Bringing financial inclusion into focus

No single strategy or approach can solve these systematic issues. But we think the CDFIs sector’s demonstrated adaptability and perseverance indicates a potential for outsized impact in both the short and long-term.

Understanding the role of CDFIs

Economic opportunity for all

Everyone isn’t on equal footing when it comes to being a homeowner, starting a small business, or working a living wage job. These paths to financial stability are often closed to members of underserved communities and/or individuals from diverse lived experiences. And while there are many reasons for that, a frequently recurring theme is lack of capital access.

Enter CDFIs - who foster lasting, transformational development by providing inclusive, fair, and equitable financial services. To build wealth, some may also offer low or no cost financial education and/or business coaching. Their closeness to the populations they serve helps CDFIs close local financial system gaps.

Despite constraints, potential for outsized impact

CDFIs use multiple approaches to tackle an array of systemic financial challenges. But to oversimplify, the sector’s approach involves working with both private and public capital providers to make investments in high need areas. Additionally, since their outcomes can have natural alignment with corporate stewardship and/or social impact commitments, CDFIs may also collaborate with a wide variety of non-finance industries.

While CDFIs have seen much success, there are numerous barriers on the road towards a more inclusive financial system. And with so many stakeholders are involved— including those who receive or benefit from CDFI services, governments and quasi-public entities, social impact investors, and research institutions—getting consensus on how to track progress and measure success can be challenging.

Recommendations for CDFIs

Challenging, but not impossible. That’s why Deloitte is collaborating with with Raza Development Fund and Opportunity Finance Network to contemplate strategies for improving CDFI capacity. To help CDFIs scale, our research agenda proposes a focus on data collection and evaluation across five areas.

The art of the possible

Improved research and evaluation processes may offer a wide array of benefits to CDFIs, their funders, and the communities they serve. The five areas of emphasis we propose are oriented toward helping CDFIs uncover new efficiencies, discover new partners, and make financial inclusion the way of the future.