Annie Donovan is the Director of the CDFI Fund at the U.S. Department of the Treasury. She previously served in the White House as a Senior Policy Advisor and spent 20 years with Capital Impact Partners, a national CDFI that works closely with IFF.
You’ve called CDFIs a “national treasure.” Can you explain why?
Since joining the CDFI Fund, I’ve shifted my point of view from that of a CDFI practitioner to the CDFI Fund Director, where I get to see the whole field. From this perch, the view is pretty impressive in terms of what’s been built over the past couple decades in the CDFI industry.
A fundamental accomplishment of the CDFI field is that it has demonstrated that low-income people and low-income communities are creditworthy. That’s no small feat. When you think about the end goal of creating a more inclusive economy and greater prosperity, CDFIs are doing that by creating the last mile in access to capital for underserved communities.
What’s more, other federal, state and local governments are starting to see CDFIs as a way to deliver on social or economic outcomes. The most recent example is the USDA’s Uplift America Initiative, where they basically expanded their program rules to allow CDFIs to access more of their capital. They saw a way to connect the dots between their goals and what CDFIs could offer.
CDFIs have built an infrastructure that’s a delivery mechanism for social innovation, for social progress, for economic prosperity. I think that’s a national treasure.
Last summer, you conducted an extensive listening tour as part of the process to create the CDFI Fund’s new strategic plan. What were some of the most important things you learned from your listening tour?
There were several take-aways from the listening tour – First and foremost, CDFIs remain deeply committed to their mission. Second, there is a desire for both the field and the CDFI Fund to get better at collecting data and making data-driven decisions. Third, there’s a strong desire to increase collaborations between smaller and larger CDFIs.
But the biggest take-away for me was that the CDFI Fund is already a great resource, it’s flexible, and it allows CDFIs to be market-driven and to fill financing gaps. Several people expressed that – although our funding applications are rigorous and competitive – working with the CDFI Fund did not feel like working with other federal agencies. In general, the sense is that we’re thought of as a partner that’s a little more responsive. People wanted us to maintain that ethos. In that sense, it was a great endorsement for what we’re already doing. Still, we want to ease the customer experience and create more transparency. We also can and should promote the work of CDFIs across government and in the larger world.
The CDFI industry has surpassed many expectations over the past few decades. What do you think the future holds?
The industry needs to grow, and that’s going to be a challenge. The model is powerful, but at the CDFI Fund, our programs are over-subscribed. It’s not that we think the industry should grow for growth’s sake, but because CDFIs have a powerful solution that people need, that communities need. The problems we’re trying to solve are so much bigger than we are right now.
There is tension between impact and scale because part of the magic of what CDFIs do is their hands-on, high-touch approach. Sometimes being smaller is more impactful. For our part, the CDFI Fund wants to leave room for a variety of strategies to take shape that are informed by what’s needed in local communities, and we want to support a diversity of institution types and activities. One size is not going to fit all. In fact, where we’re making our greatest gains is where we have a variety of types and sizes of CDFIs coming together to multiply their impact.
Many CDFIs are doing this. In some communities, they’re coming in as a bigger player, and figuring out how to harness the value that’s already in communities and helping to scale impact. They know firsthand the value of local organizations and how to enhance one another’s goals. That’s a really good example of the power and having a diversity of CDFI institutions.
Of all the projects you’ve supported through your leadership roles at CDFIs, is there any one that sticks out – a story that bubbles up in your mind repeatedly?
There are so many stories! I think about Detroit and the work that was started there when I was at Capital Impact Partners. IFF is active there now, so you know what’s working. I’m very proud that CDFIs had a role in jump-starting the revitalization of Detroit.
Then there’s an individual point of view – Last fall at the National Federation of Community Development Credit Unions’ annual meeting, they showed a great video about a single mother’s journey after becoming addicted to drugs, losing her job, and nearly becoming homeless. Her fight back to stability was aided by her credit union. If you think about the hundreds of thousands of lives that are touched by institutions like CDFI credit unions, that’s pretty remarkable.
What really blows me away is not just these individual stories, but how many stories there are and how diverse those stories are. I don’t go as deep into particular deals and personal client connections anymore, but I’m more connected to a high volume of diverse stories, and that is just overwhelmingly amazing. It makes me feel very grateful to be the director of the CDFI Fund.
How did your time in the Peace Corps affect your choice to work in community finance?
One of the things that you learn about people in that kind of situation is that it doesn’t matter how poor you are – you’re born with potential. You’re born with a set of capabilities and gifts and the desire to offer them to the world. But not everybody has an equal shot at fulfilling that potential. That’s systemic. So there’s a lot of work we can do to try to build the systems that unlock that potential. That’s what I’ve made my life’s work.