“It’s because being American is more than a pride we inherit, it’s the past we step into and how we repair it.” — Amanda Gorman

In Amanda Gorman’s powerful poem, read during President Biden’s inauguration, Gorman provides a vision for what this repair entails: “If we merge mercy with might and might with right, then love becomes our legacy and change our children’s birthright.”

As much as it is a hopeful message for our future, Gorman’s poem is also an homage to the generations of activists, community leaders, philanthropists, and political leaders who have dedicated their lives to mending the wounds of our past — and building a nation that is more just and equitable.

They were the ones who led the Civil Rights and anti-poverty movements, which brought forth landmark reforms like the Civil Rights Act and the Community Reinvestment Acts of 1977 and 1995, respectively, passed with the intent of opening doors for historically marginalized communities.

And out of this work sprang a set of institutions focused on using capital to level the playing field — Community Development Financial Institutions (CDFIs).

CDFIs have been around since the 1960s and they have a long history of investing in local institutions, providing financing to marginalized communities, and slowly changing the systems that have kept racial disparities in place.

One of the solutions we’re seeing CDFI’s use to advance racial equity and justice is the use of collaboratives to accelerate funding solutions and scale transformative change. Collaboratives form when CDFIs of different sizes and areas of expertise choose to work together to provide funding, model solutions, and then scale successes for larger impact. Here are two examples of these types of collaboratives at work:

Southern Opportunity and Resilience Fund (SOAR)

In response to the Covid-19 pandemic, a regional collaborative of 13 CDFIs joined together to create SOAR, a community re-investment fund. This fund provides access to flexible, low-cost credit for BIPOC-owned or managed small businesses and nonprofits in the southern and southeastern United States. This fund receives funding from philanthropic, private, and corporate investors, and channels that capital into one of the 13 local CDFIs participating in the fund. The CDFIs, in turn, provide capital and support to business owners, many of whom have never accessed traditional financing. Businesses that receive these funds use this capital to build their businesses and support their communities.

For example, National Development Council (NDC), a participating SOAR lender, provided a loan to a small Delaware construction business “Everyone Can Achieve” (ECA). ECA was started by local Black entrepreneur Earl Cooper, with the mission of providing second chance employment to formerly incarcerated people. In addition to providing his employees with opportunity for employment and financial stability, he has also unveiled a home remodeling pilot program for his team. This pilot program is designed to help ECA’s employees become homeowners and re-invest in the city’s often overlooked Southbridge community.

Seed Commons

Seed Commons is a CDFI that has created a national network of locally focused loan funds. The organization intentionally does things differently from other funding collaboratives: They raise money centrally, and then give each community fund decision-making authority on where to invest the capital, as well as where to reinvest any proceeds. Their work channels investment into communities that have faced the brunt of the extractive economy, deindustrialization, and systemic discrimination.

Seed Commons practices “non-extractive” lending, which means the terms of their lending ensure borrowers are never worse off than before working with them. The three most common non-extractive terms they include in their lending agreements are:

1. No repayments greater than profits — which means borrowers aren’t required to make interest or principal payments on the loan until they are able to cover operating costs, including market-rate salaries

2. No personal guarantees — meaning the only assets which can be used for collateral are those purchased with loan capital

3. No credit scores — Seed Commons’ local loan officers use close community relationships to establish a borrower’s reliability

This approach moves beyond merely treating the symptoms of inequality to challenging the very systems and structures that got us there.

CDFIs and their ability to drive capital to historically marginalized communities, play a critical role in creating a more equitable future. A future we hope is marked by the closing words of Gorman’s poem, “For there is always light, if only we’re brave enough to see it. If only we’re brave enough to be it.”