Q&A: OFN Research Talks CDFI Trends from 2017-2021 

OFN’s research team discusses findings from a new brief analyzing five years of OFN member data and the CDFI industry’s progress in advancing racial, social, and economic justice. 

In 2017, OFN had 230 members. Today, the count is 394. The intervening years saw unprecedented attention and growth, not only for OFN’s membership but for the entire CDFI industry. A devastating pandemic and outrage over racial and economic injustice sparked extraordinary national media attention and new investments in economic equity. All told, the five years from 2017 through 2021 were transformational for the CDFI industry.  

Trends Toward Equity: Five Years of OFN Member Data

To understand how CDFIs performed, OFN’s research team took a deep dive into OFN’s Annual Member Survey data from 2017-2021 in the just-published Trends Toward Equity: Five Years of OFN Member Data.

The brief captures trends in member assets and lending activity, as well as financial performance and ratios. It explores staffing sizes, functions, and diversity. Considering the current macroeconomic context, the brief also looks at OFN member interest rates for borrowed capital. 

In this conversation, Brent Howell, senior associate of research, and Adrienne Smith, senior vice president of research (authors of the brief with Research Associate Alexander Carther) share a few insights into the brief’s findings and takeaways. They closed with a discussion of OFN’s ambitious research agenda for 2023 and beyond.   

Let’s begin with the findings. What key patterns emerged?

Adrienne: I’ll start with growth. Over the five years, the size of OFN’s membership grew, as did the assets, lending volume, and portfolios of our members. Whereas the financing sectors for loans outstanding remained constant, for loans closed, there was an increase in small business lending during the most pronounced years of the pandemic.   

We examined staffing, finding that the average number of staff per CDFI decreased, a reflection of there being more small and emerging CDFIs in OFN’s membership. At the same time, among long-term OFN members, average staff size increased nearly 20% to 35.4 full-time staff.   

We also found that diversity of staff has improved. There are increasing percentages of people of color, especially at the leadership level. Although, as asset size and the leadership level of the position (from nonmanagers to managers and CEOs/presidents) both increase, the representation of people of color decreases.  

Additionally, we looked at the interest rate environment. In 2021, there was a slight increase in rates members charged their borrowers, as members started to anticipate a rising interest rate environment. However, the interest rates of members’ borrowed funds from investors remained relatively low and stable over time. We don’t have 2022 data yet, but we consider the data we do have as a buildup to 2022, when rates started increasing.  

Brent: And it’s important to note that we reaffirmed CDFIs are good fiduciaries. With all the growth, our member performance remained robust over the five years.  Looking at these five years, CDFIs often outperformed mainstream financial institutions  

The brief notes that deployment ratios declined during the five years? How do you account for the decline?

Adrienne: Members received influxes of new emergency response capital during the pandemic. Because of these capital infusions, deployment rates went down. This could be a reflection on the moment in time when the data was collected rather than a reflection of member performance.     

Brent: Part of this is because we didn’t include PPP [Paycheck Protection Program] loans outstanding to borrowers or PPP liquidity facility (debt on a CDFI’s balance sheet) in our deployment ratios. We would imagine PPP lending was a significant amount of activity, a substitution of sorts for other capital deployment. The brief does capture Emergency Relief Program capital and other types of emergency capital responses but not PPP. We’re going to look at PPP separately in the next few months.   

Adrienne: Another likely factor in deployment is staffing. As with all industries, CDFIs are challenged around hiring and retention, which may also impact their ability to get money out into communities.  

Was there anything surprising or unexpected in the findings?

Brent: The shift in staffing functions over time struck me. Newer OFN members are mostly smaller asset size CDFIs that tend to have more training and technical assistance staff than financing staff. On the other hand, CDFIs that have been members of OFN for a long time – larger CDFIs — have seen growth in their administrative staffs in comparison to financing and technical assistance. It makes sense that larger, well-established CDFIs are more focused on adding administrative roles because their training and technical assistance programs are already established. The newer members and the smaller members are more focused on preparing their borrowers and potential borrowers to receive capital.  

Adrienne: More satisfying than surprising for me is to know that CDFIs performed so well during the pandemic. It’s great to see the data support what we hear and say about the industry. 

What do you want readers to take away from this analysis? 

Brent: The message is different for funders and investors than it is for CDFIs. We want funders and investors to see in the data that CDFIs rose to the occasion as financial first responders for their communities. We want CDFIs to look beyond the industry’s emergency response and take the learnings of the past few years to transition back to what CDFIs do best, which is to invest in communities and advance economic equity.  

Adrienne: The brief is also a call to action in areas where the industry and OFN are already working, such as staffing. CDFIs know they need to prioritize staffing issues to increase diversity, deploy more capital, and ensure the future of the industry. And this is a high priority for OFN. We’re building a first-of-its-kind CDFI career center to help attract new talent to our field — the work has begun and it’s very exciting. 

Brent: Expanding on Adrienne’s point, while we still have a lot of work to do to increase diversity in leadership, the CDFI industry is already relatively diverse. The representation and inclusion in so many CDFIs really show our members are parts of the communities they serve. I can’t imagine another industry that puts their money where their mouth is and is as diverse as our members’ staffs are.   

What’s next for the OFN research team, related to the trends report or otherwise?

Brent: Most immediately, we’re preparing to take a deeper dive into PPP lending activity. It’s important for many reasons to have quality updated data that measure members’ PPP activity.     

Adrienne: There’s much more to come. OFN’s strategic plan includes a proactive research program. As a mature industry, we already know a lot about CDFIs, but there are many opportunities to build our knowledge about the field. This is OFN’s research agenda: we’re not just collecting data but analyzing it and disseminating it to show what the industry has done and what it can do. 

And we’re looking forward to revamping OFN’s annual Side by Side report and making it more thematic and analytical. OFN has collected data since the mid-’90s. We want to take a different approach to the survey, using the data in different ways and more frequently so that it’s useful to our members and to the industry. 

Download the Full Trends Report
The report is free and available for download from OFN’s CDFI Resource Library and CDFI Connect online community.

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