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March 28, 2012
$1 Million Grant to Automate Reporting by Community Development Financial Institutions
    by Robert Kropp

The grant from Citi Foundation will help the CDFI Assessment and Ratings System automate its financial performance data collection system for community development financial institutions.


In 2004, the Opportunity Finance Network (OFN), a national network of community development financial institutions (CDFIs), launched the CDFI Assessment and Ratings System (CARS), to improve investor confidence by promoting industry-wide performance standards for CDFIs.

Early this year, CARS began operating as an independent organization, stating in a press release that it plans to introduce new products and services in 2012, "making it the only independent organization that offers in-depth insight into CDFI impact and financial performance."

"Our goal in establishing CARS as an independent information service is to open doors to new capital for CDFIs by leveraging our expertise, reputation, and capacity through expanded products and services for new investors," said Paige Chapel, President and CEO. "Ultimately our goal is to increase the flow of capital benefitting low-income people and communities."

This week, the organization's efforts to standardize financial reporting by CDFI loan funds received a boost in the form of a $1 million grant from the Citi Foundation. CARS plans to develop an automated reporting system similar to that provided to commercial banks by the Federal Deposit Insurance Corporation (FDIC). The system is intended to remove barriers to sustainable investment in CDFIs by providing standardized data to help investors analyze the performance of specific CDFIs against industry trends.

"Investors consistently tell us they need access to timely, standardized data to better understand—and invest in—the industry," Chapel stated. "We believe access to quarterly performance data will spur investor analysis of and investment in CDFIs, leading to an increase in the flow of capital to low-income communities."

To date, CARS has rated more than 70 CDFIs, both on their community impacts and their financial strength and performance. The system also rewards those CDFIs that have engaged with policymakers through initiatives that "benefit the community development finance industry or disadvantaged people and communities."

In November, OFN teamed with the Starbucks Foundation to launch Create Jobs for USA, to help create and sustain jobs in underserved communities. Twenty-eight CDFIs rated by CARS became the first recipients of capital grants from the program.

One of the noteworthy findings of the 2010 Trends Report of US SIF: The Forum for Sustainable and Responsible Investment was the substantial growth in community investing, defined by the report as "the capital investors direct to communities that are underserved by traditional financial services." Between 2007 and 2010, the report found, community investing increased by more than 60%, from $25.0 billion to $41.7 billion.

 

 
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