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The city of Fort Worth launched an initiative Wednesday that officials say will bring up to $250 million in lending over five years to traditionally underserved and under-resourced communities.
CDFI Friendly Fort Worth will work as a go-between, matching community development financial institutions with borrowers to provide loans to minority-owned businesses and disadvantaged people, both of which have historically lacked access to capital.
The city has already kicked in $3 million through the federal government’s pandemic-era American Rescue Plan. Mayor Mattie Parker said on Wednesday that Bank of America has pledged $10 million toward it.
“Fort Worth has really for a long time struggled, frankly, to focus in our communities that need us most, especially our Black and Hispanic communities that have amazing businesses that really teeter month to month to just make it,” Parker said. “That’s frustrating, because we know that their capacity is so much bigger.”
Entrepreneurs of this city, she added, have long been ignored.
CDFIs have been working successfully in communities of color and other under-resourced places for more than 30 years. CDFIs are special-purpose financial institutions staffed by experts who are skilled in working with nontraditional borrowers and managing risks for a wide range of investors, including banks, faith-based investors, philanthropies, and individuals, among others. According to industry data introduced by the city, 60% of more than $100 billion in CDFI financing over 30 years has gone to borrowers of color.
Community development banks are for-profit corporations with community representation on their boards of directors. Depending on their individual charter, such banks are regulated by some combination of the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and state banking agencies. Their deposits are insured by FDIC.
“The business model [of a CDFI institution] is to be profitable, but not profit maximizing,” said Mark Pinsky, founding partner of CDFI Friendly America.
Minority-owned businesses are more likely to demonstrate signs of limited financial health compared to white-owned small businesses, said Robert Sturns, the city’s economic development director who opened the meeting at the city’s future City Hall at 100 Energy Way. Moreover, even healthy, mature minority-owned businesses are generally 30% smaller than the average white-owned business.
These businesses’ challenges are compounded by a lack of access to capital, he said, noting also that many minority-owned businesses are in the service industry, which was widely disrupted during the pandemic.
Learn more about the CDFI Fort Worth initiative. Residents and businesses who are interested in borrowing from CDFI Friendly Fort Worth can also learn more on their website.