Aligning capital with justice is the north star for Community Development Financial Institutions (CDFIs). We are in the social impact business – whether the route is loans to early education providers, micro-loans to entrepreneurs of color, appraisal gap second mortgages for first-time homebuyers, or construction loans for affordable housing. But, we also need to cover our costs.
Impact investors are in the same boat – striving for impact while also looking for financial returns.
While the alignment between impact investors and CDFIs is well documented, there has been much less discussion about how impact investors should structure their investments in CDFIs. We always need investments that allow us to finance more loans in more places, but – if properly structured – those investments can also strengthen the entire community finance ecosystem and, in turn, create greater impact in even more communities.