St. Louis CDFI Coalition Case Study

I. CDFI Partnership Genesis and Structure

The St. Louis CDFI Coalition (Coalition) traces its roots to the winter of 2015, when representatives from CDFIs in St. Louis and the Federal Reserve Bank of St. Louis recognized that, in order for the local CDFI industry to realize its potential, CDFIs needed to work more closely together. The St. Louis Fed began hosting meetings with representatives from six CDFIs, all of which remain active with the  Coalition:

• Alliance Credit Union
• Gateway CDFI
• IFF
• International Institute
• Justine Petersen
• St. Louis Community Credit Union
• Rise Community Development
• First Financial Credit Union

The initial meetings served as an opportunity for representatives of local CDFIs to get to know each other on a personal level as well as to understand  the products and services each of their organizations offered. While some of the individuals knew each other, others were meeting for the first time. In particular, the initial meetings sparked ideas regarding how CDFI credit unions and loan funds can work together.

The St. Louis Fed agreed to host and facilitate the meetings and the agendas were determined by the CDFIs. After a few monthly meetings, it became apparent that the group was interested in learning about best practices among CDFI collaborations across the country. Members of the Coalition realized that they did not have sufficient time to conduct this research on their own, so they hired a team of graduate students from Washington University in St. Louis and the University of Missouri–St. Louis. The best practices report, completed in May 2016, continues to serve as a guide for the  Coalition.¹

One of the recommendations from the report was for the Coalition to establish a minimal organizational structure that included a fiscal agent and an external organization, besides the St. Louis Fed, that could facilitate meetings while also accomplishing necessary administrative tasks between meetings. The Coalition heeded this advice and chose not to incorporate as a separate organization. They have designated the Community Builders Network of Metro St. Louis (CBN) — an association of St. Louis-area nonprofit community-building organizations — to be the fiscal agent. Additionally, the Coalition has hired an employee of CBN on a part-time basis to facilitate meetings and accomplish needed administrative tasks. The Coalition’s relationship to CBN provides a link to neighborhood-based nonprofits, which are key partners of CDFIs. The St. Louis Fed, meanwhile, has remained engaged as an advisor to the Coalition.

In early 2018, the Coalition created an advisory board of non-CDFI partners as a means to solicit feedback and suggestions regarding the organization’s strategic direction. The Coalition actively sought a mix of perspectives from the public, private and nonprofit sectors. In addition to the St. Louis Fed, other organizations represented on the advisory board include the city of St. Louis, Opportunity Finance Network, US Bancorp Community Development Corporation, PNC Bank, Washington University in St. Louis and Urban Strategies (a community-building nonprofit organization). The advisory board had its initial meeting in March 2018 and will meet quarterly.

In addition to creating the advisory board, the Coalition opened up membership to all CDFIs in the St. Louis area in January 2018 and is actively recruiting members. Rise Community Development and First Financial Credit Union joined the founding six CDFIs that make up the Coalition. Each Coalition member pays annual dues and the Coalition continues to meet monthly.

II. Goals and Achievements

The initial goal of the Coalition was to establish deeper connections and, through relationship and trust building, build the CDFI industry in St. Louis. Over the last three years, members have developed a strong bond. Below are the Coalition’s current goals and tactics to accomplish them:

• Promote positive financial strategies and policies for underserved communities
  • Form partnerships with trade associations and advocacy organizations where synergies exist to advance policy work
  • Increase peer awareness and ability of individual CDFIs to advocate on behalf of the entire CDFI sector
• Drive strong partnerships with key community stakeholders, including policymakers, banks and practitioners
  • Create an advisory board that consists of leaders from multiple sectors and perspectives
  • Identify stakeholders invested in the work of CDFIs
• Raise awareness of the critical role CDFIs play in community development and the services they offer
  • Create a unified and accessible message about the spectrum of work performed by CDFIs
  • Publish a regular series of op-eds that explain the importance of CDFIs and advocate for tools that support the creation of healthy communities
• Collaborate to drive innovative financial tools for high-impact community investors
  • Evaluate the possibility of creating a collective fund as another mechanism to raise capital for CDFIs in St. Louis
  • Obtain collective funding streams to support the ongoing work of CDFI collaboration in St. Louis

The Coalition has begun to make progress. As previously mentioned, the Coalition formed an advisory board. They have also demonstrated the ability of individual CDFIs to advocate on behalf of  the entire industry. Maria Langston from the St. Louis Community Credit Union noted, “We are fortunate to have a person on staff that focuses exclusively on public policy. Prior to our involvement with the Coalition, our advocacy strategy focused on credit unions. Now we have learned about the value of CDFI loan funds and the ways in which a depository institution can partner with them. As a result, we now advocate for the entire CDFI industry, including loan funds.”

The Coalition has also obtained funding that supports their collaborative work. In the fourth quarter of 2017, they successfully raised more than $50,000 in contributions that they will use to work together more effectively and promote the CDFI industry in St. Louis.

III. Financing and Nonlending Activities

Since the Coalition formed, the members have found opportunities to finance a few projects jointly. They have also realized more opportunities to refer clients to each other to meet the financing needs of borrowers. In addition to the organic opportunities that have arisen for CDFIs to pursue these activities together, they are working to create the conditions for more opportunities beyond one-off deals or referrals.

The Coalition continues to work on philanthropic fundraising to support their collaborative work. While not an immediate priority, they aim to explore the possibility of creating a fund as a means to simplify the process of investing in St. Louis-based CDFIs.

With respect to nonlending activities, the Coalition has collaborated in a few areas. Three examples include Opportunity Zones, policy and advocacy, and economic development.

• Opportunity Zones: The Missouri Department  of Economic Development issued a Request for Proposals (RFP) regarding which census tracts to designate as Opportunity Zones. St. Louis City and St. Louis County each asked for local input before responding to the RFP. The Coalition issued a joint statement offering feedback on how municipalities could assess which areas to recommend for inclusion.
• Policy and Advocacy: Individual CDFIs are advocating on behalf of their respective organizations but also increasingly on behalf of the CDFI industry as a whole. Additionally, the Coalition is seeking opportunities to advocate jointly (e.g., a 2017 meeting and subsequent CDFI project tour with Missouri Sen. Roy Blunt’s office organized by several Coalition members).
• Economic Development: The city of St. Louis is working to put together a comprehensive, equitable economic development plan. The Coalition has been included in talks with the city on how the plan should be informed and which stakeholders need to be part of the process (e.g., the Coalition has provided feedback on the city’s forthcoming racial equity indicators public dashboard).

IV. Impact and Assessment

To date, the Coalition has assessed its impact on the amount and diversity of their lending, though they acknowledge that can improve on assessing impact. While they are increasingly telling their collective story at community events and meetings, they recognize that their story is about more than lending amounts and the activities their loans support. They are interested in assessing impact in both the repayment rates of borrowers and the instances in which the additional flexibility they have afforded borrowers has resulted in win-win situations.

Diego Abente from the International Institute notes, “We had a small business owner who took out a loan that had a maturity of 5 years. His LLC folded and all his partners left. We worked with him to restructure  the terms of the loan and next month he will have paid off the loan … after 10 years. Although cases like this are exceptional, as a mission focused lender we were able to help the borrower meet his credit obligations and recover the loan proceeds. Although the business failed, the customer succeeded in repaying the loan, and as a result he will have a much stronger credit profile.”

V. Challenges, Opportunities and Leading Practices

The Coalition has struggled a bit with assessment of their collective impact and, to some degree, their messaging with external audiences. In an effort to more effectively communicate the CDFI mission and impact to external audiences, the Coalition released a video in June 2018 that highlights their collective action.² Still, there is a realization that they can do more to counter the stereotype that people and organizations in economically distressed communities cannot or will not repay loans. They also realize that they need to do more to lift up the creativity and ingenuity they see from their borrowers, whether those are consumers or organizations.

The Coalition has also recognized that they could benefit from greater specificity in their objectives and actions. With guidance from the newly formed advisory board, they will work to develop more concrete steps toward achievement of their goals. Coalition members see continued opportunities to deploy capital more collaboratively, to raise regional and national funds to support their work, and to make CDFIs a household name in the St. Louis area.

The keys to the Coalition’s success so far have included: 1) a commitment to facilitation by a neutral third party, starting with the St. Louis Fed and continuing with CBN; 2) receiving buy-in from each organization’s respective leadership; and 3) the camaraderie that they’ve cultivated. All three factors together have made for a strong and successful collaboration.