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Conclusions

CDLFs and CDVCs are at a critical junction. The economic and political environment of the late 1990s, which facilitated their growth in numbers and size of assets, is unlikely to return. The last few years also have brought increased competition for capital in the form of new financial products that promise both community impact and market-rate returns.

To be able to access new capital in this environment, CDLFs and CDVCs must better understand and document social and financial outcomes, including their role as policy advocates on behalf of low-income communities, innovators that demonstrate to conventional financial institutions the viability of this market, intermediaries that bring together other sources of capital to make projects and programs possible, and direct providers of financial products, services, and education.

Given the limited pool of subsidized capital, CDLFs and CDVCs must find new ways of using market-rate capital. However, they also should continue to pursue new sources of subsidized capital, such as the states and individual investors. At the same time, funders cannot lose sight of the field's ongoing need for subsidy. Without such subsidies, the ability of both CDLFs and CDVCs to serve low-income communities would be greatly diminished.

Finally, the federal government must stop abrogating its critical role in serving the financial needs of low-income communities by reinvigorating the CRA and appropriating significantly more capital to the CDFI Fund. Regulatory changes to the Employee Retirement Income Security Act (ERISA) also are needed to make pension funds more accessible sources of capital for CDFIs.

The low- and moderate-income communities that CDFIs were designed to assist are facing an increasingly difficult environment. The problems of economic inequality and poverty have worsened; funding of services for the country's neediest has shrunk; and predatory financial service providers have come to view low-income communities as market opportunities, reversing the wealth-building efforts of CDFIs. The products, services, and knowledge that CDFIs provide are needed more than ever.

 
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