Community Development Financial Institutions Draw Praise From Fed Chair
WASHINGTON -- Federal Reserve Chairman Ben Bernanke praised the work of community development financial institutions, including community development credit unions, at a recent Washington meeting.
Bernanke told the Annual Conference of the Opportunity Finance Network on Nov. 1 that CDFIs were a major part of the effort to help lower income and unbanked Americans access the financial system.
Bernanke cited the CDFI Data Project, a major, multi-year research effort collecting and analyzing information on the financial performance, institutional characteristics, and community development outputs of the CDFI Industry.
The National Federation of Community Development Credit Unions is a founding member and primary data collector of the CDP.
In his presentation, Bernanke explained that, "Studies undertaken by the CDFI Data Project show that, for 2004, charge-off rates for CDFI portfolios were similar to those for the banking industry as a whole."
Bernanke went on to state, "These studies and market data suggest that banks and other private organizations may become an increasingly significant source of competition for CDFIs. That is good news, not bad news. Indeed, the surest sign of a CDFI's success is that private investors see viable investment opportunities in the neighborhoods in which the CDFI has been operating."
"The chairman's remarks indicate the critical importance of the Federation's research work on the CDFI Data Project," commented Federation Director of Policy Research, Greg Gemerer. "Our effort is not only revealing the tremendous impact of CDCUs and other CDFIs in underserved low-income communities, but also showing that these communities can sustain profitable financing activity, undermining the rationale for red-lining and disinvestment. If the chairman has taken notice, the mainstream financial industry cannot be far behind," he added.
The CDP is a collaborative effort involving trade associations from each of the major CDFI sectors, including CDCUs, community development banks, loan funds, and venture capital funds. The Federation collects and analyzes credit union data, which is incorporated into the CDP annual reports. --firstname.lastname@example.org