The August edition of Colorado Banker shined a light on the power of Community Development Financial Institutions (CDFI) to make big impacts in partnership with the people in the communities they serve. It explained the origins of CDFIs and what has become a social and economic justice movement within the community development finance field.

The article described the mission of CDFIs as entities that invest local, state and federal resources, in combination with private sector capital, to finance people and projects in communities historically unable to access it.

The Riegle Community Development Banking and Financial Institutions Act of 1994 received bi-partisan and broad support from both houses of Congress, and President Bill Clinton signed it into law Sept. 24, 1994.

The Act established CDFIs to promote economic revitalization and community development in both urban and rural communities. CDFIs were also a response to historical injustices like red-lining and were created to help industrious people, both urban and rural, including farmers and ranchers, women-, veteran-, and immigrant-owned, start-up and established business owners, qualify for financing to pursue their dreams and aspirations.

We at First Southwest Bank (FSWB), serving rural Colorado, are proud to be one of two CDFI banks in Colorado; the other is Native American Bank in Denver. FSWB earned this designation from the U.S. Treasury in 2014.

Initially excited to see a spotlight shown on CDFIs, we would like to correct an assertion that CDFIs are exclusively nonprofit entities. It is true that the majority of today’s ~1,300 CDFIs – made up of banks, credit unions, nonprofit loan funds, and venture capital funds – are nonprofit entities.

There exists, however, a small and mighty group of 135 community development banks, nationally represented by the Community Development Bankers Association, which are public and private enterprises doing things a bit differently than most banks. As with other CDFIs, partnership is central to our work since we know we can do more to fulfill our community development missions together than apart.

One of our most unique partnerships is with our affiliated nonprofit revolving loan fund, First Southwest Community Fund, established in 2015 to provide risk-mitigating gap funding to rural Colorado communities. In partnership, we work to address community needs, support entrepreneurs, small businesses, rural livelihoods, and thriving communities, and improve the social and economic landscape of rural Colorado.

Together, we have access to public, private and philanthropic resources other banks do not. And we can lend those funds through participation with other banks that may have policy limitations.

Combining our varied funding sources with bank funding creates the greatest leverage to produce the highest impact possible across our Colorado communities. As a result, in partnership with CDFIs banks and other nonprofits, traditional community banks can be more inclusive and fair in the banking products and services they offer within their markets.

We regularly do business with and invest in schools, healthcare organizations, local governments, libraries, early childhood education centers, environmental causes, and varied nonprofit organizations. Recognizing a need for novel approaches and innovative funding mechanisms, in the past few years, we have stepped into the affordable housing space and the roots of our movement.

This year, in partnership with Impact Development Fund, another Colorado CDFI loan fund, we served as the lead lender on the Westside and Triangle Mobile Home Park acquisitions in Durango, helping to secure affordable housing for ~90 Hispanic families who had lived there for generations and would otherwise have faced exorbitant rent increases or been displaced.

First Southwest Bank also served as a participating lender offering non-qualified mortgage loans in a pilot workforce/teacher housing program in Norwood and plans to expand to other rural Colorado communities.

Since 2016, we have partnered with our local utility, La Plata Electric Association (LPEA), to offer LPEA customers low-cost fixed-rate loans on energy efficiency and solar enhancements, reducing home energy costs and overall living expenses.

We invite our fellow CBA member banks to reach out to discuss how together we might fulfill the CDFI mission, the new Community Reinvestment Act rules, and collaborate to expand access to credit, investment, and basic banking services in rural Colorado.

First Southwest Bank (FSWB) is a locally owned, independent community bank and one of two Community Development Financial Institution (CDFI) banks in Colorado, offering personal and business banking, agricultural and small business loans. We put customer dollars to work to improve the social and economic landscape of Southern and rural Colorado. With our non-profit partner, the First Southwest Community Fund, we ensure our region’s entrepreneurs, small businesses, and not-for-profit organizations have access to the inclusive and equitable capital they need to grow and enrich our communities. More information can be found at fswb.bank. Or you can contact Kent Curtis at kent.curtis@fswb.com or 970-422-5054.