Introduction
Thank you very much Saurabh for that introduction, it is such a pleasure to be here at the National Community Investment Fund's Annual Development Banking Conference. I would also like to take this moment to congratulate NCIF on both its CDFI Program award provided though the Recovery Act and its recent New Markets Tax Credit award announced last week - a very successful round for NCIF indeed.
Since we were last gathered here in 2008, the economic crisis has presented extraordinary challenges to the CDFI industry. These sweeping economic and financial developments call on us to think deeply and strategically about our industry's direction, and have no doubt influenced the choice of this year's conference theme, "The Power of CDFI Networks."
I think this is a particularly appropriate theme given how CDFI banks have survived and grown despite adversity by forging strong partnerships within and outside the industry. Conferences such as this one allow us to share our successes and develop new methods and partnerships for overcoming common challenges.
The CDFI Fund shares with NCIF a common commitment to increasing access to financial services in underserved communities across the United States. As a result, we are also strong partners working to increase the number of certified CDFI depository institutions and to strengthen CDFI networks in order to better serve the underserved.
I am confident that this conference, with its pragmatic and strategic focus, provides us with a significant opportunity to evaluate where we are, and more importantly, where we need to go.
The Power of CDFI Networks
The contraction in credit markets has placed exceedingly rigorous demands on CDFI banks, while at the same time significantly increasing demand and the need for them to expand their impact in underserved communities. As lending risks increased, CDFI banks also became more important than ever for low-income individuals and businesses as a source of capital to finance investments. Fortunately, the sound lending practices CDFIs have developed over many years helped most avoid the problematic loans and mortgages, while pre- and post-loan financial counseling and education have helped ensure solid loan performance in distressed markets.
CDFI banks have managed through the economic crisis in no small part because of their resourcefulness in seeking new partnerships both within and outside the CDFI industry. These networks have facilitated the sharing of lessons learned and best practices, brought new partners to community development, increased socially responsible investing, and raised the profile of our common mission.
Strengthened CDFI networks can lead to the development and diffusion of innovations that reduce the cost of delivery of financial services. Sharing successes can help fellow CDFI banks in other parts of the country successfully adopt new business methods and models across diverse areas, from managing commercial real estate exposures, to mitigating risk in affordable housing projects, to implementing best practices in small business lending and consumer loans.
One particularly exciting area where I believe CDFI networks have a critical role to play is also one in which NCIF has been at the forefront - developing ways to measure social performance. Creating partnerships with larger banks and building connections with mainstream and socially responsible investors requires being able prove why CDFI banks are valuable partners.
NCIF's Social Performance Metrics allow CDFI banks to better demonstrate their effectiveness and therefore, demand more resources. This is one area in which I hope that strengthened CDFI networks will help diffuse knowledge and best practices and ultimately allow more CDFI banks to show in a concrete way their track record of generating economic opportunity for individuals and small businesses and providing essential community services.
By creating industry standards for communication of social impact, Social Performance Metrics valuations enhance the industry's ability to attract additional capital to the sector, as well as help identify community development-oriented banks that are eligible to be certified as CDFIs. I commend NCIF for its sustained emphasis on developing common standards for thinking about social impact.
CDFI Fund successes
It is a truly exciting time to be Director of the Treasury Department's CDFI Fund, and I am proud to report that many of the challenges of the past year have been met head-on, though not without strong support from many quarters. With the CDFI industry as a key part of President Obama's strategy to support the economic recovery, Congress and the Administration have taken important steps to expand the CDFI Fund's impact.
We were able to move quickly to support communities made particularly vulnerable by the economic and financial crisis through the rapid disbursement of Recovery Act award dollars into financial institutions serving low-income communities.
The additional funding - totaling nearly $100 million dollars and $3 billion in New Markets Tax Credits - enabled the CDFI Fund to both reach deeper into the pools of qualified applicants and to make larger awards. These awards are already at work restoring economic growth and opportunity in communities hit hardest by the economic crisis.
In our largest annually appropriated funding year ever, our four major programs, the CDFI Program, the Bank Enterprise Award Program, the Native Initiatives, and our New Markets Tax Credit Program provided more than $160 million in awards and a total of $5 billion in tax credit allocations to distressed communities.
We have also added two new tools to our toolkit to promote community development and financial empowerment: the pilot Financial Education and Counseling program and the Capital Magnet Fund. The Capital Magnet Fund is another important community development tool to provide affordable housing in low-income communities and I look forward to working with NCIF to see that it is utilized by all financial institutions within the CDFI community. And upon the recommendation of our Advisory Board, a special sub-committee was formed to address the array of obstacles posed by the financial crisis. We have implemented a number of key recommendations to boost the CDFI Fund's technical assistance, training, partnerships and outreach within the industry to ensure the growth and sustainability of CDFIs.
I believe these initiatives demonstrate how the CDFI Fund is constantly seeking new opportunities to innovate and address the needs of the industry to help CDFIs do what they do best. However, I am not satisfied with enhancing the capacity and reach of existing CDFIs. I would also like to reach out to the many financial institutions engaged in community development that are not certified CDFIs.
One question I have often asked myself, is why are there only 63 certified CDFI banks? NCIF has identified a much larger universe of financial institutions committed to community development and I believe their certification as CDFIs would not only enable them to access more resources, but also raise the profile of our mission across the country. There are hundreds of banking institutions that are eligible to be CDFIs and I would like your support in helping to strengthen this crucial network.
The Small Business Lending Initiative recently announced by President Obama provides a strong example of how certification enables financial institutions already engaged in community development to access greater resources, build capacity and further fuel economic growth in the communities that need it most. It is also a significant example of this Administration's commitment to the CDFI industry and to developing low-income communities. The Small Business Lending Initiative will help depository institutions in our nationwide network of CDFIs to increase small business lending within low-income communities. The plan includes thrifts and credit unions and provides them with preferential terms to increase their lending to the hardest-hit rural and urban communities.
Raising equity has always been a challenge for CDFI banks due in part to the perceived risks associated with community lending, which is more difficult now that capital markets have tightened. Favorable pricing over the next eight years will stabilize and support the capital positions of CDFI banks, enabling them to continue to provide affordable and fair lending products and services to residents and businesses in underserved communities.
Additionally, we are also exploring ways in which CDFI loan funds could receive assistance to increase liquidity for additional small business and economic development lending. This new initiative is just one example of the many tangible benefits to CDFI certification. Clearly, despite the many challenges, this is a momentous time for our industry and I will continue to look for ways to further strengthen our networks.
Closing
In closing, I would like to again strongly encourage those of you whose organizations are not certified CDFIs to examine certification and our funding programs. Please talk to others here that have benefited from our programs to discover how the CDFI Fund could help you increase your impact in existing markets or expand into new ones.
I want to thank you all for joining me here today, and I hope that you will look at the CDFI Fund's programs as a source of capital to support the economic and community development in your communities.