Funders and the Challenge of CDFI Collaboration

Thursday, August 16, 2018 | David Wood

In studying the ability of places to attract and deploy capital in support of low and moderate income communities, the Initiative for Responsible Investment and our colleagues in the recently formed Center for Community Investment have found practitioners describe the most exemplary efforts as hard journeys, strewn with obstacles. These trips take place deal by deal, with institutions struggling against formidable obstacles to completion. (Odysseus’ trip home from Troy is the analogue that comes to mind).

In describing what we call “the capital absorption capacity of places,” practitioners have regularly told us that they are working against or around existing systems. In doing so, they also recognize that it is hard to find space and time for the vital work of system building. Nevertheless, that work still happens – through associations, at conferences, in workshops, on multi-party deals, and so on. However, it happens in ways that are adjacent to, or in addition to, the daily grind of deal-making. It’s extra work, and it doesn’t always get the attention that it could.

We’ve had this in mind as we heard the same felt experiences emerge in conversations from our work with the Joint Center for Housing Studies examining the Partnerships for Raising Opportunity in Neighborhoods (or PRO Neighborhoods) initiative launched several years ago by JPMorgan Chase & Co. Recognizing the need for impact at a larger scale, the PRO Neighborhoods competition asks Community Development Financial Institutions (CDFIs) to propose collaborative projects that include pooling resources with other CDFIs—across size, sectors or geographies—and, in its newest iteration, with community groups and local governments in an effort to support and encourage developing or advancing an equitable development plan in neighborhoods.

Funding opportunities like PRO Neighborhoods can be important to supporting collaborative work in community investment because, as one CDFI leader told us, “these alliances don’t come together easily,” in part because creating these new or innovative collaborations competes with current lines of work for capacity and resources. As we heard from CDFI leaders while preparing “Collaboration by Design: PRO Neighborhoods through a Capital Absorption Lens,” this was as true for collaboration among institutions in the same place as it was for interactions between place-based and national practitioners.

What does this mean for funders, who in theory have the time and resources to work on system building for community investment? The bi-annual Mission Investors Exchange (MIE) conference, held in Chicago last May, provided an opportunity to meet with funders and discuss the roles they might play in helping build more collaborative systems for community investment. In those conversations, it was intriguing to hear place-based funders, in particular, express a deeply felt need to find room for collaboration. From their perspective, the work in support of community investing was as transactional and bilateral as that frequently described by community investment practitioners themselves. These funders, who came from mid-size to large metropolitan areas, talked about how collaboration took place incidentally, in the context of transactions, because there was no consistent platform for collaboration to take shape consistently apart from these transactions. Even in metropolitan regions with substantial and engaged philanthropic resources and community investment practitioners, place-based funders described community investment and multi-sector collaboration as in its infancy or not central to daily practice.

To me, these conversations suggest that funding strategies for the field remain an issue to be wrestled with, and that there is still appetite for engagement on a topic that has long been a part of philanthropic discussion. What’s new about the discussion is the sense that community investment itself is reorienting around new goals—the intersection of health, housing, and quality work came up in different ways in Chicago—and faces complex political challenges as both national and regional levels.

So, there is impetus for revisiting this question in a new context, and a felt need for collaboration among community investors. Our work this year with the Joint Center is turning to how community investment practitioners can engage with equitable development plans in place, to better orient transactional activity towards communally shared goals. Within this work, I suspect the challenge of creating space and time for strategic collaboration among community investors and across multiple sectors will play a prominent role, and that the role of funders will be central to that effort.

Read More About: Neighborhood Change
David Wood

David Wood

David Wood directs the IRI’s research and field-building work on responsible investment across asset classes, and currently manages projects on RI strategy with pension fund trustees, mission investing by foundations, the changing landscape of community investing in the US, and impact investing and public policy. He holds a Ph.D. in History from The Johns Hopkins University....

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