Building Bridges: The Impact of CLIMB Fund and CDFIs on Economic Empowerment

The CDFI industry has grown significantly in recent years, gaining recognition for its role in supporting under-resourced communities, particularly during challenging times like the COVID-19 pandemic and economic fluctuations. This article, aims to educate stakeholders by providing resources such as a background information, industry overviews, history, and impact stories.

What are CDFIs?

Community Development Financial Institutions (CDFIs) are essential lenders that provide fair and responsible financing and services to underserved communities, including rural, urban, Native, and other marginalized populations typically excluded by mainstream finance. They address the market gap by offering financing for small businesses, affordable housing, community services, and various development projects to promote economic opportunity nationwide. CDFIs have gained recognition for their role as "financial first responders," consistently providing capital in times of economic crisis, natural disasters, and during the COVID-19 pandemic. CDFIs come in various forms, including banks, credit unions, loan funds, and venture capital providers, but all share common characteristics such as being mission-driven, focusing on economic empowerment, and offering financial products and services tailored to the needs of their communities. Certification by the CDFI Fund at the U.S. Department of the Treasury distinguishes entities as CDFIs, with over 1,300 certified institutions currently operating across the nation, collectively managing assets exceeding $151.8 billion

Context of the CDFI Movement

The CDFI industry, comprising 1,271 certified institutions with a collective asset value of $151.8 billion, represents a relatively small portion of the overall U.S. financial system at 1%. This industry is anticipated to grow significantly due to special recovery programs allocating $12 billion to CDFIs and Minority Depository Institutions (MDIs). Community Development Financial Institutions are essential for providing access to capital and financial services in underserved communities, particularly for minority-owned businesses and low-income individuals. With their flexible lending criteria and local expertise, CDFIs foster economic development, create jobs, and address systemic inequities by channeling capital to communities that have historically been marginalized.

The CDFI Business Model

The CDFI business model emphasizes tailored services to meet the unique needs of communities, enabling clients' success through a combination of financial support and services. CDFIs prioritize community impact over profit maximization, often operating as nonprofit organizations, and raise capital from various public and private sources to provide financial products and services to underserved individuals and organizations

Where does CLIMB Fund come in?

Our mission is to make an impact in communities across South Carolina not only by providing access to capital for small businesses but also by the way which we make it happen. On a mission to provide opportunity for those where they would not otherwise be granted opportunity, CLIMB Fund uses capital to create local impact, elevate development and advance social and economic justice for BIPOC, women-owned, veteran-owned, and other disadvantaged small business owners

Success Story- Elwood Wine

Justin Fox, Harvard graduate and soon-to-be Doctor of Family Medicine, learned his first recipe for wine on a phone call with his father, who is serving a prison sentence in relation to a controversial case that aired nationwide on an episode of “Reasonable Doubt.” His father explained how he would use the simple ingredients and resources available to ferment what he called “prison wine.” Justin’s father insisted his son make his own at home so that they could share the progress of the fermentation daily as a means to reconnect. From there, Justin’s hobby turned into a company and Elwood Wine was born – not only as a business – but to raise awareness about the injustice in the judicial system and to support programs that help children of incarcerated parents. CLIMB Fund was able to assist with start-up funding for working capital and to purchase equipment, supplies, and marketing. Elwood Wine created three full-time jobs and plans to hire six part-time employees in the next two years.