Microlending fills a vital role in creating opportunity and equity in low-income communities, and in meeting demand for loans among entrepreneurs who have face barriers accessing credit: people of color and women. But it can be challenging for CDFIs involved in microlending to raise the capital they need to support a growing portfolio. In this article in the San Francisco Fed’s Community Development Innovation Review, “Addressing the Capitalization and Financial Constraints of CDFI Microlenders,” the Business Ownership Initiative and our co-authors from Revolve examine a novel and promising approach: create a secondary market for loans originated by community-based microlenders.
The new Entrepreneur Backed Assets (EBA) Fund—developed in collaboration with members of our Microfinance Impact Collaborative—is showing how this strategy can work in practice. EBA Fund is purchasing existing loans from CDFI microlenders and selling them to banks to provide capital for new lending working to make a secondary market where CDFI microloans by loans from microlenders and selling them to banks.
Tweet #Microlending fills a vital role in creating opportunity and equity in low-income communities and meeting demand for loans among entrepreneurs who have face barriers accessing credit: people of color and women.
Tweet It can be challenging for #CDFIs involved in #microlending to raise the capital they need to support a growing portfolio. This paper in @sffed examines the approach of @EBAFund: sell those loans to banks.
Tweet Most #smallbiz owners seek credit less than $100k. The demand for smaller loans is particularly strong among entrepreneurs of color. How can efforts like @EBAFund give #CDFIs the resources needed to expand their #microlending?
Tweet The pandemic has exposed and exacerbated the challenges faced by entrepreneurs of color. PPP failed to reach #smallbiz in marginalized communities. We must support orgs like #CDFIs who work to advance equitable growth.
Tweet Thanks to @jpmorgan @Chase for supporting this paper in @sffed’s Community Development Innovation Review, “Addressing the Capitalization and Financial Constraints of #CDFI Microlenders,” and helping to highlight the promise of @EBAFund.
The Business Ownership Initiative works to build understanding and strengthen the role of business ownership as an economic opportunity strategy. BOI is an initiative of the Economic Opportunities Program.
The Economic Opportunities Program advances strategies, policies, and ideas to help low- and moderate-income people thrive in a changing economy. Follow us on social media and join our mailing list to stay up-to-date on publications, blog posts, events, and other announcements.