Financial Protection Bureau has documented a host of abusive tactics targeting soldiers and their families. According to this report, thousands of service members receive short-term, high-interest loans each year.  According the research, many of these consumer credit products available on the market today fall outside of the scope of the Military Lending Act, as currently implemented.  For example, according to case studies in the report, one military family that took out a $2,600 loan ended up paying back $3,966.84 over the course of a year. Another borrower spent $1,428.28 to pay off a $485 loan in just six months.

At FUND Consulting, we have seen a trend in CDFI product development, with several clients developing and implementing small dollar loan programs to provide an alternative to predatory loans. Based on this report, it is apparent that there is significant need and demand amongst military families for this type of consumer credit product.

Does your CDFI have a small dollar loan product? Does it have special products for those in the military? Have you seen demand from service members?

CDFI Boards and Fundraising, Week 8: Considerations for Increasing Board Member Fundraising

Over the past eight weeks, the FUND Consulting Blog Smart Decisions, Reliable Data ​has focused on presenting data from our annual industry research project. The project consisted of a survey focused on collecting information on CDFI Boards and Fundraising.  FUND Consulting chose this topic as a result of key themes that emerged while conducting strategic planning for its Annual Service Package cohort.​​

The survey was conducted in 2014, with the following respondent profile:

The survey research focused on describing the board composition of CDFIs, identifying barriers to engaging board members in fundraising, and examining strategies used to increase board participation in fundraising.  Based on this research, and insight gained from working closely with CDFIs, the FUND team offers the following items for consideration in increasing board involvement in fundraising:

• ​​Just ask! Many CDFI executives have told us that they would not think of asking their boards to raise funds as they are grateful for the time the board members dedicate to help govern the organization. However, as the data presented in the blog indicates, many CDFIs have already jumped this hurdle with positive results.
• Set up a structure that encourages board participation in fundraising. The survey responses have shown that those with fundraising committees and formal fundraising plans are more likely to achieve funding goals.
• Be clear about expectations.  ​Survey responses and client feedback has indicated that those who set clear guidelines during the board recruitment process and set clear goals and policies for the board are more likely to reach fundraising goals.

We encourage you to continue to share the survey results with your board and team, as well as continue to discuss this topic through this blog.

FUND Consulting is wrapping up its 2015 industry research in partnership with its client, VEDC. This research focuses on coverage models for national CDFIs.  We expect to roll out this information on this blog over the coming months.

CDFI Boards and Fundraising, Week 7: How Much Money do CDFI Boards Raise?

Much of this blog series has presented data indicating that CDFI Boards lag behind the general nonprofit sector in fundraising.  This week we offer some of the data the FUND team gathered on just how much money boards raise for their CDFIs.

Survey respondents indicated that 30% of CDFIs have boards that engage in fundraising.  Almost half of these CDFIs consider that their boards were not successful in raising funds for the organization.

The same group reported that their boards raised an average of $556,250 over the past three years.  To account for the size of the organization, the FUND survey also included a question on what percent of the CDFIs budget board members are expected to raise.  The most common response was between 10-20%.

Of the CDFI boards that reported having a “give or get” policy, the most common amount required is $5,000 annually. The minimum response was $1,000 and the maximum was $10,000.

Those CDFIs with clearly agreed upon goals for the board and organization have a set of metrics by which to gauge success in fundraising.  How does your CDFI measure success in terms of board fundraising performance?

CDFI Boards and Fundraising, Week 6: Strategies for Board Engagement in Fundraising

Last week’s blog focused on barriers to engaging board members to participate in fundraising.  This week, we will concentrate on how some CDFIs achieve board participation in fundraising activities and how the CDFI industry might be lagging behind a bit with respect to other nonprofit organizations. In the nonprofit industry, one of the most common methods of engaging board members in fundraising is by requiring them to donate a specified amount to the organization.  The 2012 Non-Profit Research Collaborative Survey showed that 57 percent of nonprofit respondents required board member contributions. However, in FUND’s recent survey, only 40% of CDFIs reported requiring a “give or get policy”.

Another frequently used method for engaging board members is the development of a formal fundraising plan.  Overall, 25% of CDFI survey respondents reported having a written fundraising plan, with CDFI loan funds the most likely to have a formal plan:

According to respondents, 72% of the plans are approved by boards, with 29.5% of boards participating in the drafting of the plan.  There are several benefits to having a formal fundraising plan:

• Staff and board have a shared comprehension of fundraising constraints and capabilities
• Staff and board have a mutual understanding of how fundraising needs fit into programmatic needs
• Staff and board have agreed upon fundraising goals and targets.

When asked if board members have specific fundraising goals, only 17.6 percent of respondents indicated that they create agreed upon performance goals with board members. Of these, 37.5 percent create customized goals for each board member.  Goals may include monetary targets, facilitating a specified number of introductions, or sharing contact lists.

Does your organization have specific policies on board giving? Are they goals specified in a formal fundraising plan?

Next week we will present data on how much money CDFI boards are raising for their organizations.